(

•
• • •

JJW:jbc

UNITEO STATES OISTRICT COURT

POR THE MIDDLE DISTRICT OF PENNSYLVA.IUA

UNITEO STATES OF AMERICA ,,

,,

vo. CRIMINAL

,,
R. BUDD DWYER
ROBERT B. ASHER v"'" \110:

I N 0 l e T MEN T
MAY 13 '986
Introduction . .r:oNALO\ BERRY, CLERK

-~-
The P["t!viously Ch~r9ed Corporate and Individual Defendants.

1. At all tillles relevant to the Indictment, JOHN R.

TORQUATO, JR •• was. resident or Callt'Ol:"nb. ["Baiding at 214 Colton

Street, NeWpOl:t Besch, californb 92663.

2. At .11 t11lles relevant to the Indlctlllent. JUDY ELLIS was B

resident of california residing at 214 COlton Stt::eet, Newport

Beach, Culfo.::n!. 93662.

3. At all thles relevlInt, WILl.IAM T. SI'lITH was an attoE:ney,

licensed to practice law in the Connonwelllith of Pennsylvania, with

offices at 2931 N. Front Street. Harrhburg. Pennsylvania 17110.

• •
 • •
• • •

4. At all times relevant lILAN R. STONEMAN was an attorney,

licensed to practice law in the St"'te of California, with offices

at 542 East Mam. Avenue, orange, California 92667.

5. At all thles relevant to this indictnlent, DAVID 1.

HERBERT "",s the State Director of the Bureau of SOcial security

for Public &PIployeee toc the COlD/IIonwealth of Pennsylvania under
the Pennsylvania DepartJaent of Labor an~ Industry with offices in

the Labor and Industry Suildin<} in H",rriaburq, Pennsylvania,

6. On Novembet: 29. 1982 Articlea of Incorporation vere filed

with the Secretary of State of Califol:nia on behalf of XRT, Ltd.,

3931 MacArthul: BOulevard, Newport Beach, California 92660.

1. Articles of Incorporation for XET, Ltd. declared JUDY
ELLIS to be Chief Executive Officer, JOHN R. "roRQUATO. JR., to be

Secretary and ~~ R. STONEMAN to be Chief Financial Offic.~.

8. ~rUcles of Incorporation for XBT, Ltd. decla~ed the

corporate di~ector9 to be JUDY ELLIS, Janice I'\incaid, JOHN R.

TOROU~'l'O, JR., and ~lAN R. sroNEJII~N.

9. c:.J J1ay 25, 1983, XET, Ltd. filed p~oof of publication

with the County of Orange, California that XET, Lt.d. had

published, as public notice 1'\-04970, that it would be doing

bus1ne6s as CTA, Ltd., 214 Colton St~eet, Newpo~t Beach,

California 92663 and that said notice was pUblished on May 4, 11,

18 and 25, 1983 aa required by Califo~nia law.

,
• \ ...
 •

10. On April 13. 19B4 CCMPUTBR TECHNOLOGY ASSOCIATES, INC.

(eTA, Inc.) tiled Articles of Incorporation with the Co~onweelth

of Penneylveni" declaring it.a principal place ot business to be

2931 N. Pront Street, RlIrrlllbuc9. Pennsylvania 11110.

11. The Articles of Incorporation tor CTA, Inc. declared

WILLIAM T. SMITH of 2931 N. pront Street, Harrisburg. Penn.ylvan!a
17110 to be principal stockholder.

12. The Articles ot Incorporation for eTA., Inc. declared the

President to be JUDY ELLIS, 214 COlton Street, Nevpot't. Beach,

California 92663. and the Secretary to be Janice IUncald, La

Pill•• , California 90623.

The Business of PICA Recovery.

13. Under the Federal SOcial Security Act workez:-s elllployed by

atate and local governlllenta c.n be covered by Federal Old-A.ge and

Survivors Disability and Supplenlental Income Benefit. (Social

security) by a contractual agree~ent entered into between the

state and federal govern.ant. The Cb_onweal th of Pennsylvania

entered into such a contractual agreelllent with the I"eder"l

Government on August 20, 1952.

14. Under the agreelllent described above, elllployees of state

and loc"l governments in Pennsylvania c"n becOllle el i9 ible for

Social security beneUts if they pay a tax identical to the t"x

•
 •

i_posed on private sector employees under the Federal Insurance

COntribution ACt, 26 U.S.C. S 3101,!!~. (referred to hereaner

as the FICA taxI. 'Itle lllIount ot the PICA tax ia llIatched by the
employing state and/or political subdivision. In the ca. of
elllployees of Pennsylvania SChool Diatdcts, half of the tax 18

paid by the e.ployee and the other half Is paid jointly by the
IItate and elllployil'l9 ac:hool district.

IS. In the State of Penneylvllnia the above-described pr09l:8.

covering collection of the FICA tax from public eIIployeee ill

lldndnlstered by II state ofHcial known 88 the State Director of

the Bureau of Social Security for Public Employees.

16. Under quidelin•• set up by the SOcial Security

Adrainistrlltion (Social Security Ruling 79-31). the FICA tall doe.

not have to be paid on payments made to employees of st",te and

local govet"nments PJt"suant to a specific plan pt"ovi(ling tot"

payaents because of sickness (as opposed to a continuation of

wages in spite of sickness). If the st",te ot" local govet"nlllents

mistakenly lllade pa~entB of l'IeA taxes fot" such pt!t"iods a ctedit
can be claimed fot such payaenta against rutut"e PICA taxes with a

tesulting t"efurd of overpaid l'ICA taxes to tl\e involved elllployees.

This ptocedure is known as a PICA reCQvet"y.

11. The pt"ocedure followed in obtaining a credit tor a I"IC"

recovety t"equires the state or local governments to submit their

~ \-.
 •
, •

proof of a qllalifylng sick ~y ph,n and proof of the amount of

~ICA tax overpaid to the State Direetor ot Social Security for

Public l!aployees who can authorize an iamediate credit for ill PICA

OVlltpll)'lllent. The claitl. i ' then forwarded to the Soc1,,1 SecuE"ity

M.ini8tl:ation toe eventual review and approval or rejection.

18. The defeno:'ant corporations and their officers lind

employees identified 1n the pcecedin') paragraphs (paragraphs 1

through 12) were in the business of preparing and subnlitting PICA

recoveries on behalf of .tate and local govern~entB. Thi. service

WllS pecfor.ed pUI:8Uant to contract entitling the "_(aMant

corporllltlons to II fee based upon the lllIlount of the PICA recovery

obtained •

The Relevant Pennaylvanill Public Officials.

19. At all ti_eB relevant to the indic~ent, R. BUDD DWYER

waB the elected Treasurer of the COftnonvealtb of Pennsylvania.

20. At all thles relevant to the indietrllent, ROBERT B. o\SHBR
vas Chairman ot the RepUblican State CQ~ittee of Pennsylvania.
21. At all ti.. e8 relevant to the indictlllent, LeRoy Zi_erRlan
vae the elected AttOrney General of the COmlllQnvealth of
Pennsylvania.

,
. ,.
 ,

22. At all times relevant to the indictment, Patrick T.

Boyle served sa Press Secretary to the Attorney General of

the Commonwealth of Pennsylvania.

23. At all times relevant to the indict.ent, WILLIAM T.
SHlTH was the Republican County Chairman, or Co-Chairman, of
Dauphin County.

24. At all times relevant to the indictment, MARK E.

PHENICIE was 8 Special Assistant to the State Treasurer and

Treasurer of the Republican State Cogmittee.

25. At all times relevant to the indictment, Senator

Euqene F. Scanlon was an elected State Senator and Senate

Minority Whip of the Senate of the Commonwealth of

Pennsylvania.

26. At all time' relevant to the indictment, David 1.

Herbert was the State Director of SOCial security for
Public Employee •.

•
 ,

'['HE GRANO JURY CR.J.R.GES:

COUNT I - CONSPIRACY

1. The Grand Jury realle<jell paragraphs 1 through 26 of the

intl:oduc:tion all if fully &et forth herein.

2. Beqinning on or about J ... nu.~ 1, 1983 and continuing up

to the present, in the KiddIe District of Penn"ylvanill. and

elsewhere, the defendants,

R. BUDO .owYER
ROBER'I' B. ASHER

and otbera. known and unknown, including previously indicted

co-conspirators, WILLI~ T. SMITH and JOHN R. TORQUATO.

(herein4fter referred to al the previously indicted

co-eonspiE:atQral did unl"wfully, knowingly and will fully oonlplre.

c-c.bine, confederate and agree together and with each other to
C01DJDlt offenses against the United State_, to wit. violations of

the statutes prohibiting lIlaU fraud. 18 U.S.C. S 1341, lind

interstate tnlnsportation in aid of r",cketeering. 19 U.S.C. S
1952, that ls, causlng the Unlte<! State. lIlails to be used in
furtherance of a schellle or arttfice to defraud (Mail P'raud) and

using any facility in interstate COllneree ..,ith the intent to

prOliote, manage, establish, carryon, and facilitate bribery in

violation of the laws ot the state in which co_it ted Le .• the

Co-fOnwe.uth of Pennsylvania 18 1'.5. Ann. 54701 (Intel:"state

Transportation in Aid ot Racketeel:ing).

3. It va8 pal:"t of said eonspio:sey and scheme or artifice to

defraud and use the tac 11 it lea of interstate C'OM/Ilecce to prollote,

llIanage, establish, carry Ol'l and facilitate bribery that:

(5) The previously indicted co-conspirators would

locate and identity elected public officials who oooid

be InstrUlllentlll and inflUf!ntial in the .warding of ..

contl:act to recove ... PIC'" taxes and would deter.ine if SlIteS

ofUctals could be corruptly influenced;

(bl The previously indicted co-conspirators

would then attempt to obtain FICA recovery contract. trOll

the COIIIIllOnwealth of Pennsylyania on " no-bi(l baai. by

col:ruptly buying the influence of certain public Officials;

(c) The nMed defendants, who were themselves

public officials, would join the conapiracy, and further

it, by lI9reeing to be corruptly influenced in the
awarding of FICA recovery contracts on a no-bid basis

 • •

by payment of larg6 8~B of cBsh and/or la~e ca.palgn

contributions,

(dl The previously indicted co-conspirators would

IIttelllpt to corruptly influence lIIelllbers of the

[.egisl_t... re of the COlIlIIIonwealth of Pennsylvania to pass

legislation which would place j ... r1edictlon oyer PICA

recovery on behalf of school entitles in the Office of

State Treasurer for the purpose of centralizing the

"ward of a FICA recovery contract 11"1 an office whiCh the

defendants believed they could (XlrJ:uptly influencel

eel The nMled defendants and preYiQusly indicted

co- conspirators would continue to act in 8 oorrupt

fashion during the course of pertoming such contract.

with the public official defendants rendering decisions,

opinions, recommendations, votes and other ezercises of

dlllcretion that wel:s favorable to the XE'l'. Ltd. d/b/a

CTA, Ltd. and CTA, InC.1

(f) The n_ed defendant public officials would be

corruptly influenced by various lIeans and lllethoo9

including, but not li.ited to, the follolling:

 •
•

(1) offers of large political ca-palgn

contributions and donations to various politic",l

committees, parties and elected officials running tot"

public office;

(2) offers of of cash payments, atock, patd

tl:avel and athel: things of value to such offici"'ls;

19l The named defendant public officialS would

accept the Offers eet forth llIbove in paragraph 3( f).

subsections (I) and (2), and thereby allow the_selvea to

be corruptly influenced in their official conduct in

JUllttee8 dealing with 8aid FICA I:ec:overy contracts;

(hI The named defendant public officials would 91: ... nt,

",nd cause to be granted, lucrative PICA recovery

contracts without COMpetitive bidding. notwithstanding

the fact that others Wel:8 willing to pel: forll

substantially identical FICA recovery work at a much

lower cost;

10