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'Widespread' PennDOT Scandal Nets 10

Friday, December 19, 2014

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Ten more people have been charged in what authorities call an extensive corruption scandal surrounding the Pennsylvania Department of Transportation.

The overbilling scheme involves two former PennDOT managers who allegedly took kickbacks from highway inspectors to ignore fake time sheets and mileage reports. In all, the fraud cost Pennsylvania taxpayers at least $1.2 million, state Attorney General Kathleen G. Kane announced Wednesday (Dec. 17).

The charges were recommended in a presentment delivered by a statewide investigating grand jury. The grand jury heard testimony from dozens of individuals and reviewed evidence collected in a joint investigation by the AG's office and the U.S. Department of Transportation-Office of Inspector General.

Alex Morrone William Rosetti
Images: PA Attorney General's Office

Alex Morrone (left) and William Rosetti are the two former PennDOT managers that prosecutors say are at the center of the conspiracy.

The presentment details "how a pattern of nepotism and cronyism" led to the defendants being hired by PennDOT and two regional consulting firms, Construction Methods and Coordination Inc. (CMC) and CZOP Spector Inc., "which allowed their conspiracy to continue and flourish," the AG's office said.

Unearned Overtime

The investigation started in March 2013 after the Bureau of Criminal Investigation received evidence of "widespread abuse" within the Highway Occupation Permit Program (HOP) in PennDOT's District 6, which consists of Philadelphia and five surrounding counties.

PennDOT issues HOP permits for any construction or other encroachment on interstates, U.S. routes and state highways. The agency pays inspectors, directly and through outside firms, to ensure permit holders comply with laws, regulations and permit conditions.

According to the presentment, inspectors were paid more than $500,000 that they had not earned, and CMS and CZOP were paid more than $700,000 for their employees' unearned overtime.

"The citizens of Pennsylvania expect state employees and contractors to perform the work they are paid to do," said Kane.

"Those who accept kickbacks and falsify documents are stealing from the taxpayers. My office will continue to uncover and diligently pursue public corruption across the Commonwealth."

Defendant Roundup

The two PennDOT managers alleged to be at the center of the conspiracy are former Assistant District 6 Permits Manager Alex Morrone, 50; and former Philadelphia County Permit Manager William Rosetti, 36.

According to Kane's office, these two facilitated the fraud and theft by routinely taking kickbacks from inspectors, and by encouraging and helping them falsify their records to be paid for unearned wages and reimbursements.

PennDOT scheme

Also charged are (clockwise from top left): PennDOT inspector Frank DiMichele, PennDOT inspector Generoso Palmieri, CMC inspector John Cavanaugh, CMC inspector Joseph DeSimone, CZOP inspector Brandon Grosso, CZOP inspector Chris Lauch, and CMC inspector Jason Laspada. Not pictured: CZOP inspector David Betzner.

Morrone also allegedly paid some inspectors to do home improvements at his and his mother's houses while they were billing the taxpayers for the work.

Rosetti also allegedly billed for and received payment for hours that he did not work.

The other eight charged are:

  • PennDOT Inspector Frank DiMichele, 49, of Norristown, PA;
  • PennDOT Inspector Generoso Palmieri, 60, of Glenside, PA;
  • CMC Inspector John Cavanaugh, 61, of Philadelphia;
  • CMC Inspector Joseph DeSimone, 34, of Philadelphia;
  • CMC Inspector John Laspada, 40, of Philadelphia;
  • CZOP Inspector Chris Lauch, 50, of Dover, DE;
  • CZOP Inspector David Betzner, 72, of Port Saint Lucie, FL; and
  • CZOP Inspector Brandon Grosso, 33, of Boothwyn, PA.

All 10 were charged with two counts of corrupt organizations, and one count each of theft by deception, theft by unlawful taking, bribery in official and political matters (except DiMichele), tampering with public records and criminal conspiracy.

Morrone and Rosetti were also charged with one count of receiving stolen property.

How it Worked

Allegations surrounding the scheme laid out in the presentment included:

  • DiMichele allegedly "was completely unqualified for his position and instructed to lie on his resume by a childhood friend at District 6."
     
  • Cavanaugh, also unqualified, was allegedly instructed by Rosetti to add two hours of overtime to his timesheet each day and give $140-150 per pay period as a "street tax."
     
  • Grosso, who had no construction experience, was hired after Rosetti, his brother-in-law, told him  how to lie on his resume. Grosso paid Morrone $120-140 per week for "protection" in exchange for allowing him to add about three hours of overtime to his timesheet each week and lie about mileage.
     
  • DeSimone and Laspada allegedly provided kickbacks to Morrone to overlook fraudulent billing and rarely visited job sites they had claimed to inspect.
     
  • DeSimone allegedly billed eight hours for work he did not perform at a construction site that had been shut down due to an emergency.
     
  • Lauch allegedly paid Rosetti $100 a week to ignore bonus timesheets and was laid off after falling behind in kickbacks.
     
  • Rosetti, instructed by Morrone, gave Betzner pre-signed blank timesheets. Betzner improperly billed and was paid $53,000 for hours and mileage for inspection work at a single job site that workers said he never visited.
PennDOT corruption

This flowchart illustrates the kickback scheme's pecking order, according to the AG's office.

Most of the defendants were expected to surrender Wednesday for arraignment, according to the attorney general's office.

Previous Arrests

The attorney general's office started arresting others related to this investigation earlier this year.

In April, DeSimone was arrested and charged with perjury for allegedly lying to a grand jury during the investigation.

In July 2014, contractor Thanh Nguyen was arrested for allegedly stealing at least $3.6 million by submitting false invoices. Nguyen also bribed Robert Slamon, a CZOP inspector who was also arrested in July, to ignore his own fraud, according to the grand jury.

"Our ongoing investigation of PennDOT District 6 has exposed nearly $5 million in fraud in Philadelphia and the surrounding counties," Kane said.

"I urge anyone with information regarding corruption at District 6 or any other Commonwealth entity to contact my office immediately."

   

Tagged categories: Contractors; Department of Transportation (DOT); Fraud; Government contracts; Inspection; Laws and litigation; North America; Program/Project Management; Roads/Highways

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