Wednesday, March 23, 2011

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.

Monday, March 21, 2011

DeRosa letters keep on coming

By PATRICK E. LITOWITZ
New Castle News

Nicholas DeRosa’s backers and detractors continue their letter campaigns as the retired educator prepares to be sentenced for mortgage fraud.

Federal prosecutors and DeRosa’s defense team submitted 10 letters Friday to U.S. District Judge Gustave Diamond. The New Castle resident will be appear at 10 a.m. Tuesday in Pittsburgh federal court.

In a deal accepted on Oct. 29, 2010, DeRosa pleaded guilty to felony counts of bank fraud, mail fraud and conspiracy to commit money laundering. As his court date approached, the retired city educator attempted to minimize his role in the scheme that caused Affordable Housing of Lawrence County to default on a $250,000 loan from First Commonwealth Bank.

Family members, friends, city school district administrators, Slippery Rock University officials and other associates offered support to DeRosa through letters.

Publication of the correspondences generated criticism from city residents, who attacked DeRosa and those backing him. The latest letters, including one from a district principal and a former school board member, highlight DeRosa’s divisive nature.

Mark Elisco, principal of the George Washington Intermediate Elementary, said he worked with DeRosa as an educator and on city council.

“Without question, Nick has been one of the most influential forces for the common good in my professional life,” he wrote on personal stationery.

“I learned from Nick how to squeeze dollars out of tight municipal budgets for low-income budgets to use for recreational facilities for kids to use as athletics, arts and crafts, and free lunches throughout many summers.

In her letter to prosecutors, former board member Andrea Przybylski turned in a state audit of school operations, dated July 2003.

The state Department of the Auditor General’s report focused on DeRosa’s travel practices, financial interests, reimbursements and food purchases made from the district.

“DeRosa’s actions in the HUD scandal were not a result in a lapse of judgment, but a pattern of behavior which included abuses of his position, as assistant superintendent, at the cost of taxpayers and students,” she wrote.

“As a former board member, I witnessed his significant influence in a system plagued by nepotism, favoritism and questionable practices.”

Edward L. Van Dusen, another city resident called for jail time.

“People get sent to jail for stealing $50 from Walmart or Uni-Mart, usually because they are poor or need drug money,” he wrote. “Here we have an intelligent, well-paid college graduate who does not have to steal to put food on his table conspire to steal from the U.S. government.”

In her support of DeRosa, city resident Amy DiMuccio rejected a New Castle News editorial that suggested people backing the former educator didn’t represent the views of most city and county residents.

“(What) I don’t understand is why the New Castle News felt compelled to print articles that question the motives of those who support Mr. DeRosa and encourage people to write to (the U.S. Attorney) and give you “ammunition” to use against Mr. DeRosa.”

An 86-year-old woman from DeRosa’s Croton neighborhood expressed her anger with his supporters.

“We’re from a little town in New Castle, Pa., or ‘Little Italy,’" she wrote. “With Mr. DeRosa … if you are Italian you are ‘in.’ Many people (if you were Italian and especially if you had the Dolly Parton look) got jobs with his help.

“No doubt the judge will rule in his favor and he will avoid jail time and receive probation only.”

Thursday, March 17, 2011

Candidates critical of city board and Gabriel

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com

Two school board candidates showered New Castle’s superintendent with criticism last night.

Board member Dr. Marilyn K. Berkely later joined John B. Rossi and Lynne Ryan in faulting George Gabriel’s professional and personal judgment. The comments came during the board’s regular meeting.

Complaints ranged from fiscal responsibility and the early learning center to district letterhead and open records compliance.

Rossi said Gabriel and the board failed to heed an ad-hoc committee’s recommendation against the creation of a $19 million early learning center on the Harry W. Lockley Kindergarten Center site.

“There was an uncertainty in the air and at those meetings regarding the financial future of the district’s state and federal subsidies,” the East Lutton Street resident said.

“We can see the committee was point on with our concerns in light of the recent development of Gov. (Tom) Corbett’s proposed educational budget.”

Gabriel said declining financial resources and student enrollment require the district consolidate its resources.

“This is very little financial benefit by abandoning the Lockley project in favor of the status quo. All of our district primary buildings are in need of comprehensive upgrades.”

APPROVED

The board originally rejected a $31 million renovation of George Washington Intermediate Elementary School and the creation of a kindergarten-through-second-grade facility.

When the district qualified for a $15 million, no-interest federal loan, the project’s scope was scaled. The Lockley renovation was approved in June 2010.

Rossi also related to the board that a letter appearing in The News, which called for change on the board, offended Gabriel.

“I did not mean for us to do away (with) all the good things that have been accomplished and continue to be accomplished in this district,” Rossi said of the exchange that occurred at a boys basketball game.

“Rather, the change that I hope for is the change in the ‘business-as-usual’ mentality that operates with many on this board as well as a change of faces on the board so that others can come forward to share their time and their talents for this district.”

Gabriel said he had asked Rossi for clarification.

“I see all the good things going on in this district,” the superintendent said. “When I asked you, ‘John, what change are you talking about?’ ... And I’m going to quote you. ‘Faces. Faces.’ That wasn’t an adequate answer.”

Rossi cited the early learning center and the 2007 sale of the former Ben Franklin Junior High as two examples of business as usual.

“I don’t know what went into (the sale of Ben Franklin),” he said.

“You’re admitting you don’t know what went into that,” Gabriel responded.

“Right.”

“But you want changes based on that.”

“Right.”

CHASTISE

Ryan, who lives on Highland Avenue, chastised the administration’s response to the open records request involving the city’s youth football program. Board member Barbara Razzano is suing the district for the organization’s records.

Ryan said the district provided a new batch of bank records from Huntington Bank on March 9. The records belong to board member Mark Kirkwood, who had assisted Red Hurricane head coach Frank Bongivengo in running operations for one season.

“I’m curious when you sought to obtain these documents,” she said. “Contrary to what you might believe, there is a slew of parents behind this that are very upset.”

Like Rossi, she said the district could not afford an early learning center. Her complaints extended to the delayed posting of records on the school system’s website and the district’s committee policy.

“If this district’s goal is to make a difference in the lives of our students, I think we can do a little bit better and make a little bit more positive influence and example,” she said. “Hopefully, we can protect the taxpayers’ money a little bit more prudently.”

DeROSA

Berkely then discussed former administrator Nicholas DeRosa, who pleaded guilty to federal charges involving mortgage fraud. Gabriel, business manager Joseph Ambrosini and Principal Debra A. DeBlasio each sent letters on DeRosa’s behalf to the federal judge hearing the case. District letterhead had been used in the correspondences.

“I would like to take this opportunity to state publicly that the opinions of our recent administrators regarding Mr. DeRosa are not shared by this board member,” she said. “In my view, it was a mistake to place personal opinions on official stationary ...

“We need to be ever mindful of the image we present to our students and our community.”

Gabriel said DeRosa has been a friend of 40 years.

“I am not here to defend him. I didn’t defend his actions in that letter and merely stated (my) opinion.

“Did I make a bad judgment using letterhead? You can say ‘Yes,’ but even at that it’s a weak argument. I never represented anyone on this board or in this community.”

Wednesday, March 16, 2011

Missing money may affect scholarship awards

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com

Pennsylvania State Police are investigating the theft of funds earmarked for scholarships.

The Lawrence County School Counselors Association contacted state police about the loss of approximately $3,300. Michele McClelland, president of the nonprofit group, said the money was taken during a two-year period.

“Our whole goal is to reclaim the money and to give it back to the students for scholarships,” said McClelland, a counselor at Laurel Junior-Senior High.

The association, which has close to 30 members, includes school counselors from the county’s eight school districts and the Lawrence County Career and Technical Center. The group provides monthly network and professional development opportunities.

The organization’s lone fundraiser is an annual college/career fair held in September at Westminster College. Postsecondary institutions pay a fee to appear at the event.

McClelland said the group uses the funds to award scholarships in May to two seniors from each school district and the career center. “We don’t make any money,” she said.

State police said a 62-year-old woman, who was not named, is a suspect in its investigation. Police said she received $3,355 in checks and failed to forward them to the group’s treasurer. The money was reportedly placed into her personal bank account.

McClelland said the woman is not affiliated with the association. She was hired to provide minor clerical support during the fundraiser.

McClelland said the group had enough money last year to give out scholarships.

“We’re concerned about this year,” she said.

Tuesday, March 15, 2011

Judge unmoved by pleas of DeRosa

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com

Nicholas DeRosa’s role in a Lawrence County mortgage fraud is not subject to revision.

To the U.S. Attorney’s Office, he was “an influential behind-the-scenes power broker” and “used his authority in the New Castle and Lawrence County communities to line his pockets and finance a gambling habit.”

A federal judge and prosecutors each addressed DeRosa’s effort to seek a reduced sentence on felony counts of bank fraud, mail fraud and conspiracy to commit money laundering.

The New Castle resident, scheduled to be sentenced at 10 a.m. March 22, attempted to minimize his role in the scheme that caused Affordable Housing of Lawrence County to default on a $250,000 loan from First Commonwealth Bank. The loss included an additional $200,000 from the Lawrence County Housing Authority, which created the nonprofit housing agency.

Reviewing the U.S. Probation Office’s report, District Judge Gustave Diamond said DeRosa’s objections would not affect the sentencing guidelines. He noted the parties agreed to the facts associated with the case.

“Accordingly, the court will adopt herein the description of defendant’s offense conduct as set forth in the written factual basis.”

DeRosa sent a letter to Diamond in late February. He accepted responsibility for his actions but attached conditions to his guilt. The retired educator claimed he took kickbacks from two friends and that others were responsible for carrying out the fraud.

He also included letters of support from Slippery Rock University’s president and trustees; former and current New Castle school district administrators; a former common pleas judge; and union leaders.

The action upset federal prosecutors, who sought a continuance to respond to DeRosa’s request.

“The investigation revealed that DeRosa and his co-conspirators duped Affordable Housing into purchasing (seven) properties and First Commonwealth into lending Affordable Housing the majority of the money needed to make the purchases,” wrote Assistant U.S. Attorney Brendan T. Conway.

Conway said testimony from co-conspirators Donald “Ducky” Conti, Gary Felasco and Robert Ratkovich pointed to DeRosa as the group’s ringleader. Conti, who served on the housing authority and Affordable Housing boards, was granted immunity for his cooperation.

Felasco is a convicted former county treasurer and one-time housing authority chairman, while Ratkovich was Affordable Housing’s consultant and had run the housing authority’s maintenance department. They received reduced sentences.

The government also produced 18 letters, eight of them unsigned, calling for DeRosa’s punishment.

“I have been a resident of Lawrence County for most of my life and have seen a lot of criminal activity with regards to politics,” Ed Urian wrote. “This is only the tip of the iceberg. Please throw the book at this man if for nothing more than making an example for the rest of the local politicians to take heed.”

DeRosa faces up to 46 months in prison. Diamond said DeRosa is required to make restitution of approximately $344,000. Citing his $100,000 annual pension, the government is also seeking a fine that could range from $7,500 to $1 million.

“He also owns a nice home and a condominium in Florida,” Conway wrote. “He is therefore more than capable of making payments on both the restitution obligation and a fine.

“A fine would further the goals of sentencing and at least partially cover the enormous expenses associated with this prosecution.”

Saturday, March 12, 2011

Police raid Ellwood meth lab

By LISA MICCO
and PATRICK E. LITOWITZ
lmicco@ncnewsonline.com
plitowitz@ncnewsonline.com

The noxious fumes hit Andy Petyak as he entered the Ellwood City home yesterday afternoon.

Seeing two preschoolers inside made the former federal drug agent sick.

Led by the borough police department, authorities shut down a moving methamphetamine lab. Arrested were William Justin Perrine, 40, and Frank Demaro, no age provided, at 418 Ninth St. Perrine faces felony and misdemeanor drug charges. Demaro, held on a state parole detainer, is awaiting charges.

Lawrence County District Attorney Joshua Lamancusa said the raid was the result of a two-week investigation involving a meth lab that moved between Beaver and Lawrence counties.

“We identified a couple of the targets, and we then conducted an operation last week,” he said. “We ended up raiding a house over in Beaver.

“We hit a lab and realized that based on the information ... there was potentially another lab being run in Lawrence County.”

He credited the cooperation of the borough’s police, fire department and Mayor Tony Court, along with Pennsylvania State Police, New Castle police and the Lawrence County Drug Task Force.

“The chiefs of police of Ellwood and New Castle have just given us free reign to do whatever we can to assist them, and their guys are constantly out there,” Lamancusa said of the joint effort. “It’s extremely difficult and dangerous. Today was a good day for law enforcement and the community of Ellwood.

“We want to send the message that we do not want meth coming into our community.”

He also commended New Castle’s full-time narcotics unit.

“They are one of the major players in our drug task force. They are essentially our backbone.”

Police went to the home at 4 p.m. to serve an arrest warrant to Perrine, who is also known as “The Sandman.” A woman met officers at the door and ran in the opposite direction, screaming Perrine’s name. When police and Petyak went inside, they quickly determined that a meth lab was in operation.

“I’ve been doing this so long that as soon as I crossed the threshold of the door, I smelled it,” Petyak said, referring to the solvents used in the drug’s production. “I knew exactly what was in there.”

As they secured the residence, several officers headed to the basement. One of them noticed an unusual wall construction with a shelf in front of it. Once removed, an entry to a secret room was uncovered. Inside were Perrine and Demaro, along with chemicals used to make meth.

Petyak, who is director of the local task force, said the pair reportedly used the “boxed meth lab” method.

“They completed their process and put everything back in a ready box for the next time they cook,” he said. “So there’s not an active bubbling, churning lab, but the danger is still real.”

Petyak is familiar with this scene. For 23 years, he worked as a Drug Enforcement Administration agent, specializing in meth operations.

The chemicals used to cook meth are toxic and volatile. Neighbors were evacuated as a precaution while a special state police unit from Meadville arrived to assess potential dangers. Petyak expected unit members to be there throughout the night.

“You just can’t bag this stuff up,” Lamancusa noted. “It poses a significant environmental hazard.”

Petyak added that 1 ounce of meth produces 5 to 6 pounds of waste.

“I don’t know the size of the room but as soon as they secured the residence (we) want to get those guys out of there to minimize their exposure to the methamphetamine fumes,” Lamancusa continued.

Petyak said he was concerned with the two children, who were turned over to county Children and Youth Services.

“I know the officers were very upset when they saw the kids,” Lamancusa said.

Petyak noted the youngsters should be taken to the hospital for blood work.

“Children absorb chemicals and other things more readily than adults do. They don’t have the tolerance that adults do, and it can affect their livers.

“You see the little girl come out with the stuffed animal. It’s bad.”

(Reporter Dan Irwin contributed to this story.)

Friday, March 11, 2011

One-derful

By PATRICK E. LITOWITZ
Progress 2011

The New Castle school system’s pre-kindergarten classes introduce youngsters to early learning.

The program has generated success during its seven years in operation.

The district’s proposed kindergarten through second-grade facility — the Harry W. Lockley Early Learning Center — is expected to bolster those efforts.

“The stuff we do in here is what we did in kindergarten when I was younger,” said April Lemmon, a teacher at the Croton Pre-Kindergarten Center and a Ne-Ca-Hi graduate.

“You can really tell the kids that come from a Pre-K program as opposed to day care because they learn a lot,” she said.

“When they go to kindergarten, they’re not lost.”

Terence P. Meehan, administrative assistant to Superintendent George Gabriel, said the center is an important piece of the early learning initiative.

“I see this every day what these kids can do. The sentences they can complete. The way they can communicate,” he said.

“If we don’t build on it, it’s a loss of time and effort. We come out of the gate with a head start, but what we’re doing in New Castle is very progressive.”

The center will also reverse the practice of separating students into neighborhood schools, Meehan said.

“The kids would come here and start friendships that were invaluable,” he said. “Then they’d all go to Lockley for kindergarten. Then all of the sudden they would split up into three (John F. Kennedy, West Side and Thaddeus Stevens primary centers).

“Now we’re one unified district. I think that word ‘unified’ is critical. That will be a major benefit of the early learning center.”

Familiarity is a byproduct of unity, Meehan said.

“There’s a lot to say about familiarity. Some people say familiarity breeds contempt and they might be correct in some situations.

“For an early learner, familiarity is an ingredient to success.”

Starting with the pre-kindergarten students, reading skills are emphasized.

“When they go to kindergarten, they’re going to read,” Lemmon said.

Meehan said students that have had that extra year have consistently been academic leaders within their grade level. District students receive structured reading instruction through seventh grade.

“With all this data from all these years of information, we hope we can identify kids’ strengths and weaknesses.

Meehan said the early learning approach isn’t new in the educational community.
“I’ve never worked in a K-2 center, but I believe in it based on what I see from our early learners in the Pre-K program.”

Lemmon said the changes are tremendous when comparing students from the beginning to the end of the school year.

“When you teach them to make the first letter of their name ... just the look on their faces when you teach them as something as simple as that is priceless.”

Thursday, March 10, 2011

New Castle rocked in proposed budget

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com

Gov. Tom Corbett’s proposed budget would pound the New Castle Area School District with an “economic tsunami.”

Corbett presented a $27.3 billion spending plan Tuesday, which must be approved in the Republican-controlled General Assembly. While it represents an $866 million reduction from the previous year, public schools would receive $1 billion less in support, the Associated Press reported.

Superintendent George Gabriel said preliminary figures from the state show the district losing $3.3 million for the 2011-2012 school year. Approximately $40 million will be spent this school year.

“This will fundamentally change the way we deliver instruction,” he said. “We will no longer have relatively small class sizes.

“This is all going to have a negative impact. Ultimately, it’s going to hurt our kids.”

The district’s basic education funding would see a $2.3 million shortfall. Corbett declined to finance a special grant that pays for pre-kindergarten programs statewide. The monies provided approximately $871,000 for the Croton Pre-Kindergarten Center.

“We’re going to assess everything from pencils to staffing needs,” Gabriel said. “There’s going to be a comprehensive look at the needs of the district.”

He said the pre-kindergarten program and the $19 million early learning center would be included in that examination.

“It’s too soon to say anything about pay freezes or cutting X amount of teachers, but there is a reality that we are going to have to take some steps to make up for that money.”

Business manager Joseph Ambrosini said preparations from the district’s 2011-2012 budget have started. He expects it to be presented to the board and public in May.

“Every line item in the budget is going to be scrutinized,” he said.

Ambrosini noted that 65 to 75 percent of the district’s funding comes from state sources.

“The impact on a lower social-economic school district is going to be greater than those who rely on real estate taxes,” he said. “This (budget cut) is larger than anyone expected.

“There’s no question that the experiences my kids have had in the district with the programs and individualized attention is not going to be the same in the upcoming years.”

New Castle has a $12 million fund balance, $3 million of which is set aside for capital improvements. The administration and board will determine how those dollars will be applied.

The district’s tax rate has been 17.27 mills for the last eight years, Ambrosini said.

In his address, the governor called on public school employees to take a one-year pay freeze. He estimated the move could save $400 million.

New Castle has started negotiations with its teachers union, whose contract ends in June. The district reached agreements last year with its secretary and custodial workers. However, their health care benefits are tied to the teachers’ contract.

(The Associated Press contributed to this story.)

Thursday, March 3, 2011

Dissolving company expected penalty

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com

Castle Realty Appraisal Services Inc. is out of business but exists on paper.

Senior U.S. District Judge Gustave Diamond had to acknowledge that fact Tuesday when he sentenced the Neshannock Township firm for its role in the Affordable Housing mortgage scandal. It was ordered to pay $244,000 in restitution to First Commonwealth Bank and to serve two years of probation on its conviction of bank fraud.

The government charged the appraisal company authored inflated property assessments to First Commonwealth. The bank used the appraisals to approve a $250,000 loan in December 2005 that allowed Affordable Housing of Lawrence County to purchase seven properties.

The nonprofit agency went into default months later. Overall losses, which included $200,000 from the Lawrence County Housing Authority, amounted to approximately a half-million dollars.

“None of us are agonizing over this,” company attorney Thomas J. Farrell said yesterday.

Castle filed articles of dissolution with the state in mid-February. Decertification can take place in as early as 30 days.

“The judge is obligated to put it on probation with the condition of paying the balance of the restitution,” Farrell said.

In his review of the company’s presentence report, Diamond said full restitution was mandatory and probation was a proper penalty unless the company officially disbanded.
Farrell said that as part of Castle’s plea bargain it was ordered to pay full restitution. The amount was unknown when it pleaded guilty in October.

The company also agreed to pay $75,000 prior to sentencing.

“It was always known that the full amount would be more than $75,000,” he said. “Even back then, we realized this company was going out of business.”

The verdict will have minimal effect in the appraisal firm’s case.

Since the company does not generate income, it is unable to make payments to First Commonwealth. Farrell said Castle will not be penalized for its inability to pay.
The firm’s sentencing had been set for Tuesday. Diamond rescheduled the hearing and ordered a status conference to be held instead.

Farrell said his client was prepared to be sentenced that day.

“Let’s get this done,” Farrell said. “It’s pretty straight forward, and we all agreed on it.”

Castle Realty Appraisal Services Inc. is not affiliated with Castle Realty, an independent real estate company.

The businesses are separate entities but had operated out of the same Wilmington Road location.

Tuesday, March 1, 2011

DeRosa attorneys seek light sentence

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com
 
Nicholas DeRosa’s attorneys and federal prosecutors can agree one thing occurred last October.

Before U.S. District Judge Gustave Diamond, the New Castle resident pleaded guilty to felony counts of bank fraud, mail fraud and conspiracy to commit money laundering as part of the government’s investigation of mortgage fraud in Lawrence County.

However, the seriousness of the offenses is being questioned.

The scam involving the sale of seven properties to Affordable Housing of Lawrence County resulted in losses nearing a half-million dollars. Affordable Housing officers secured a $250,000 mortgage from First Commonwealth Bank. The Lawrence County Housing Authority, which created the nonprofit agency in 2003, provided $200,000 in funding.

Four of the seven properties sold were either owned by DeRosa or in partnership with John Orlando.

“The really unique aspect from my perspective was the intermingling of the financial crime with the sort of undertow of political corruption,” Assistant U.S. Attorney Brendan T. Conway said after DeRosa’s plea.
 
WINDFALL? 

Defense attorney Jeffrey M. Weimer disputed DeRosa’s financial windfall. Instead of being responsible for more than $200,000 to which he pleaded, DeRosa should be accountable for $12,500, Weimer said. That amount represents money he received from two friends to sell their properties to Affordable Housing.

DeRosa also engaged in “poor judgment to associate with criminals who embezzled money from public finances and diverted it to pay legal fees for their own, unrelated misdeeds.”

Diamond will decide which depiction of the retired educator is accurate when he sentences DeRosa at 10 a.m. March 22 in federal court, downtown Pittsburgh.

Defense attorneys began an assault on the government’s case when they stated their objections to a presentence investigation report prepared in January. The government document outlines the case, DeRosa’s involvement and the sentencing guidelines.
 
OBJECTIONS

Among the items to which they object:

•DeRosa advised Castle Realty Appraisal Services on how to prepare the appraisals.

•He established the sale prices for the properties sold to Affordable Housing.

•The conditions of the properties rested with the DeRosa.

•Affordable Housing consultant Robert Ratkovich and DeRosa shared money from the sales.

•Former county Treasurer Gary Felasco, Ratkovich and DeRosa plotted to pay Felasco’s attorney fees through the Affordable Housing sales.

The objections are part of DeRosa’s effort to receive probation or house arrest instead of the punishment suggested under the federal sentencing guidelines. He could face prison time, probation, restitution, forfeiture of assets and fines. The government agreed to a prison term of no more than four years.
 
FAIRNESS

Weimer also questioned the fairness in sentencing when compared to three of the four parties involved.

“The co-conspirators in this matter served much less time, although they engaged in much more serious criminal conduct,” he wrote in a motion.

Diamond veered from the guidelines when sentencing Felasco and Ratkovich.

Failing to file a 2005 federal tax return, Felasco received three years probation with the first six months under home detention. He faced four to 10 months in prison. The former treasurer was also ordered to repay back taxes with interest.

Ratkovich pleaded guilty on one count of bank and mail fraud conspiracy and one count of conspiracy to launder money. The former city councilman and housing authority maintenance director was sentenced to five years probation for each count, which is being served at the same time. He also was placed under house arrest for eight months and ordered to repay $338,800.

Diamond cited the assistance the pair provided in the government’s investigation as the reason for sentence reduction.

Castle Realty Appraisal Services Inc., a Neshannock firm that ended operations recently, was fined $75,000. The payment to First Commonwealth was a condition of the agreement in which the company pleaded guilty to one felony count of bank fraud.

A fifth person, Michael Trover of New Castle, was charged with three counts of lying to a grand jury. The contractor’s testimony centered on Ratkovich. Trover’s trial is scheduled for 9:30 a.m. March 14.

Weimer added that DeRosa has accepted responsibility for his actions and pointed to his service as an educator and community leader.

“He has suffered in the eyes of those he cares most about: his family, his friends, and members of his community,” the attorney wrote. “He has lost much of his own self-respect, and he experiences periods of great depression along with his feelings of remorse.

“Mr. DeRosa nevertheless remains a much-loved and much-respected member in his community.”