Affordable Housing scandal snares two

Published July 15, 2009

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com

Two New Castle residents will answer to federal charges as part of an investigation into a defunct housing agency.

The U.S. Attorney’s Office in Pittsburgh yesterday alleged Nicholas DeRosa, 64, of 221 N. Cascade St. and Robert Ratkovich, 40, of 512 Norwood Ave. engaged in mortgage fraud.

A federal grand jury indicted DeRosa on one count of bank fraud, two counts of mail fraud and one count of money laundering conspiracy. Prosecutors filed a bill of information against Ratkovich, charging him with one count of bank and mail fraud conspiracy and one count of money laundering conspiracy.

The reported fraud focuses on First Commonwealth Bank and a loan it approved for Affordable Housing of Lawrence County.

The Lawrence County Housing Authority created the corporation in 2003 and funded it with $200,000 in federal funds. Affordable Housing declared itself insolvent in March 2006.

“Whoever gave you my phone number, lose it,” Ratkovich told the New Castle News last night.

In May, Ratkovich resigned as the housing authority’s maintenance superintendent. He served in that position since April 2005. Before that, he was the authority’s modernization coordinator.

An attempt to reach DeRosa for comment was unsuccessful. He is a retired assistant superintendent in the New Castle Area School District.

Both men served on city council.

THE CLAIMS

The government claimed DeRosa, Ratkovich, Anthony J. Staph Jr. and a person identified as “G.F.” attempted to defraud First Commonwealth between June 2005 to December 2005. Staph, 43, of 132 Firestone Drive is a city-based real estate appraiser.

Earlier this year, Staph entered a not guilty plea to one count of bank fraud. Pretrial motions in the case have been moved to September.

DeRosa and Ratkovich compiled a list of 14 properties they wanted Affordable Housing to purchase, the U.S. Attorney’s Office said. The rental properties were reportedly ones that DeRosa, family members and friends wanted to sell.

Ratkovich, who had served as the group’s consultant, allegedly recommended to Affordable Housing’s board that it enter into the purchases.

“Unbeknownst to most of the Board of Directors of AHLC, the defendant, Nicholas DeRosa, had entered into agreements with some of the sellers of the properties to kick back money to him after the closings,” according to court records.

REJECTED

First Commonwealth, which has a branch in New Castle, rejected the initial loan proposal. The board trimmed its list to seven properties and reapplied for a $250,000 loan, which the bank approved.

The group obtained the structures in December 2005 for $327,000.

The properties were purchased from DeRosa, 857-859 Frank Ave. ($49,000); DeRosa and John Orlando, 502 Florence Ave. ($48,000), 217-219 E. Wallace Ave. ($45,000) and 1806 Highland Ave. ($72,000); Harry DeRosa, 445-445 1/2 N. Cascade St. ($40,000) and 1123-1125 Dewey Ave. ($45,000); and David L. Defibaugh, 446 Croton Ave. ($28,000).

The government charged that Staph prepared appraisals “that he then knew were false and fraudulent.” The appraisals reportedly misrepresented the value and conditions of the properties in addition to whether they were occupied.

MAIL FRAUD

The two counts of mail fraud against DeRosa involve an unsigned power of attorney that was sent and returned in November 2005 from a person living in Florida. Court records identify the individual as “J.O.” The document was reportedly used in the sale of properties to Affordable Housing.

The board paid Ratkovich $45 an hour to serve as its consultant. During his time with Affordable Housing, he received approximately $60,000.

The government charged that Ratkovich and DeRosa knew that Ratkovich’s recommendation to Affordable Housing “was not the product of a true search of eligible properties and the sale prices were not the product of arm’s length negotiations.”

The indictment claimed Ratkovich also submitted false financial projections regarding the properties to First Commonwealth as part of the loan application.

Ratkovich’s wages also came into question with government attorneys, who called the $60,000 “far in excess of the consulting fees he legitimately earned.” The U.S. Attorney’s Office charged that Ratkovich, DeRosa and “G.F.” agreed to share the funds.

KICKBACKS

The indictment also claimed DeRosa received kickbacks as part of the purchases.

In one instance, a seller listed as “D.D.” in court documents paid DeRosa $5,000.

A portion of the reported payoffs were given to a person identified as “R.J.” and placed into that individual’s account. “R.J.” then wrote checks for $25,000 on Nov. 1, 2005, $10,000 on Dec. 10, 2005, and $5,000 on May 3, 2006, to “an entity known to the United States Attorney.”

If convicted on all counts, DeRosa faces a maximum of 50 years in prison, a $2 million fine or both, according to the U.S. Attorney’s Office. The government said it will also pursue forfeiture of property and cash.

Ratkovich, if found guilty, can be sentenced to a maximum of 40 years in prison, a $750,000 fine or both. The maximum sentence for Staph, if convicted, is 30 years in prison, a $1 million fine or both.

Arraignment dates for DeRosa and Ratkovich have not been announced.

FELASCO

Gary F. Felasco, a former county treasurer, pleaded guilty in February to a misdemeanor charge of failing to file a tax return for 2005. At the time, the U.S. Attorney’s Office said the charge was separate but related to the case involving DeRosa, Ratkovich and Staph.

Felasco is scheduled to be sentenced in August.