Caroselli, Beachler & Coleman, L.L.C.

Kids for cash case continues to unfold

Breaking news in the "Kids for Cash" scandal has just come out that one agreement in particular with Pennsylvania Child Care (PACC) and Western Pennsylvania Child Care (WPACC), completed in 2004, was worth $58 million worth of juvenile conviction referrals. It was, however, later negated as an "unreasonable contractual obligation" of government monies.

While the $58 million "big one" got away from the two judges and their cohorts, prosecutors have duly noted that PACC and WPACC were co-owned for most by Robert Powell, as mentioned in previous posts, but also by attorney Gregory Zappala, who worked for J.P. Morgan Securities and eventually bought out Powell's interest in the PACC and WPACC in 2008 as a way to shake the FBI who was investigating both firms at the time. 

According to Michael J. Cefalo and Associates, talks of opening the detention center began in June 2000 between the Mark Ciavarella and Robert Mericle in an effort to put out the word about who might be interested in constructing a juvenile detention facility in Luzerne County. Mericle's job was to find the building site, which Powell and Zappala would eventually buy before setting the final plans into motion.

Now, part of the prosecutions job is to figure out how and why a professional contractor like Mericle, or businessmen like Powell and Zappala, would feel so comfortable approaching a judge about offering kickbacks in return for juvenile offenders in their "prison for profit" juvenile detention center. Most believe that Ciavarella knew what was going on the entire time and may have even perpetuated the entire scheme. It is also thought that he then spoke to Judge Conahan about helping him and taking some of the load of referrals so that it didn't look so bad for Ciavarella.

As of now, prosecutors do know that on 21 January 2003, Mericle wired over $600,000 to a still-unknown party, who then laundered it to a company called Beverage Marketing of PA--owned by, believe it or not, Michael Conahan. The fraud and tax evasion went on for six years until 2009 when the United States Attorney's office finally charged both judges. Estimates are that both judges split somewhere in the ballpark of $2.6 million, but Cefalo will argue that the real number is much higher.

The conspirators involved, in fact, set up quite a sumptuous network of companies like Beverage Marketing of PA, that are known as "shell" companies: a means to transfer funds and hide illegal profits. Cefalo believes that transactions between Powell and Mericle, and then Judges Ciavarella and Conahan, took place regularly going as far back as 2002.  

In January of 2002, Conahan surreptitiously signed something called a "Placement Guarantee Agreement," a sort of rental agreement, with PA Child Care guaranteeing $1.3 million be paid annually to the owners of the detention center.  Part of the agreement postulated that the duty of payment would be "complete and unconditional," but then, eleven months later in December 2002, Conahan withdrew funding for the detention facility. The prosecution is still unsure why Conahan withdrew the funding, but it is believed that it was a sign of good faith toward Powell and Mericle, only to be withdrawn so as not to leave a paper trail.

As the facts unfold and the disgrace continues for the once-respected men involved, Cefalo promises to be unyielding in his attack on what he considers to be true harbingers of greed without remorse.

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Caroselli, Beachler & Coleman, L.L.C.
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