FBI Arrests One of Its Own: Task Force Officer Charged with Mail Fraud

NEWARK, NJ—Weysan Dun, Special Agent in Charge of the FBI’s Newark Field Office, in conjunction with Michael Fedorko, Superintendent of the Port Authority Police Department (PAPD) of New York and New Jersey, and James Tomlinson, Special Agent In Charge of the Department of Justice Office of the Inspector General, announce the arrest of Michael Palermo, age 50, a Detective with the Port Authority Police Department. Palermo was arrested at his residence this morning without incident and charged with one count of mail fraud.

Palermo, a PAPD officer for approximately 16 ½ years, was detailed to work with the FBI as a Task Force Officer (TFO) in the area of violent crime investigations for the past 11 years. From 2003 to about June 2008, Palermo worked with a cooperating witness (CW) in his official capacity. According to the criminal complaint and unbeknownst to the FBI or PAPD, Palermo allegedly had the CW perform services to assist Palermo with personal, non-law-enforcement matters—a serious violation of DOJ, FBI, and PAPD policies. These services included assisting Palermo in obtaining favorable purchase prices of high-end automobiles, free repair work on automobiles, and obtaining favorable prices for landscaping work at Palermo’s residence. This personal relationship became an integral part of the scheme with which Palermo is charged.

According to the criminal complaint, in February of 2007, Palermo filed a civil lawsuit complaint in the Superior Court of New Jersey, Law Division in Ocean County that alleged a contracting company and its principal had breached a contract and conducted acts of misrepresentation, fraud, and other types of civil malfeasance relating to the building and purchase of Palermo’s residence in 2006. As a result, Palermo sought compensatory and punitive damages, including treble damages, interest, costs of the lawsuit, and a declaratory judgment, among other forms of restitution. In May of 2007 and again in March of 2008, Palermo filed amended complaints in Superior Court that added defendants and allegations, namely: that the drainage and grading of the property was wrong which led to a flood of the basement of Palermo’s residence; that the flooding destroyed many of the Palermos’ personal belongings; and that Palermo was forced to spend $10,000 to have the water damage cleaned up.

As part of his testimony at a deposition related to his civil suit, Palermo alleged that he paid the owner of New Day Construction $10,000 in cash and received an invoice for the clean-up which he turned over as part of discovery. The principal of New Day Construction was the CW with whom Palermo had been working as part of his FBI task force duties. According to the criminal complaint, the invoice for the April clean-up was dated July 9, 2007 and indicated the total cost of the clean-up was $10,020, stamped “PAID”, and had a handwritten note stating “7-13”  “cash.” This invoice was fraudulent because Palermo had never been charged for the work, the CW created the invoice at Palermo’s request, and the fraudulent invoice was mailed to counsel for the adverse parties in the lawsuit—all revealed in the FBI investigation six months after Palermo’s civil case was settled. (Palermo’s civil case had been settled in January of 2009 for a total of $50,000: $30,000 from the contracting company and $10,000 each from the engineering company and Palermo’s realtor.)

“We never take joy in announcing the arrest of public officials and today is no exception,” remarked Weysan Dun. “Indeed, this announcement is particularly painful to make because Detective Palermo served on an FBI Violent Crime and Major Theft Task force for more than a decade. As a result, we considered him one of our own. All law enforcement officers are held to higher standards of conduct beyond basic obedience of the law. Allegations of misconduct on their part must always be aggressively investigated. That is what happened in this matter and the charges announced today are the result.”

James Tomlinson, Special Agent In Charge of the U.S. Department of Justice Office of the Inspector General, New York Field Office added, “Today’s announcement is the result of continued cooperation between the DOJ Office of the Inspector General and the FBI. We, too, are saddened by this news, but we will continue to work with our partners in law enforcement to bring criminals to justice.”

Palermo will have an initial appearance today before Honorable Mark Falk, United States Magistrate Judge in the District of New Jersey in Newark at 2:00 p.m.  If found guilty, Palermo faces a possible sentence of up to 20 years' imprisonment plus fines. A criminal complaint is merely an accusation. Despite this accusation, every defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.  This investigation remains ongoing.

This case is being prosecuted by Assistant United States Attorneys James Nobile and Thomas R. Calcagni in the District of New Jersey.