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Justice News

Department of Justice
U.S. Attorney’s Office
Northern District of Ohio

FOR IMMEDIATE RELEASE
Tuesday, December 5, 2017

Former Broadview Heights man sentenced to nearly six years in prison for defrauding Cuyahoga Heights School District out of $2.6 million

A former Broadview Heights man was sentenced to nearly six years in prison for his role in a scheme to defraud the Cuyahoga Heights School District out of millions of dollars, law enforcement officials said.

David Donadeo, 43, (formerly known as Donald A. Rupp) was sentenced to 70 months in federal prison and ordered to pay approximately $2.6 million in restitution.

Donadeo and others established and owned shell vendor companies that were used to defraud the school district. Joseph Palazzo worked as Cuyahoga Heights School District’s information technology director.  Palazzo was responsible for managing the District’s IT Department, which included purchasing hardware and software and making other IT expenditures to benefit the District and its students, according to court documents. 

Palazzo, Donadeo, and others devised a scheme to divert millions of dollars of school district funds to their own personal use. Overall, the school district sustained a loss of approximately $3.3 million.

This scheme involved Palazzo submitting to the school distict false invoices that purported to be for IT-related goods and services purchased from legitimate companies by the school district’s IT department.  Palazzo represented that the invoices he submitted were legitimate, and he approved the false invoices himself or forged the signature of another in the approval section, according to court documents.

The companies named on the invoices did not supply such goods to or perform such services for the District and were nothing more than shell companies set up by Donadeo and others to perpetrate the fraud scheme. The invoices listed services that were never performed, fictitious software and hardware, adn software and hardware never received or already purchased by the school district from another source, according to court documents.

Relying on these invoices, the school district issued checks to these shell vendor corporations, two of which Donadeo operated. Donadeo, and the other shell vendor corporation owner kept approximately half of the stolen money themselves and funneled the remainder of the money back to Palazzo for his personal use, according to court documents. 

According to court documents, Donadeo fled the country with his family shortly after learning authorities were were pursuing a criminal investigation and had executed search warrants. The case was indicted in 2013, but Donadeo remained at large until May 2017, when Spain extradited Donadeo and returned him to the U.S. to face prosecution.

“This defendant set up sham corporations that he used to steal millions of dollars from the students and taxpayers of Cuyahoga Heights,” said U.S. Attorney Justin E. Herdman.

“David Donadeo will be in prison for more than five years for his involvement in a scheme laced with a web of financial lies, but the harm caused to the students and citizens of Cuyahoga Heights may last a lifetime,” said Ryan L. Korner, Special Agent in Charged, IRS Criminal Investigation, Cincinnati Field Office.

“David Donadeo stole from the citizens and students of Cuyahoga Heights and then avoided the consequences of his actions for years,” said Stephen D. Anthony, Special Agent in Charge of the FBI’s Cleveland Office. “The investigators are to be commended for uncovering this enormous fraud.”

Joseph Palazzo was sentenced to 11 years in prison for his role in the conspiracy. His brother, Dominic Palazzo, was sentenced to 30 months in prison. Dennis Boyles was sentenced to more than two years in prison for his role in the conspiracy.

This case was investigated by the Internal Revenue Service -- Criminal Investigation and the Federal Bureau of Investigation, with the assistance of the State of Ohio Auditor’s Office, the Cuyahoga County Sheriff’s Office and the United States Postal Inspection Service.

The case was prosecuted by Assistant United States Attorney Rebecca Lutzko and Assistant United States Attorney James L. Morford.

Topic(s): 
Public Corruption
Component(s): 
Contact: 
Mike Tobin 216.622.3651 michael.tobin@usdoj.gov
Updated December 5, 2017