DeRosa judge sends message

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com

PITTSBURGH — A judge showed little sympathy toward Nicholas DeRosa for his role in the Affordable Housing mortgage scandal.

However, U.S. District Judge Gustave Diamond made one concession. The retired New Castle educator and former city councilman could be housed in a federal prison close to home — if accommodations were available.

Diamond rebuffed defense attorney Efrem M. Grail’s request for a reduced sentence yesterday afternoon when he ordered that DeRosa spend 41 months in prison, pay approximately $312,000 in restitution and serve three years of supervised release.

“It’s appropriate to send an important message to officials who want to line their pockets,” Diamond said. “Hopefully, this will deter other public officials from engaging in similar conduct.

“The sentence is one that should protect the public from the defendant.”

The U.S. Attorney’s Office targeted the North Cascade Street resident as the leader of a scheme to sell handpicked structures to a nonprofit agency at inflated prices. DeRosa owned or co-owned four of the seven properties.

Affordable Housing of Lawrence County obtained a $250,000 loan in December 2005 for the purchases. Within three months, the agency declared itself insolvent with debts nearing a half-million dollars.

DeRosa, indicted by a federal grand jury, originally pleaded not guilty to felony counts of bank fraud, mail fraud and money laundering conspiracy. Prosecutors filed the charges in July 2009. He changed his plea last October.

DELAY

Prior to sentencing, DeRosa forced a 20-minute delay when he attempted to withdraw his plea agreement.

“The motion he has made today is his,” Grail said. “With respect to this matter, I have a conflict.”

DeRosa said he struggled with admitting guilt.

“I can’t change my (original) plea for things I didn’t do,” he said.

However, he was concerned for his family, which includes two grandchildren.

“I tried to stop the suffering of the family. That was really the reason I changed my plea (in October).

“Since that day I haven’t been right. I haven’t had a good night’s sleep since I signed my plea. I should have never signed those papers.”

DeRosa then claimed he did not write the Feb. 22 letter to Diamond in which he professed his guilt. He stated Grail’s office produced the correspondence.

“I didn’t know I had to write a letter. I glanced at it. It looked all right to me.”
DeRosa acknowledged he had signed the letter.

“I would have never called myself a convict. I would have never said I was broke.”

Diamond then responded.

“You have a master’s degree in education?”

DeRosa answered yes.

“You sent this letter to me. Where did you think this letter was going?”

To approve DeRosa’s motion, Diamond said he had to consider three issues: DeRosa’s assertion of innocence; a valid reason; and show the government’s case would not be prejudiced by the action.

“You have not even come close,” the judge said. “On the contrary, the evidence is very strong against you in this case.”

He later commented, “I’ve not heard an assertion of innocence yet. Are you denying your guilt in this case?”

DeRosa didn’t directly answer.

The judge then denied the change of plea request.

With the hearing under way, Grail portrayed DeRosa as a proud and kind man who spent his life helping his community.

“The government would have the court believe Mr. DeRosa is the worst criminal in the last 15 years,” he continued. “Mr. DeRosa admitted to taking $12,500.

“(He’s an) aging 65-year-old struggling to understand the events around him.”

Grail pointed to co-conspirators Gary Felasco, Robert Ratkovich and Donald “Ducky” Conti as the men responsible for the fraud.

“Mr. DeRosa wasn’t a member of this board. He didn’t make decisions.”

Conti, who received immunity from prosecution, served on the Lawrence County Housing Authority and Affordable Housing boards.

A convicted former county treasurer, Felasco had been the housing authority chairman. Ratkovich was Affordable Housing’s consultant and oversaw the housing authority’s maintenance department. They received reduced sentences for their cooperation.

Grail said DeRosa made another mistake he didn’t disclose to the court.

“He spent his time with people who did bad things.”

POWER

Assistant U.S. Attorney Brendan T. Conway said Felasco, Ratkovich and Conti produced evidence that DeRosa was a man of enormous power.

“He was the power broker and behind-the-scenes person to make things happen,” he said.

Before sentencing, Diamond briefly discussed the letters he received related to the case. DeRosa’s backers spoke of his good works, while foes detailed an unflattering portrait.

“They virtually cancel themselves out,” he said.

At Grail’s urging, unsigned letters were removed from court documents.

Diamond cited the seriousness of the crime in denying a reduced sentence.

“The fact an individual has a clean record does not give him a free, one shot (to commit a crime),” he said. “That message should be conveyed.”

Along with the 41-month prison term, Diamond ordered DeRosa to repay $224,000 to First Commonwealth and $88,000 to Affordable Housing. With the nonprofit operation no longer in operation, it is uncertain if the housing authority would receive the funds. The authority created Affordable Housing in 2003 using $200,000 in federal funds.

An attempt to reach the U.S. Attorney’s Office for clarification was unsuccessful.

The U.S. Department of Housing and Urban Development, which funds the housing authority, has consistently declined to discuss the case.

Diamond said the government may take 10 percent of DeRosa’s $8,000 monthly pension for repayment. Conway had asked for a higher amount. The judge also declined to assess a fine.

DeRosa, who has 10 days to appeal Diamond’s sentence, was given until noon May 19 to report to the U.S. Marshals Service. He remains free on an unsecured $10,000 bond.

“The prison time received by Mr. DeRosa should serve as a strong warning that tough punishment awaits those who embark on a similar criminal path,” said Thomas Jankowski, special agent in charge, IRS-Criminal Investigation, Pittsburgh field office.

The IRS-Criminal Investigation unit is part of the Mortgage Fraud Task Force that investigated DeRosa.