Judge Hands Down Prison Term for Fraud Scheme Involving Former Traffic Court Judge
|U.S. Attorney’s Office November 25, 2013|
PHILADELPHIA—Lorraine Dispaldo, 58, of Philadelphia, was sentenced today to 18 months in prison for her role in a fraud conspiracy with then-Philadelphia Traffic Court Judge Robert Mulgrew. Dispaldo pleaded guilty to a total of 36 counts including conspiracy to commit mail and wire fraud, mail fraud, wire fraud, filing false personal income tax returns, and bankruptcy fraud. Dispaldo and Mulgrew, who is awaiting sentencing, carried out a scheme to defraud the Pennsylvania Department of Community and Economic Development (DCED). U.S. District Court Judge C. Darnell Jones, II also ordered restitution of $120,865, a $3,600 special assessment, and three years of supervised release.
Dispaldo helped orchestrate the scheme to fraudulently receive and misuse Pennsylvania state grant funds awarded to non-profit groups. Between 1996 and 2008, the DCED awarded hundreds of thousands of dollars in grants to two community groups with which Mulgrew and Dispaldo were associated. DCED awarded approximately $397,000 in grants to the Community to Police Communications (CPC) to be used to purchase communications equipment for the police and to purchase materials to secure vacant lots and buildings for the protection of the police. Dispaldo signed the CPC grant contracts with DCED. Between 1997 and 2007 DCED also awarded approximately $460,000 in grants to the Friends of Dickinson Square (FDS) to be used for the maintenance of Dickinson Square at 4th and Tasker Streets and the surrounding neighborhood. Dispaldo’s codefendant, Mulgrew, signed the FDS grant contracts with DCED.
Dispaldo admitted that the grant contracts she submitted misrepresented how the funds would be used. She admitted that, instead of using grant funds exclusively for materials and equipment, as agreed, she instead paid tens of thousands of dollars in CPC and FDS grant funds to Mulgrew’s relatives and associates, including the teenage sons of his friends, and to the state representative’s lifelong friends. Dispaldo wrote over $104,000 of the almost $180,000 in impermissible payments made to persons for neighborhood revitalization “work.” While there were several decent gardens built, some trees planted and much landscaping material purchased, for the most part the activities undertaken primarily served as a “constituent service” clean-up-the-neighborhood-arm for the representative’s benefit, easy money for favored friends and relatives, a summer make-work program to benefit the teenage sons of Mulgrew’s neighborhood and childhood friends, and some work on private property.
To mask the fact that grant funds were being used improperly, Dispaldo falsified her five CPC “close out” reports sent to DCED by concealing most of the $104,000 in payments she made to persons from CPC funds and FDS funds during 2005 through September 2010. At times, Dispaldo submitted to DCED inaccurate IRS forms 1099, which document payments to persons, and at other times failed to prepare the forms, as required by law. Dispaldo also improperly paid almost $13,000 in CPC funds to the Representative’s office cleaner and improperly used $4,600 in CPC grant funds over the years to pay for her personal cell phone.
To conceal the improper payments Dispaldo made to persons, she also submitted to DCED staggering numbers of duplicate phone invoices. For example, she sent in $91,500 worth of receipts in the close-out report for the third grant in the amount of $90,000, but $41,640 of those receipts were already sent in with either the first or second grant close-out reports. In the fourth close-out report, Dispaldo sent in $87,394 in receipts to satisfy the $50,000 grant, but $46,156 of those were previously sent to the state.
Dispaldo filed false personal income tax returns for tax years 2006 through 2009, and concealed her true income for 2008 and 2009 in a 2010 bankruptcy filing.
The case was investigated by the Internal Revenue Service Criminal Investigation and the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorney Paul L. Gray.