Federal Court Upholds Sentence and Restitution Order Against Charles A. Costanzo, Former Administrator of the Lackawanna County's Workers Compensation Fund
The United States Attorney's Office for the Middle District of Pennsylvania announced today that in an opinion filed on August 15 the United States Court of Appeals for the Third Circuit affirmed the sentence and restitution ordered against Charles A. Costanzo of Dunmore, Pennsylvania.
According to United States Attorney Peter J. Smith, Costanzo was sentenced on August 13, 2009, by United States District Court Senior Judge Edwin Kosik to a total of 70 months' imprisonment and $504,439.28 in restitution for fraud, money laundering, and tax charges in connection with the administration of the Lackawanna County Workers' Compensation fund.
Costanzo was convicted on April 22, 2009 after a three-day trial. The Superceding Indictment returned by a federal Grand Jury stated that from on or about November 11, 2004, and continuing until on or about September 5, 2005, Costanzo conspired with Marc Boriosi to misappropriate approximately $647,260 of Lackawanna County funds. Boriosi previously pleaded guilty to one count of conspiracy and one count of tax evasion in connection with the scheme. Boriosi testified as a government witness in the June 2011 of former Lackawanna County Commissioner Robert Cordaro and Anthony J. Munchak.
In appealing his sentence and restitution, Costanzo argued that the sentence was based on flawed advisory Sentencing Guidelines calculations related to the total loss and the District Court's adoption of the 2-level enhancement for an abuse of a position of trust; and the District Court's improper denial of his request for a downward departure because the calculation over-represented the seriousness of his criminal history.
The Court upheld Costanzo's sentence and restitution order ruling that facts established at trial undermined Costanzo's argument. Costanzo was not entitled to take money from the Lackawanna County Worker's Compensation Fund. The money Costanzo misappropriated came out of the Fund, without the County's knowledge and agreement, and was used for Costanzo's personal expenses. The Court further noted there were procedures in place to provide for Costanzo's lawful reimbursement, but he failed to follow those procedures.
The Circuit Court upheld the Court's ruling that the total loss as a result of Costanzo's fraud scheme to the County was $647,260.
The Court upheld the District Court's finding that Costanzo abused a position of trust, stating that he was "in control of all of the monies flowing into the Fund. Costanzo's arrangement with the County and the existence of a second account at Old Forge Bank, which was exclusively controlled by Costanzo, allowed him unfettered access to the Fund without detection...the County relied on Costanzo's integrity in administering the Fund. Costanzo abused that position of trust to accomplish his misappropriation, using his position to divert money from the Fund to himself for personal gain. The most significant support for this proposition is his ability to access and spend County money without immediate ramifications. The scrutiny and supervision that Costanzo claims is omnipresent is not supported by the record."
The Court also found that Costanzo's prior criminal record was properly considered by the District Court and that the District had correctly ruled that he was not entitled to a downward departure from the Sentencing Guideline calculations.
The case was investigated by the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigations. The prosecution and appeal were handled by Assistant United States Attorney Lorna N. Graham.
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