Presumption of Guilt: How the Kids for Cash Scandal Trampled Justice

Associates

INTRODUCTION

A PROSECUTOR’S DUTY

I can calculate the motion of heavenly bodies but not the madness of people.

ISAAC NEWTON

I WAS A federal prosecutor for over twenty-five years. It may surprise you to hear that a prosecutor’s duty is not to convict criminals. Rather, it is to seek justice. Courtrooms are decorated with various reminders of this sacred duty. Most popular is Lady Justice, a statute of a blindfolded woman from ancient times holding a set of scales in her right hand and a sword in her left. The blindfold symbolizes that the law is to be applied objectively, without regard to undue influence, prejudice, or bias. She uses the scales to weigh the evidence and wields the sword with fairness. Such symbols assure the public that our criminal justice system is beyond reproach. Sadly, the public’s trust in the system is woefully misplaced. Too many times, justice takes a back seat to bias, expediency, pandering, self-promotion, convenience, misguided intentions, undue influence, and denial.

Law enforcement officials possess nearly unbridled authority to investigate and indict anyone for committing a vast array of crimes. Obviously, there are ethical rules they have to follow. Criminal charges must be based on admissible evidence, not conjecture, supposition, innuendo, or sensationalism. Unfortunately, there are investigators and prosecutors who crave the spotlight and use their official positions to seek out notoriety and headlines. Prosecutors issue daily press releases touting the dozens of successful prosecutions they have secured, never their mistakes or reasons for declining a case. This burning desire for convictions and media coverage can trample the pursuit of justice.

Federal prosecutors were so anxious for a media splash that they indicted Alaska’s Senator Ted Stevens for false statements while he was in the midst of running for reelection in 2008. Stevens was charged with failing to disclose his receipt of gifts and services on congressional financial forms. He lost the Senate seat he had held for over forty years as a result of the scandal and was convicted by a jury soon thereafter.

As it turned out, prosecutors’ zeal to nail a sitting United States Senator prevented them from disclosing documents indicating Stevens was innocent. A special investigation concluded that government attorneys engaged in numerous acts of prosecutorial misconduct in the run-up to Stevens’ trial. Their actions were so outrageous that United States Attorney General Eric Holder abandoned the case in 2009.¹

Just as prosecutors can succumb to the temptation of notoriety, so can members of the media. On July 27, 1996, there was a terrorist bomb attack on the Centennial Olympic Park in Atlanta, Georgia, in the midst of the 1996 Summer Olympics. One person was killed and 111 injured. There would have been more casualties but for the efforts of security guard Richard Jewell, who spotted a suspicious backpack containing the bomb and moved people out of harm’s way just before it exploded. Days later it was reported that an anonymous federal law enforcement source said the criminal investigation was focusing on Jewell. That unsubstantiated allegation was enough to cause a media storm to swirl around him. Reporters camped outside his mother’s apartment, and for weeks articles depicted him as a law enforcement wannabe who might have planted the bomb in the hopes of being seen as a hero when he discovered it.

Authorities ultimately concluded that Jewell had nothing to do with the bombing. An extremist named Eric Rudolph, along with three others, planted the bomb. He pled guilty and was sentenced to life in prison. In 1997, United States Attorney General Janet Reno expressed regret over the leak implicating Jewell, saying that the government owed him an apology. Although he was thoroughly vindicated, Jewell never recovered from the intense derision he suffered as a result of being publicly connected to the bombing. He died of natural causes in 2007.²

Concern over media coverage often clouds prosecutors’ decision-making. During the McMartin preschool case that dragged out during the 1980s, the media learned there was an investigation of child abuse when police inadvisably sent letters to two hundred parents detailing one child’s claim of abuse by the owner’s twenty-five-year-old son. Community reaction condemning the McMartins hit like a sledgehammer. California prosecutors indicted the school’s owner, her son and daughter, three teachers, and the woman who had founded the school thirty years earlier. The district attorney was facing an upcoming primary race, so he added ninety-three charges to hype the case. Media responded with sensational headlines about the McMartin seven heavily slanted in the prosecution’s favor. The criminal allegations were never seriously questioned.

After years of trials accusing McMartin family members of sexually abusing children, there were no convictions. These fruitless prosecutions cost over $15 million. Eventually several of the children recanted their stories, saying that law enforcement officials had suggested that they falsely accuse the McMartins of committing heinous acts. The media’s coverage of the McMartin fiasco has been described as pack journalism due to reporters’ habitual reliance on each other as substantiation for their reporting.³

Crimes implicating children are the most susceptible to overreaction. This leads me to the case at hand: United States of America versus Mark A. Ciavarella Jr., which was brought by my former colleagues in the United States Attorney’s Office for the Middle District of Pennsylvania. Ciavarella was accused of taking money to jail juvenile delinquents while he was a county court judge. Prosecutors’ promises to prove those heinous accusations spawned relentless media coverage of the kids for cash scandal, misguided official reactions, and mass hysteria. Thousands of crimes committed by juvenile delinquents were summarily erased. Ciavarella’s repeated assertions of innocence were universally derided despite his constitutional right to the presumption of innocence. By the time his criminal trial was finally held, the belief in his guilt was so widespread that prosecutors’ failure to fulfill their promise to produce evidence proving a kids for cash scheme was irrelevant. Ciavarella was convicted of being a kids for cash judge in the court of public opinion based on prosecutors’ false promises and media hype.

Ciavarella’s prosecution was the product of a perfect storm involving: a corrupt juvenile judge; overly zealous, publicity-hungry federal prosecutors; juvenile delinquents and their parents’ desperate attempts to blame someone else; media more intent on making a profit based on unproven scandalous allegations than investigating their veracity; and public officials who took drastic measures to distance themselves from the scandal rather than go against the tidal wave of public outcry.

What follows is the story of the notorious, but unproven, kids for cash scandal which presumed Ciavarella’s guilt of taking money in exchange for incarcerating juveniles.

CHAPTER 1

HOW IT BEGAN

MARK ARTHUR CIAVARELLA Jr. was born in Wilkes-Barre, Luzerne County, Pennsylvania, in 1950. The only son of a first-generation Italian father and an Irish mother, he and his two sisters grew up in a predominately blue-collar Irish community where no one locked their front door. He worked his way through law school and practiced in Wilkes-Barre for some years before announcing his candidacy for a judgeship at the Luzerne County Court of Common Pleas, the general trial court in Pennsylvania, in 1995.⁴ Ciavarella promised to be tough on criminals. One of his campaign ads showed a jail cell door slamming shut, demonstrating that he would not hesitate to lock ’em up and throw away the key. He won the election.

Ciavarella was sworn in for a ten-year term as county judge in January 1996 and was the county’s sole juvenile judge from September 1996 until June 2008. Faithful to his campaign promises, he detained more juveniles than any other judge in Pennsylvania with the help of a zero tolerance policy for drugs, alcohol, and weapons offenses, systematically jailing all juveniles who committed those or similar crimes. He expanded this policy to include all school-related offenses after two armed teenagers massacred thirteen people at Columbine High School in Littleton, Colorado, on April 20, 1999.⁵ This increased his already high detention rates. The state average for detention in juvenile cases from 1999 to 2007 was somewhere around 10 percent to 13 percent. For Ciavarella, the average was more like 17 percent to over 25 percent.⁶

Ciavarella’s penchant for detention was common knowledge and well received by the public. Police officers and school officials applauded him for clearing troublemakers from the schools and keeping them off the streets. At the beginning of every school year, Ciavarella spoke at assemblies, promising students detention for any and all school-related infractions, even minor ones.⁷

Ciavarella’s tough love approach in sentencing juveniles became an issue during his 2005 campaign for a second ten-year term as judge. He faced his detractors head on, adamantly defending his detention rates. Convinced that probation did not work for a majority of juveniles, Ciavarella was quoted in interviews as saying: If a child believes the consequence will be anything other than placement, they don’t care. I have to find consequences that will get their attention.⁸ He touted the decrease in juvenile recidivism rates, which went from 44 percent to 14 percent, as proof that his detention policies worked. The public approved and reelected him as Luzerne County’s juvenile judge.⁹

Using detention to control a juvenile’s behavior was a common tactic of Ciavarella’s, but he often dispensed his form of justice in a caustic manner. The following exchange was typical:

The vast majority of juveniles charged with being delinquent appeared in Ciavarella’s court without an attorney and pleaded guilty. Evidence of crimes committed by kids is usually clear-cut; most confess when confronted by police officers. Parents did not want their children to hide behind a legal mouthpiece trying to get them off on some technicality, preferring to have their children accept responsibility for their wrongful actions and plead guilty. Ciavarella’s abrupt demeanor coupled with so many juveniles waiving their right to an attorney and pleading guilty made for pretty quick juvenile delinquency proceedings, often lasting mere minutes.¹¹

Although Ciavarella had little patience with juvenile delinquents and sentenced many of them to jail, he told juvenile probation officers that the job was a vocation to help children and ordered them to transport juveniles to appointments outside of court.¹² When some of the probation officers complained about having to chauffeur these kids around, Ciavarella said, When parents aren’t going to be parents, you be the parent.¹³ He would stop a proceeding in order to console parents, and he made it a point to follow juveniles’ progress after they were released. He was most proud of those kids who were able to turn their lives around, often attending their high school graduations. He even helped some get into college.¹⁴

The juvenile detention facilities Ciavarella sent these kids to varied, but one of them was Luzerne County’s juvenile detention center located near the county courthouse on River Street in Wilkes-Barre. It was a dilapidated former women’s prison infested with roaches and rats. The plumbing and heating systems did not work properly. Pipes leaked. There were no recreational or educational facilities for the kids. Social workers met with family members in filthy jail cells. Ciavarella was ashamed of sending kids to such a dump and vowed to have the Luzerne County commissioners shut it down.¹⁵

The three county commissioners sympathized with Ciavarella but had no money to build a new juvenile detention center. Fed up, Ciavarella turned to his fellow Luzerne County judge Michael The Boss Conahan, who was two years his junior. Their friendship was a case of opposites attract. Ciavarella was 5'6 tall with a slight build, thick glasses, and a prickly temperament. Conahan was a large man who loved to gossip, glad-hand, and generally know what was going on. Conahan was nicknamed The Boss" because he made it a point to know about everyone and everything in the Luzerne County Courthouse.¹⁶

Conahan brought Ciavarella into his circle of friends, which included Robert Powell, a personal injury lawyer, businessman, and wheeler-dealer. Like Conahan, Powell hailed from Hazelton, Pennsylvania. A former Division I basketball player, Powell was a formidable bear of a man. He owned many corporations and created complex relationships among them.¹⁷

Powell saw Ciavarella’s desire for a new juvenile detention center as a fantastic business opportunity. After all, two sitting Luzerne County judges were telling him they wanted to shut down the old center and use a new one they were asking him to build. He formed yet another company, PA Child Care, LLC (PACC), this time with Gregory R. Zappala, son of a former Pennsylvania Supreme Court chief justice and brother of Allegheny County’s District Attorney. Powell’s next step was to locate a suitable piece of land and a developer to build PACC.¹⁸

As luck would have it, one of Ciavarella’s oldest and dearest friends just happened to be one of Pennsylvania’s premier commercial developers, Robert K. Mericle, owner of Mericle Commercial Real Estate Services located in Wilkes-Barre. Ciavarella introduced Mericle to Powell in May 2000. The two men had little in common other than financial success. Mericle was thoughtful, methodical, and quiet. Powell was impulsive, sneaky, and bombastic. Powell was not going to hire Mericle at first but changed his mind when Mericle warned him about buried barrels on a site he was considering. Mericle’s submission of the lowest bid for the project sealed the deal.¹⁹

During 2001 Powell negotiated with Mericle to build a $7.6 million-dollar state-of-the-art juvenile detention center. One of the fees Powell insisted on including in the final contract was a $997,600 finder’s fee as a reward for the referral. Such a fee was standard practice in the industry, but Mericle felt it belonged to Ciavarella and went to Ciavarella’s chambers on the second floor of the Luzerne County Courthouse to discuss the matter. Mericle explained he wanted to pay Ciavarella a finder’s fee amounting to 10 percent of the contract price, but Powell wanted it paid to him. Ciavarella was pleasantly surprised to hear about the windfall and told Mericle to do whatever Powell instructed; Ciavarella would work out the details with Powell. After Mericle left, Ciavarella excitedly ran upstairs to Conahan’s chambers to tell him about the nearly $1 million coming their way. Conahan joyfully threw his pen in the air, exclaiming, That’s one heck of a friend.²⁰

As county judges, Conahan and Ciavarella were allowed to engage in business investments outside of their judicial office. However, they were legally required to disclose the source of all money they received on their annual financial interest statements.²¹ Of course, they were also required to properly account for all income on their federal tax returns. Neither of them had any intention of doing either. They preferred to avoid certain public outcry if it became known that they accepted an outsized referral fee from the developer of a facility where Ciavarella would order juveniles detained. They agreed to share the money in secret and preside over legal proceedings involving Powell and Mericle without disclosing their financial ties.

Before Conahan and Ciavarella could get their hands on the money, PACC had to be completely finished. Yet the project could not begin until financing was secured. Since neither Powell nor Zappala had any experience running a juvenile detention center, bank officials were reluctant to loan PACC the millions of dollars it needed to construct a juvenile detention center in Luzerne County. Powell had to find a way to persuade bank officials that PACC would be profitable.²²

In July 2001 Powell floated a lease purchase agreement to county commissioners calling for Luzerne County to lease PACC for approximately $1 million a year for thirty years, after which the county had the option to buy it outright. If the commissioners agreed to this proposal, Powell could use it as proof that PACC would be financially successful so the bank would give him the construction loan he needed. Thomas Makowski, Tom Pisano, and Steve Urban, the county commissioners at the time, could not reach an agreement on Powell’s proposal.

There was a general consensus among the commissioners that they desperately needed to repair or replace the old facility, but they could not decide what to do. Engineering surveys conducted in 1999 and 2001 indicated that the place was beyond repair and a new one had to be built. The commissioners compared the cost of accepting Powell’s lease/buyout of PACC against that of the county building its own facility. Unfortunately, the cost comparisons proved to be useless because the facilities under consideration did not have uniform specifications.

The commissioners continued to dither for the remainder of 2001. They did not feel the matter to be particularly urgent. Despite the old facility’s deplorable condition, the Pennsylvania Department of Public Welfare (DPW) renewed its annual license to operate. A factor in DPW’s decision-making was the brief duration juveniles had to spend there, an average of only three to five days. Since DPW gave the thumbs-up to continue housing juvenile delinquents at the old women’s prison, the commissioners were in no rush to seriously consider Powell’s proposal.²³

Powell got tired of waiting for the commissioners. He and Conahan came up with a plan to get the much-needed financing to build PACC. Conahan was slated to become President Judge of the Luzerne County Court of Common Pleas in January 2002 and could use his official position to sign a document stating PACC would be profitable. Sure enough, on January 29, 2002, President Judge Michael Conahan signed a Placement Guarantee Agreement with PACC to house juvenile offenders for an absolute and unconditional obligation to pay PACC $1,314,000 annually with no termination date mentioned. This document was fraudulent because only the county commissioners could designate which facilities were authorized to house juveniles. Even as President Judge, Conahan did not have that authority. Not surprisingly, Conahan did not want the county commissioners to know about this supposed agreement. The Placement Guarantee Agreement was prepared for the sole purpose of helping Powell secure financing for the project. It worked. PACC obtained a $12 million loan in March 2002. Construction started soon thereafter.²⁴

Mericle’s people worked diligently. Completion of PACC’s twenty-four-bed juvenile detention facility was scheduled for the end of January 2003. The hurdle Powell, Conahan, and Ciavarella now faced was how to get the Luzerne County commissioners to contract with the facility. The commissioners never accepted Powell’s lease/buyout proposal made in July 2001. Powell had essentially built PACC on speculation, with no assurances that the commissioners would ever use it. In fact, they did not want to. They were still weighing the pros and cons of building a county-owned facility versus Powell’s July 2001 proposal and fully intended to continue using the old facility until they came to a consensus. After all, DPW kept renewing the old facility’s license.

Powell was out of luck, but not for long. Once again, he turned to his friend and now President Judge Michael Conahan for help. Conahan responded with a crafty plan to manipulate the county into using PACC. The county may have owned the old detention center, but it was operated by the Probation Department, which was funded under the court’s budget. As President Judge, Conahan controlled that budget. In late 2002, he removed from the court’s 2003 budget all funding for the probation officers and other employees of the old detention center. Conahan also had the certificate of compliance allowing the old county juvenile detention center to operate returned to the state and publicly announced that the court would no longer send juveniles there. These actions effectively shut the place down as of December 31, 2002.

There was substantial backlash over Conahan unilaterally forcing Luzerne County to stop using the old juvenile detention center, particularly since it was done over the vehement objections of the Luzerne County commissioners. The commissioners tried to get the certificate of compliance back from DPW. They had reason to believe the state would comply, as it had routinely reissued the certificate for the old center every year. Apparently, Pennsylvania’s standards for reissuing an existing certificate of compliance were much lower than those for granting a new one. DPW treated the commissioners’ request as one for a new certificate and demanded repairs the commissioners deemed too expensive to make.²⁵

In response to the controversy, both Conahan and Ciavarella gave press interviews detailing the deplorable conditions of the old center. Since there was no denying that the place was horrific, the issue eventually died down. Conahan’s actions had effectively forced the commissioners’ hand. It was not devastating, as the old center was not only dilapidated but also woefully inadequate to meet the county’s needs. The old center had only twenty-two beds that were exclusively used to temporarily detain juveniles for a limited time, approximately three to five days, while awaiting their court hearing. The county had to outsource to other counties for additional bed space for temporary detention. In addition, the old facility could not be used to detain juveniles who were ordered by a judge to undergo a period of residential treatment.

At the start of 2003, the commissioners had existing placement agreements to house juveniles with facilities in Tioga, Lycoming, and Schuylkill Counties, all pretty far away from Luzerne County. This required a great deal of travel by probation officers and made it difficult for the juveniles’ families to visit. Consequently, it was in everyone’s best interests for the commissioners to enter into a placement agreement with Powell’s conveniently located modern facility. The agreement allowed the county to use as many beds as PACC had available for $268 per day. Since PACC had only twenty-four beds and was not required to reserve them all for Luzerne County’s use, the commissioners approved identical placement agreements with five other facilities to detain juveniles for 2003.²⁶

With PACC’s completion in January 2003, Mericle’s company released the $997,600 finder’s fee. As per the terms of the construction agreement, the fee was to be paid to Powell. Mericle understood that Powell would share the money with Ciavarella but did not know any of the details. He would disburse the money as per Powell’s instructions, which turned out to be pretty strange.

Powell directed $610,000 of the $997,600 to be wired to his friend and fellow attorney Robert Matta. He told Matta the money was from a real estate transaction that he wanted to low key by using Matta’s account rather than his own.²⁷ Matta did not have any problem with Powell’s proposal, especially since Powell promised to give him $10,000 for his trouble. Mericle wired $610,000 to Matta’s attorney escrow account on January 21, 2003. A week later, as per Powell’s instructions, Matta wired the entire $610,000 to an account belonging to Beverage Marketing, a shell corporation controlled by Conahan. Conahan made three wire transfers totaling $480,000 to Ciavarella’s bank account and kept the rest. Powell paid Matta with a $10,000 check from PACC.

Powell had Mericle’s company wire the rest of the finder’s fee, $387,600, to Powell’s Robert Powell Esquire account. Powell transferred the money from his attorney account to a business account he owned under Vision Holdings. On August 29, 2003, Powell wrote a check to himself for $326,000 from his Vision Holdings account, endorsed it, and gave it to Conahan who deposited it into a nominee account. Powell kept the remaining $61,600.²⁸

Federal law required Mericle to file IRS Form 1099s reporting the disbursement of the fees as income to its recipients in the 2003 tax year. Mericle’s company issued a Form 1099 to Matta for $610,000 and a Form 1099 to Powell for $387,600.²⁹ Matta received his 1099 in early 2004. Not wanting to pay tax on this money, he promptly prepared a Form 1099 stating that he transferred the entire $610,000 to Beverage Marketing, one of Conahan’s companies.³⁰ Conahan was not about to pay any taxes on this windfall. He instructed his bookkeeper to falsify his company’s records to indicate that the money constituted consulting fees, but no tax was due because it all went to Joe Smith.³¹

Conahan and Ciavarella celebrated by purchasing a luxurious condominium on the Intercostal Highway in Jupiter, Florida, in February 2004. The property was mortgaged for $848,000, requiring a $5,570.76 monthly payment. Consistent with their mutual desire to avoid public scrutiny, they had the condo titled under the name Pinnacle Group of Jupiter, LLC, a corporation with Conahan and Ciavarella’s spouses as the sole owners. Powell was a frequent visitor to the condo, maintaining his $56 million yacht, Reel Justice, at a nearby marina. During 2004 Powell paid a total of $590,000 to Pinnacle, noting that the money was for rental fees and related expenses.³²

The $590,000 Powell paid to Pinnacle was a drop in the bucket. PACC proved to be a veritable cash cow. It was so profitable that Powell and Zappala built a larger detention facility in Butler County, Pennsylvania, called Western PA Child Care, LLC (WPACC). In June 2004 Powell contracted with Mericle’s company to construct WPACC at a cost of $9,745,300, which generated a second finder’s fee totaling $1 million. Industry practice dictated that fees associated with subsequent projects with the same party be paid to the original finder, in this case Ciavarella. Mericle verified that Ciavarella approved payment of this second fee to Powell before signing the construction agreement. As with the first fee, Mericle assumed Powell shared the money with Ciavarella but did not know to what extent.³³

Mericle’s company completed WPACC in June 2005. On July 13, 2005, Mericle visited Ciavarella in his chambers to ask if he would be attending an upcoming golf tournament sponsored by Catholic Youth Services. During the course of their conversation, Ciavarella inquired about the status of the WPACC project. Mericle indicated that it was complete and the $1 million finder’s fee would be paid as soon as Powell finished his end of the paperwork. Ciavarella stood up and said, I can help with that; give me a minute, before walking over to his secretary’s work area.³⁴

After Ciavarella returned, the two men continued their conversation. As Mericle was getting ready to leave, Ciavarella’s secretary handed him a piece of paper with instructions on where to wire the second finder’s fee. Mericle returned to his office and called Powell to verify the wiring instructions and find out when Powell would finish the paperwork. Powell was in Florida with no secretarial help at the time, so Mericle faxed the documents to him. Powell sent the completed documents back to Mericle via FedEx that afternoon.

The wiring instructions handed to Mericle by Ciavarella’s secretary and formally approved by Powell called for the $1 million finder’s fee for the WPACC project to be deposited into an account under the name of Pinnacle Group of Jupiter, LLC, at the Wachovia Bank. Mericle had the money wired to Pinnacle as