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$17.75 Million Settlement for Victims of Pennsylvania “Kids for Cash” Scandal
by David M. Reutter
Several of the defendants in a “widespread scheme and subversion of the Luzerne County juvenile justice system” in Pennsylvania have agreed to a $17.75 million settlement to resolve a class-action federal lawsuit. The scheme involved the building of two private juvenile detention centers and payments to two judges to ensure the facilities were filled with youthful offenders, many of whom were convicted of minor offenses absent legal representation.
The conspiracy was exposed after a bill of information was filed by the U.S. Attorney’s office against two Luzerne County judges, Michael T. Conahan and Mark A. Ciavarella, Jr., from the Court of Common Pleas for Pennsylvania’s 11th Judicial District. They were charged with fraud for accepting around $2.1 million for sending children to the privately-operated juvenile facilities.
The scheme began in June 2000 when Ciavarella had a conversation with Robert J. Powell, an attorney who expressed interest in building a juvenile detention center in Luzerne County. He was introduced to Ciavarella’s friend, Robert K. Mericle, the owner of Mericle Construction, Inc., for the purpose of locating land and building the facility.
Powell and his business partner, Gregory Zappala, bought land and contracted with Mericle through their company, PA Child Care (PACC), to construct the juvenile detention center.
Once completed, Conahan, who was the President Judge of Luzerne County, entered into a $1.314 million “Placement Guarantee Agreement” on January 29, 2002 between the county and PACC. From that point on, Ciavarella often denied children who came before his court of their right to counsel and disproportionately sentenced them to terms of juvenile detention, even for minor offenses.
For their assistance in helping construct PACC’s juvenile facility, Conahan and Ciavarella arranged to receive a $997,600 payment from PACC. To conceal the payment, a backdated “Registration and Commission Agreement” was created that indicated Mericle was receiving a broker’s fee. Mericle transferred $610,000 of the “broker’s fee” to an attorney’s trust account; it was then transferred to an account for Beverage Marketing of PA, which was owned by other parties but controlled by the two judges. From there a number of wire transfers were made to numerous bank accounts, designed to hide the payments, and fraudulent entries were made in the books and records of Beverage Marketing.
The financial success of PACC’s juvenile facility led Powell and Zappala to build another juvenile detention center in western Pennsylvania. Their new company, Western PA Child Care (WPACC), also contracted with Mericle to construct the facility. Upon the completion of the detention center in July 2005, a $1 million payment was made to Conahan and Ciavarella through Pinnacle Group of Jupiter LLC, another company owned by others but controlled by the judges.
They also received a $150,000 payment when a PACC expansion project was completed, and from February 2003 to January 1, 2007 the judges received hundreds of thousands of dollars from Powell for their actions related to PACC and WPACC. Again, the payments went through a maze of transfers and fraudulent records designed to conceal them.
When the county-run detention center was effectively closed due to budget reductions, in late 2007 Conahan and Ciavarella helped push through a contract worth about $58 million for juvenile offenders to be housed at PACC and WPACC. Ciavarella would order youths to serve time in detention even when the Juvenile Probation Officers (JPOs) recommended against that action. In some cases he pressured JPOs to change their recommendations, and he often denied or discouraged legal representation for juvenile offenders. [See: PLN, June 2010, p.26; Nov. 2009, p.42; May 2009, p.20].
According to the Philadelphia-based Juvenile Law Center, “Over 50 percent of the children who appeared before Ciavarella lacked legal representation; 60 percent of these children were removed from their homes. Many of them were sent to one or both of the two facilities at the center of the corruption scandal.”
Ciavarella was sentenced to 28 years in federal prison on August 11, 2011 after a jury convicted him of 12 counts of racketeering, bribery and conspiracy. He was acquitted of 27 other counts. Conahan cooperated with prosecutors and pleaded guilty in 2009 to racketeering conspiracy charges. He was sentenced to 17½ years in federal prison on September 23, 2011. [See: PLN, Nov. 2011, p.14].
Powell was sentenced on November 4, 2011 to 18 months in federal prison after pleading guilty to misprision of a felony and accessory after the fact to conspiracy to commit income tax evasion, plus one year on supervised release and a $60,000 fine. [See: PLN, May 2012, p.28]. Mericle pleaded guilty to misprision of a felony; he has not yet been sentenced.
The Pennsylvania Supreme Court, which had initially declined to intervene when the Luzerne County scandal was brought to its attention, eventually overturned thousands of convictions in juvenile court cases handled by Ciavarella.
In April 2012, Pennsylvania’s General Assembly passed two laws (Senate Bills 815 and 818) intended to ensure the abuses that occurred in Luzerne County would not happen again. In most cases, juvenile offenders and their families will no longer be able to waive the right to counsel in juvenile court proceedings; also, judges must provide a written statement of reasons for dispositions in juvenile court cases, and when detention is ordered, shall “also state the name of the specific facility, or type of facility, to which the child will be committed...” as well as the court’s “findings and conclusions of law that formed the basis of its decision.”
A class-action lawsuit filed by juvenile offenders and their parents who were victimized by the Luzerne County bribery/conspiracy scheme, which was dubbed the “kids for cash” scandal, raised a number of claims – including Racketeer Influenced and Corrupt Or-ganizations (RICO) claims – against Powell, Conahan, Ciavarella, Mericle, PACC, WPACC, Mericle Construction and other defendants.
The $17.75 million settlement, reached with Mericle and Mericle Construction, was approved by the district court on December 14, 2012. Basic settlement payments include $500 for each juvenile adjudicated by Ciavarella but not incarcerated; $1,000 each for juveniles placed in detention centers other than PACC or WPACC; and $5,000 for each youth placed in PACC or WPACC. Various enhancements can increase the amount of the settlement awards, such as the juvenile’s age and whether they suffered physical injury, illness, or emotional or psychological trauma.
Of the $17.75 million settlement, $4,335,000 was allocated to attorneys’ fees and costs. The class members, numbering over 3,000, were represented by the Juvenile Law Center and the law firm of Hangley Aronchick Segal Pudlin & Schiller. Claims against the other defendants remain pending. See: Wallace v. Powell, U.S.D.C. (M.D. Penn.), Case No. 3:09-cv-00286-ARC.
Additional sources: www.thetimes-tribune.com, www.fox43.com, www.jlc.org, www.post-gazette.com
Several of the defendants in a “widespread scheme and subversion of the Luzerne County juvenile justice system” in Pennsylvania have agreed to a $17.75 million settlement to resolve a class-action federal lawsuit. The scheme involved the building of two private juvenile detention centers and payments to two judges to ensure the facilities were filled with youthful offenders, many of whom were convicted of minor offenses absent legal representation.
The conspiracy was exposed after a bill of information was filed by the U.S. Attorney’s office against two Luzerne County judges, Michael T. Conahan and Mark A. Ciavarella, Jr., from the Court of Common Pleas for Pennsylvania’s 11th Judicial District. They were charged with fraud for accepting around $2.1 million for sending children to the privately-operated juvenile facilities.
The scheme began in June 2000 when Ciavarella had a conversation with Robert J. Powell, an attorney who expressed interest in building a juvenile detention center in Luzerne County. He was introduced to Ciavarella’s friend, Robert K. Mericle, the owner of Mericle Construction, Inc., for the purpose of locating land and building the facility.
Powell and his business partner, Gregory Zappala, bought land and contracted with Mericle through their company, PA Child Care (PACC), to construct the juvenile detention center.
Once completed, Conahan, who was the President Judge of Luzerne County, entered into a $1.314 million “Placement Guarantee Agreement” on January 29, 2002 between the county and PACC. From that point on, Ciavarella often denied children who came before his court of their right to counsel and disproportionately sentenced them to terms of juvenile detention, even for minor offenses.
For their assistance in helping construct PACC’s juvenile facility, Conahan and Ciavarella arranged to receive a $997,600 payment from PACC. To conceal the payment, a backdated “Registration and Commission Agreement” was created that indicated Mericle was receiving a broker’s fee. Mericle transferred $610,000 of the “broker’s fee” to an attorney’s trust account; it was then transferred to an account for Beverage Marketing of PA, which was owned by other parties but controlled by the two judges. From there a number of wire transfers were made to numerous bank accounts, designed to hide the payments, and fraudulent entries were made in the books and records of Beverage Marketing.
The financial success of PACC’s juvenile facility led Powell and Zappala to build another juvenile detention center in western Pennsylvania. Their new company, Western PA Child Care (WPACC), also contracted with Mericle to construct the facility. Upon the completion of the detention center in July 2005, a $1 million payment was made to Conahan and Ciavarella through Pinnacle Group of Jupiter LLC, another company owned by others but controlled by the judges.
They also received a $150,000 payment when a PACC expansion project was completed, and from February 2003 to January 1, 2007 the judges received hundreds of thousands of dollars from Powell for their actions related to PACC and WPACC. Again, the payments went through a maze of transfers and fraudulent records designed to conceal them.
When the county-run detention center was effectively closed due to budget reductions, in late 2007 Conahan and Ciavarella helped push through a contract worth about $58 million for juvenile offenders to be housed at PACC and WPACC. Ciavarella would order youths to serve time in detention even when the Juvenile Probation Officers (JPOs) recommended against that action. In some cases he pressured JPOs to change their recommendations, and he often denied or discouraged legal representation for juvenile offenders. [See: PLN, June 2010, p.26; Nov. 2009, p.42; May 2009, p.20].
According to the Philadelphia-based Juvenile Law Center, “Over 50 percent of the children who appeared before Ciavarella lacked legal representation; 60 percent of these children were removed from their homes. Many of them were sent to one or both of the two facilities at the center of the corruption scandal.”
Ciavarella was sentenced to 28 years in federal prison on August 11, 2011 after a jury convicted him of 12 counts of racketeering, bribery and conspiracy. He was acquitted of 27 other counts. Conahan cooperated with prosecutors and pleaded guilty in 2009 to racketeering conspiracy charges. He was sentenced to 17½ years in federal prison on September 23, 2011. [See: PLN, Nov. 2011, p.14].
Powell was sentenced on November 4, 2011 to 18 months in federal prison after pleading guilty to misprision of a felony and accessory after the fact to conspiracy to commit income tax evasion, plus one year on supervised release and a $60,000 fine. [See: PLN, May 2012, p.28]. Mericle pleaded guilty to misprision of a felony; he has not yet been sentenced.
The Pennsylvania Supreme Court, which had initially declined to intervene when the Luzerne County scandal was brought to its attention, eventually overturned thousands of convictions in juvenile court cases handled by Ciavarella.
In April 2012, Pennsylvania’s General Assembly passed two laws (Senate Bills 815 and 818) intended to ensure the abuses that occurred in Luzerne County would not happen again. In most cases, juvenile offenders and their families will no longer be able to waive the right to counsel in juvenile court proceedings; also, judges must provide a written statement of reasons for dispositions in juvenile court cases, and when detention is ordered, shall “also state the name of the specific facility, or type of facility, to which the child will be committed...” as well as the court’s “findings and conclusions of law that formed the basis of its decision.”
A class-action lawsuit filed by juvenile offenders and their parents who were victimized by the Luzerne County bribery/conspiracy scheme, which was dubbed the “kids for cash” scandal, raised a number of claims – including Racketeer Influenced and Corrupt Or-ganizations (RICO) claims – against Powell, Conahan, Ciavarella, Mericle, PACC, WPACC, Mericle Construction and other defendants.
The $17.75 million settlement, reached with Mericle and Mericle Construction, was approved by the district court on December 14, 2012. Basic settlement payments include $500 for each juvenile adjudicated by Ciavarella but not incarcerated; $1,000 each for juveniles placed in detention centers other than PACC or WPACC; and $5,000 for each youth placed in PACC or WPACC. Various enhancements can increase the amount of the settlement awards, such as the juvenile’s age and whether they suffered physical injury, illness, or emotional or psychological trauma.
Of the $17.75 million settlement, $4,335,000 was allocated to attorneys’ fees and costs. The class members, numbering over 3,000, were represented by the Juvenile Law Center and the law firm of Hangley Aronchick Segal Pudlin & Schiller. Claims against the other defendants remain pending. See: Wallace v. Powell, U.S.D.C. (M.D. Penn.), Case No. 3:09-cv-00286-ARC.
Additional sources: www.thetimes-tribune.com, www.fox43.com, www.jlc.org, www.post-gazette.com
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Related legal case
Wallace v. Powell
| Year | 2012 |
|---|---|
| Cite | U.S.D.C. (M.D. Penn.), Case No. 3:09-cv-00286-ARC |
| Level | District Court |
| Conclusion | Settlement |
| Attorney Fees | 4,335,000.00 |
| Damages | 13,415,000.00 |
| Injunction Status | N/A |