THREE CICERO OFFICIALS AMONG 10 INDICTED IN RACKETEERING
AND FRAUD SCHEME TO LOOT TOWN OF MILLIONS IN INSURANCE MONEY
CHICAGO -- Alleging that organized crime influenced government operations in the Town of Cicero, three officials of the western suburb -- Town President Betty Loren-Maltese, former public safety director Emil Schullo, and former supervisor, trustee and treasurer Joseph DeChicio -and seven other defendants were indicted for allegedly diverting more than $10 million of public money to a third party claims administrator for the town's self-insurance plans for their own personal benefit. Millions of dollars allegedly were siphoned by the defendants to provide themselves with income and to finance investments in a northern Wisconsin golf course, an Indiana horse farm, a home and automobiles. All 10 defendants were charged in a 17-count indictment alleging racketeering conspiracy, fraud, money laundering and federal tax offenses, which was returned yesterday and unsealed this morning rafter FBI and IRS agents began arresting the defendants, announced Scott R. Lassar, United States Attorney for the Northern District of Illinois.
According to the indictment, between April 1992 and March 1997, Cicero paid a newly incorporated and unlicenced insurance administration firm, Specialty Risk Consultants, Inc., (SRC), of Schaumburg, approximately $33.2 million; and SRC spent approximately $18.5 million on town insurance expenses. Loren-Maltese, Schullo and DeChicio, who comprised the town insurance committee, approved payment of approximately $28 million to SRC, knowing that the payments-
often weekly wire transfers of money - without complying with town ordinances and obtaining approval from the town board, as required by a local ordinance. Of that amount, more than $10 million paid to Specialty Risk allegedly was used for the benefit of the defendants and not for the town's insurance expenses. The indictment seeks forfeiture of $10 million, the Four Seasons golf course in Pembine, Wis., which the defendants purchased and renovated to operate a casino gambling business, and a Wisconsin residence.
Loren-Maltese was an aide to former Cicero Town President Henry Klosak until he died on Dec. 28, 1992, and she was married to Frank Maltese, Cicero town assessor and a trustee who died on Oct. 19, 1993. She was appointed a trustee and interim town president in January 1993 to replace Klosak and was elected town president in 1993, 1997 and this past April for a third four-year term.
Also indicted were: Michael Spano, Sr., who was associated with a Cicero trucking company and who allegedly had a hidden controlling interest in SRC; his son, Michael Spano, Jr., controller of SRC and an executive of several related entities; John LaGiglio, a Cicero trucking executive and an executive at SRC and a related company whose interest in the insurance firm was hidden; his wife, Bonnie LaGiglio, a general partner and manager of the Four Seasons golf course; Gregory Ross, a former supervisor with the IRS Criminal Investigation Division in the 1970s and an accountant for John LaGiglio, Michael Spano, Sr., and Specialty Risk, who operated SRC for a period; Charles Schneider, an attorney for John LaGiglio and Michael Spano, Sr., a tax-preparer for Loren-Maltese, a general manager of Specialty Risk for a time, and financial consultant for Cicero; and Frank Taylor, who was hired to manage Specialty Risk for John LaGiglio and Michael Spano, Sr. Taylor is cooperating with the government, Mr. Lassar said.
The defendants were scheduled to appear later today in U.S. District Court. A list of the defendants and charges is attached.
"By disguising transfers from the town as insurance payments, the defendants successfully looted the Town of Cicero of millions of dollars," Mr. Lassar said. "They used their mob connections to turn Cicero into their personal piggy bank."
Mr. Lassar announced the charges with Kathleen McChesney, Special Agent-in-Charge of the Chicago Field Division of the Federal Bureau of Investigation, and James W. Martin, Special Agent-in-Charge of the IRS Criminal Investigation Division.
"These charges will hopefully bring an end to a sad history of government for profit in the Town of Cicero," Ms. McChesney said.
Mr. Martin said: "The IRS is continuing to attack organized crime in Cicero through our tax fraud investigations, just as we began doing 70 years ago."
According to the indictment, Frank Maltese and the elder Spano "were associated with organized crime and used their organized crime relationship to influence the operations of the Cicero Town government." Between February 1992 and November 1998, the defendants, along with Frank Maltese, allegedly conspired to conduct the affairs of SRC through a pattern of racketeering activity consisting of bribery, official misconduct, mail and wire fraud, bank fraud, money laundering and interstate transportation of money stolen from Cicero. Separately, the defendants, along with Frank Maltese, allegedly participated in a fraud scheme to obtain money from Cicero and to deprive its citizens of their right to the honest services of their elected and appointed officials. The defendants allegedly caused the town to divert millions of dollars to Specialty Risk "under the guise of ensuring the payment of health care claims of Town employees and other insurance expenses," when, in fact, a substantial amount of money was used to enrich themselves at the expense of the town and its citizens.
Cicero maintained a self-insured employee health plan and was self-insured for general liability and workers' compensation losses. In 1992, the indictment alleges that the elder Spano, John LaGiglio, Loren-Maltese, Frank Maltese and Taylor caused Cicero to drop Travelers Plan Administrators of Illinois, Inc., as its health claims administrator. SRC, which was never licensed to provide insurance administration services and was secretly controlled by Spano, was incorporated in February 1992 and began providing claims services for town employees in July 1992. Loren_Maltese, Schullo and DeChicio were responsible for fair administration of the plan. No proposal or contract substituting SRC as the town's claims administrator was ever submitted to or approved by the town board. In fact, to provide the appearance of legitimacy to the manner in which SRC obtained the town's business, the indictment alleges that after Klosak died, Schullo caused Klosak's signature stamp to be placed on the SRC proposal to be given to accountants working for the town.
As part of the fraud scheme, LaGiglio hired Taylor to manage SRC and to serve as nominee for himself and Spano Sr. in various business ventures. In turn, Taylor, who was general manager of SRC from 1992 to the spring of 1995, was required to kickback a portion of his salary to the elder Spano. Defendants Schneider and Ross also allegedly managed SRC for Spano Sr. and John LaGiglio at various times.
Certain defendants allegedlypaid bribes to Loren-Maltese, Schullo and DeChicio to influence
them to continue the town's fraudulent overpayments to Specialty Risk. At SRC, John LaGiglio,
the elder Spano, Ross, Schneider and Taylor allegedly failed to keep the town's insurance funds in
fiduciary accounts as required by state insurance law. Loren-Maltese, Schullo and DeChicio
transferred or fired town employees who questioned the town's overpayments to SRC, and they
repeatedly took no action regarding the town auditor's formal recommendations that the town obtain
detailed financial statements from SRC on a regular basis, the indictment alleges.
In December 1993, Loren-Maltese caused Cicero to obtain a $3 million line of credit to borrow money to give to SRC for the payment of health claims when the town had already given SRC more than $8 million that year. In January 1994, as a result of the excessive payments to SRC and its failure to make timely payments of the town's claims, the three insurance committee members caused town employees to accept payroll deductions to defray unmet health care costs. The indictment adds that between 1993 and 1997, the trio of town officials caused SRC to reimburse their personal health claims at 100 percent, exceeding the benefits covered by the health plan, and to provide them with free life insurance.
As part of the fraud scheme, the non-public official defendants established and operated various related companies, including Plaza Partners, Specialty Finance, Inc., Specialty Leasing, Inc., Specialty Claims Management, Inc., Specialty Personnel Leasing, Inc., Global International, Co., Crown Point Farms, Miscauno Management Company, Inc., Centrex Research of Illinois, Inc., SRC Holding Company, Inc., and S R C Holdings, Inc., which were predominantly funded by the transfer of millions of dollars of the town's insurance funds to these companies through Specialty Risk. The defendants used these companies to conceal the investment and expenditure of money that they acquired from the town, and the younger Spano and Schneider caused the creation of fraudulent records and invoices that misrepresented SRC's expenditures of town funds to. the town's auditors, according to the indictment.
Among the allegedly fraudulent investments was the wire transfer of $3 million in town funds. from SRC to Plaza Partners between October 1992 and July 1995. Between August 1993 and January 1996, the LaGiglios and other defendants paid for and renovated the Four Seasons golf course and club house, intending to develop a casino gambling resort on the premises. The nine-hole
course is located on Miscauno Island in the Menominee River about 80 miles north of Green Bay. The government has obtained a state court order freezing title to the property in Marinette County.
Large amounts of cash allegedly were taken out of Plaza Partners for the benefit of defendants, including weekly checks totaling $813,150 to Bonnie LaGiglio and Frank Taylor's wife to conceal income to their husbands and to provide funds allowing the two men to make regular kickback payments to the elder Spano.
Regarding Loren-Maltese's role in the golf course and fraud scheme, the indictment also alleges that:
· Between July and September 1994, she gave John LaGiglio three $100,000 checks from her political fund to invest in the Four Seasons golf course;
· she received preferential treatment on her investment, causing SRC to pay her $270,000 as a return in 1996;
· on Jan. 5, 1996, Loren-Maltese and DeChicio caused Cicero to wire transfer $400,000 to SRC, and on the same day, Spano Sr. caused SRC to issue a $150,000 check to her as a partial return on her golf course investment; and
· she received two checks from SRC - one in January 1994 for $3,000 payable to "Committee to Elect Betty Loren-Maltese," and the other in July 1994 for $5,000 payable to "Betty Loren-Maltese Committeeman."
In another allegedly fraudulent investment, between 1993 and 1998, the Spanos and LaGiglios caused Plaza Partners and SRC to use town insurance money to pay for and maintain the Crown Point Farms horse ranch in northern Indiana, where the elder Spano and John LaGiglio kept thoroughbred race horses.
As additional aspects of the fraud scheme, the indictment alleges that:
· Between 1993 and 1995, the three Cicero officials, Taylor and the elder Spano caused the town to pay more than $750,000 to SRC under the guise of a workplace "safety program," which bore little or no relation to services being provided by SRC;
The indictment also alleges that the Spanos, LaGiglios, Ross and Schneider conspired to obstruct the IRS by concealing income received by SRC from Cicero and by evading the payment of employment taxes. They allegedly evaded payment of nearly $2.35 million in employment and taxes and employees' federal income withholding taxes that was owed in various amounts by Rail
cartage, Inc., Piggyback Specialists, Inc., Dispatch Services, Inc., Miscauno Management Company, Inc., and SRC Management, Inc. As part of the conspiracy, between 1993 and 1997, the elder Spano and LaGiglio cashed or caused to be cashed more than $3 million in checks payable to Dispatch Services at currency exchanges in Chicago and Cicero, according to the indictment.
The government is being represented by Assistant U.S. Attorney Matthew M. Schneider.
The maximum penalties for each count of the offenses charged in the indictment are:
As an alternative fine, the Court may order a fine totaling twice the gross loss to any victim or twice the gain to the defendant, whichever is greater. In addition, defendants convicted of tax offenses remain liable for any taxes, interest and penalties owed, together with mandatory costs of prosecution. The Court also must order restitution, and it would determine the appropriate sentence to be imposed under the United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
United States v. Michael Spano, Sr.
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