Government’s case againt DeRosa: Piles of quarters, nicknames and bingo

Oct. 30, 2010

Patrick E. Litowitz
New Castle News

NEW CASTLE — The government’s case against Nicholas DeRosa centered on mortgage fraud.

However, prosecutors were prepared to discuss quarters, nicknames and bingo.

And defense attorney Efrem Grail did not want a jury exposed to those topics.

DeRosa’s guilty plea Thursday in the Affordable Housing scandal made Grail’s effort to suppress parts of the government’s evidence no longer necessary. The 65-year-old New Castle resident pleaded to felony counts of bank fraud, mail fraud and conspiracy to commit money laundering.

The retired city school district administrator will be sentenced March 1.

Grail targeted six areas in his motion to exclude evidence. Court paperwork highlights some of the information investigators collected as they worked to bring charges against those responsible for defrauding First Commonwealth Bank of $250,000.

The issues were New Castle building code violations and tenant complaints; nicknames; and the alleged receipt of stolen quarters, embezzled contract fees and bingo funds.

Grail argued that the evidence was improper and served “to sully Mr. DeRosa’s character in the eyes of the jury, to show he has a propensity to do wrong, to paint him as a bad person.”

The Pittsburgh-based attorney said the crime took place over short span and the evidence’s prejudicial nature outweighed any value it might provide.

“Nevertheless, the government has produced wholly unrelated … material alleging prior bad acts by Mr. DeRosa dating as far back as the (1990s) … ,” Grail wrote.

Assistant U.S. Attorney Brendan T. Conway said he did not expect additional charges to be filed. However, he would not comment when asked if the evidence would be turned over to other law enforcement agencies.

CODE VIOLATIONS

Using a $250,000 loan from First Commonwealth and a portion of the $200,000 in federal funds provided by the Lawrence County Housing Authority, Affordable Housing of Lawrence County purchased seven properties in December 2005. The appraisals that Castle Realty Appraisal Services Inc. presented to First Commonwealth depicted one condition.

Prosecutors presented another using a government expert and the city’s code enforcement department. The government argued little change in property condition from the time Castle Realty issued its appraisal until state-certified appraiser R. Robert Barone Jr. provided his assessment 10 months later.

DeRosa owned or co-owned four of the properties.

“(D)uring that time period, 10 truckloads of trash were removed from five of the seven properties, and they were cleaned up. In one property, the one located at 857-859 Frank Avenue, the basement was filled with garbage … ,” the government wrote in rebuttal to Grail’s motion.

“Many of these properties had reached the ends of their economic lives, and significant investments had to be made into the properties to make them habitable.”

DeRosa was the sole owner of the Frank Avenue property.

In another example, code enforcement Officer Larry Joseph condemned a Wallace Avenue property co-owned by DeRosa five days after Castle Realty’s inspection. Officer Anthony Cioffi found another Affordable Housing structure, located on Croton Avenue, to be in deplorable condition.

COMMENTS

Investigators also spoke to DeRosa’s former tenants. Among their comments:

•“DeRosa was a slumlord.”

•“Every time something broke, (we) had to fix it (ourselves).

•“There were rats in the place.”

•“It smelled musty and had mold in the structure.”

Saying that no one in the real world likes their landlord, Grail said the tenants’ statements would make DeRosa appear unsympathetic to a jury. He added that it was not relevant or fair to allow them to make negative statements about DeRosa.

While objecting to DeRosa being called a “slumlord,” the defense also argued against introducing testimony referring to the city resident as “Boss Hog” and the “Godfather.” The government learned of the nicknames through an interview with Gary Felasco, former county treasurer.

Grail said the terms were “highly prejudicial as it paints Mr. DeRosa as corrupt, as a mob boss, and as criminal.” He added that “Godfather” is a term that continues the stereotype of “Italian Americans’ involvement in organized and sustained criminal enterprises.”

Felasco was convicted in 2006 of theft and embezzlement while in office. A portion of the funds from the Affordable Housing mortgage scam paid for his legal bills, the government said. He pleaded guilty to failing to file a tax return in connection with the unreported proceeds.

MONEY ISSUES

The government also obtained witness statements regarding DeRosa’s alleged role regarding stolen money. As Grail detailed in his motion, DeRosa was never charged in the reported incidents.

The first area involved the theft of quarters from laundry machines based in county housing authority properties. In creating Affordable Housing, the authority turned over management of its washing facilities to the nonprofit agency.

Donald “Ducky” Conti told investigators of the alleged scheme during a July 3, 2008, meeting. Conti served on the housing authority and Affordable Housing boards.

Conti collected the quarters and placed them in bags, which were left in his car’s trunk. He usually had $1,300 to $1,500 before DeRosa contacted him, court records stated. DeRosa reportedly phoned him within a day of the collection.

“From the first time he collected the coins, they were taken to DeRosa’s house,” according to prosecutors. “Conti pulled into DeRosa’s garage, the garage door was closed, and DeRosa and Felasco took the bucket of coins into the house.”

Conti estimated Felasco and DeRosa each collected $800 to $1,000 a year from the coins.

Felasco told investigators of a second alleged scheme involving the housing authority. This one dealt with contract fees for grass cutting.

Felasco said he and DeRosa told a housing authority maintenance provider to bid on lawn cutting services. As part of the deal, Felasco alleged, the company would include kickbacks to Felasco and DeRosa as part of the bid. The business also was told to cut the grass every nine days but to bill the housing authority every seven days.

“The government has no proper purpose in offering the evidence,” Grail said. “Its introduction can only be to show that Mr. DeRosa has a propensity to attempt to benefit improperly from others’ business dealings with Lawrence County municipalities.”

NEXT NUMBER

Lastly, the government alleged that DeRosa and Felasco took money from a county bingo hall. Felasco made the statement to investigators in August 2006. He originally denied the claim two years earlier.

The incident reportedly occurred when Felasco was running for county treasurer. A bingo hall operator told him that the small bingo games were hurting his business and he wanted to get rid of the competition.

“At the time Felasco became treasurer, bingo was big business in Lawrence County,” a government investigator wrote. “(The operator) was busing people in from Ohio to play bingo.

“DeRosa and (the operator) became friends and hatched a plan that Felasco would go out and get rid of the small bingos.”

Upon becoming treasurer, Felasco used the state tax regulations and closed some of halls. In return, court records stated, DeRosa and Felasco reportedly received payments of $1,000 each.

Felasco did not provide the total amount they reportedly received.

Had DeRosa not pleaded guilty, his trial was scheduled to begin Monday.