Loren-Maltese, mob 'looted' town of $10 million, U.S. says
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U.S.
Atty. Scott R. Lassar announces criminal
indictments Friday against Cicero Town
President Betty Loren-Maltese and other
Cicero officials. (Tribune photo by
James F. Quinn)and Ray Gibson
Tribune staff reporters
June 16, 2001
Betty Loren-Maltese, the colorful and
controversial Cicero town president, was charged Friday along with nine others
for allegedly looting millions of dollars in taxpayer funds in a racketeering
and fraud scheme involving a mob-controlled health-insurance administrator,
authorities said.
The indictment, unsealed after
Loren-Maltese's early morning arrest at her vacation home in northwest Indiana,
marks the most significant federal prosecution in the corruption-plagued west
suburb since Loren-Maltese's late husband, then the town assessor, pleaded
guilty in 1991 in a wide-ranging probe of mob gambling.
"As a result of this investigation and today's arrests, the Cicero candy
store is closed," declared Kathleen McChesney, special agent-in-charge of
the FBI in Chicago, at a packed news conference in the Dirksen Federal Building.
The 17-count indictment charged
that Loren-Maltese and two former town officials—Emil Schullo, public safety
director, and Treasurer Joseph DeChicio—siphoned off more than $10 million in
town funds under the guise that the money was for insurance payouts to town
employees.
Instead, the money was stolen by the insurance administrator, Specialty Risk
Consultants Inc., which was secretly controlled by the reputed head of the mob
in Cicero, the charges alleged.
Much of the $10 million went to buy and renovate a golf course and clubhouse
in northern Wisconsin that the mob and its associates hoped to turn into a
lucrative gambling casino, authorities said.
Also charged were Michael Spano Sr., who reputedly took over as Cicero's mob
boss after Ernest Rocco Infelice was convicted
on federal charges in 1992; Spano's son, Michael Jr.; John LaGiglio, a Cicero
trucking executive, and his wife, Bonnie; Gregory Ross, a former IRS agent
turned reputed accountant to the mob; and attorney Charles Schneider.
A 10th defendant, Frank Taylor, is a former insider at Specialty Risk who is
cooperating with law enforcement and is expected to be a key government witness
at trial.
Most of the defendants, including Loren-Maltese, also were charged with
either filing false tax returns or tax evasion conspiracy.
"By disguising transfers from the town as insurance payments, the
defendants successfully looted the Town of Cicero of millions of dollars,"
U.S. Atty. Scott Lassar said. "They used their mob connections to turn
Cicero into their personal piggy bank."
Attorneys for Loren-Maltese and other defendants ripped the government for
its early morning arrests, saying they had offered to surrender voluntarily.
Loren-Maltese's mother, Kitty Loren, said her daughter had just awakened and
was putting on makeup and fixing her hair when FBI and other law-enforcement
agents showed up at her second home near Crown Point, Ind. Loren-Maltese's
daughter, Ashleigh, 4, was asleep, the grandmother said.
A law-enforcement source said agents disarmed two Cicero police officers
acting as Loren-Maltese's bodyguards before taking her into custody.
By late afternoon, Loren-Maltese, who has run the town since 1993, was
released on a $100,000 bond secured by her house in Cicero.
The usually quotable Loren-Maltese was silent as she left the Dirksen Federal
Building, but her lawyer, Terence Gillespie, attacked the government case,
noting that Loren-Maltese had the town sue Specialty Risk to get the stolen
funds back and hired a former state prosecutor to investigate the scam.
"To suggest that she is involved in a conspiracy that she's worked so
diligently over the last several years to uncover we think is really sad and a
shame," Gillespie said.
Gillespie and attorneys for the LaGiglios and Schneider vowed their clients
would be vindicated at trial.
"They're trying to use her to pressure her husband and others,"
attorney Michael Nash said of his client, Bonnie LaGiglio.
"It's outrageous the government would charge a lawyer who was merely
doing his job with acts that they attribute to the client," said
Schneider's attorney David Stetler.
Several already faced charges
The latest federal assault on corruption in Cicero brings to 11 the number of
current or former town officials or employees who have been charged with
wrongdoing in the last three years.
It marks the second time that Schullo and the elder Spano have been charged
this year and the third time for Ross, the former IRS agent, since last
September.
But Cicero's storied corruption and mob influence dates to the 1920s when Al
Capone set up shop there.
The five-year investigation of Specialty Risk by the FBI and the Internal
Revenue Service's criminal investigation division involved the painstaking
tracing of some $33 million paid out to the firm in town funds.
About $18.5 million of those funds went for legitimate insurance expenses,
authorities said. But, the indictment charged, at least $10 million—called a
conservative figure by Lassar—was stolen in the scheme.
Specialty Risk, never licensed to administer insurance services and
controlled behind the scenes by the elder Spano, took over as Cicero's claims
administrator without a vote by the Town Board, authorities said.
To make it appear legitimate, the indictment alleged, Schullo directed that
Town President Henry Klosak's signature stamp be placed on the Specialty Risk
proposal given to accountants working for the town.
But Klosak had recently died.
As members of the town's insurance committee, Loren-Maltese, Schullo and
DeChicio were responsible for ensuring the fair administration of the plan,
authorities said. Instead, the indictment alleged, they were paid bribes to
permit the fraudulent overpayments to Specialty Risk.
According to the charges, Loren-Maltese, Schullo and DeChicio transferred or
fired town employees who questioned the overpayments.
The excessive payments forced the town to borrow $3 million and institute
payroll deductions on town employees to defray unmet health-care costs,
authorities said.
Much of the stolen money went to buy and renovate the nine-hole Four Seasons
golf course on Miscauno Island in the Menominee River about 80 miles north of
Green Bay, the charges alleged.
An additional $325,000 went toward the construction of a vacation home for
the Spano family on the Wolf River in Winneconne, Wis., while another $133,000
was spent on new Cadillac Devilles for both Spanos, John LaGiglio and Taylor,
the government charged.
The stolen money also went to pay for and maintain the Crown Point Farms
horse ranch near Crown Point, where the elder Spano and John LaGiglio kept
thoroughbred horses, the indictment alleged.
Golf course venture cited
Authorities said Loren-Maltese's political fund invested $300,000 in the golf
course venture.
When the casino plans went bust and the investment soured, Lassar said,
Loren-Maltese was given "preferential treatment" and was repaid most
of her investment-$270,000-by Specialty Risk.
In January 1996, Loren-Maltese received $150,000 of the repayment, according
to the indictment. The same day, prosecutors alleged, she authorized her town
government to transfer $400,000 to Specialty Risk.
But at a senior center in Cicero, Loren-Maltese remained a popular figure
despite the charges.
"There is nothing they can say about her that will turn me against
her," said Dorothy Harps, 80. "She has done a lot of good for this
community."
Tribune staff reporters Gary Marx, Aamer Madhani and Robert Becker
contributed to this report.