WHITE PLAINS, NY — John C. Gallagher Jr. entered Courtroom 420 at the Charles L. Brient United States District Court in White Plains, NY shortly after 11 a.m. He wore a dark suit. His face taught, his, bald head and neck flushed a deep red.
Gallagher rose slowly before U.S. Magistrate Judge Paul E. Davison and stood quietly before pleading “Not Guilty” to federal corruption charges for operating a bribery and kickback scheme for years in the City School District of New Rochelle.
Thirty Minutes later the Press Office of the United States Attorney’s Office Southern District of New York issued a press release announcing that his alleged partner in the scheme, Mauro Zonzini had secretly entered into a cooperation agreement with the U.S. Department of Justice on March 24th, 2017 and plead guilty to tax evasion and bribery charges on May 23rd.
Zonzini had admitted he “routinely diverted corporate receipt checks of [his company] into his personal bank accounts” and “regularly issued checks to himself from [his company]’s corporate accounts and had his bookkeeper falsely record the cash withdrawals as business expenses” to understate his business income and his personal income.
Gallagher faces up to 10 years in federal prison. Zonzini faces up to 15 years in federal prison.
The case against Gallagher is being prosecuted by Assistant U.S. Attorneys Kathryn Martin and Benjamin Allee.
Gallagher, 53, filed a financial statement with the court, and took an oath attesting that he had few assets and earned just $3,200 a month in income. Gallagher told the court that the could not afford an attorney and asked court to appoint an attorney for him. Attorney Suzanne Brody, already on hand, was formerly assigned to defend Gallagher at taxpayer expense.
Throughout the arraignment proceeding, new information was revealed.
Gallagher was arrested at his home in Harrisburg, Pennsylvania at 6 a.m. on Tuesday May 23rd. He was taken to Middle District of Pennsylvania United States District Court in Harrisburg where he had an initial appearance and posted a $25,000 bond. He was released and ordered to travel to New York for his arraignment in United States District Court in White Plains.
Brody stated that Gallagher had left Harrisburg Wednesday morning at 4 a.m. to arrive in White Plains by 10 a.m. where he was processed prior to his arraignment.
Brody revealed that Gallagher has a prior criminal history. He was convicted of two DWI charges. She indicated he has an alcohol problem and that terms of bail are that he may not consume alcohol. Brody said Gallagher knows “he needs to put down the beer, it got him enough trouble”.
Brody said that Gallagher was approached about the allegations contained in the indictment “years ago” by Postal Agent Sean Smith and that “it did not pan out”.
Judge Davison upheld the bail of a $25,000 bond but added a few conditions. Gallagher, who said he does not have a passport, was told he could not now apply for a passport. He was given a travel restriction limited to the federal district around his home in Harrisburg, the federal district around White Plains and the federal districts in between so that he could drive back and forth for court appearances. He was told that pre-trial services may require some sort of mental health or alcohol abuse treatment program.
Brody strenuously opposed a requirement that Gallagher inform Aramark, his current employer, of his federal indictment. She said there had been plenty of media coverage already, complaining specifically about blogs written by people that have nothing better to do than write “nasty things” about people (i.e., Talk of the Sound).
AUSA Martin pointed out that Gallagher works in the Harrisburg School District which receives federal funds and the position was similar to the position he held in New Rochelle.
Davison ordered Gallagher to notify Aramark of his indictment by presenting a copy to them within the next couple of weeks.
The court clerk drew a name from the wheel and selected U.S. District Judge Kenneth M. Karas.
After the arraignment in the morning, Gallagher was back in court at 3 p.m. in front of Judge Karos in Courtroom 521.
Lawyers from both sides discussed the logistics of the case and it was agreed that the prosecution would turn over its evidence under rolling discovery over the next three weeks. After that the defense will get about 2 months to review the evidence.
A conference was scheduled with all parties on July 27th at 11:30 a.m.
Brody asked that Gallagher’s travel restriction include the Eastern District so that he could visit family in Long Island and Brooklyn. Judge Karas agreed.
AUSA Allee stated that discovery would include various records including school records, bank records, credit card statements employment records from Aramark and audio recordings.
The DOJ released the following statement detailing the case against Gallagher and Zonzini:
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector in Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the unsealing of an Indictment yesterday charging JOHN C. GALLAGHER JR., former Director of Environmental Services of the City School District of New Rochelle (the “School District”), with bribery. The charge arises from an alleged corruption scheme in which GALLAGHER solicited and accepted kickbacks from an outside contractor for the School District in the amount of 10 percent of the funds paid to the contractor’s company by the School District. Mr. Kim also announced the guilty plea of MAURO ZONZINI, a former contractor for the School District, to bribery and tax evasion, charged in a separate Information unsealed yesterday.
Acting U.S. Attorney Joon H. Kim said: “A school district official should be doing what is best for our children and their education. Instead, as alleged, John Gallagher demanded and received more than $150,000 in kickbacks and bribes from a contractor for the school district. We are committed to finding and rooting out corruption wherever it lurks, including, in our public schools, and we thank our partners at the U.S. Postal Inspection Service for their work in this shared mission.”
USPIS Inspector in Charge Philip R. Bartlett said: “Mr. Gallagher and Mr. Zonzini were in positions of trust and therefore had a responsibility to act in the best interest of their employer and client. Unfortunately they allegedly allowed their judgment to be clouded by money. Postal Inspectors and their law enforcement partners will not tolerate the use of US Mail to facilitate alleged kickback and tax evasion schemes.”
As alleged in an Indictment and an Information unsealed yesterday in White Plains federal court:
The School District, which receives federal benefits significantly in excess of $10,000 each year, has a Buildings and Grounds Department. It is responsible for, among other things, maintenance and repair of facilities used by the School District to educate the children. To do certain maintenance and repair work, the School District uses outside contractors.
Among the outside contractors used by the School District are companies with specialties – in, for example, masonry, electrical work, plumbing, and carpentry – sometimes referred to as “bid vendors” or “time and materials” contractors. These contractors bid annually, using set rates, and if awarded contracts, are paid by the School District to handle any projects within the contractors’ specialties that do not exceed a certain threshold cost. (As of 2009, that amount, per New York State law, was $35,000.) A more costly project that exceeds the threshold is offered for bid and awarded to the lowest responsible bidder, unless the project is deemed a health and safety emergency (i.e., a major plumbing leak during the school year), in which case, the time and materials vendor may be asked to do the job, regardless of the cost.
GALLAGHER, the defendant, was the School District’s Director of Environmental Services, overseeing the School District’s buildings and grounds. To fill this position, the School District contracted with a company that provided, among other things, management services (“Company-1”). GALLAGHER, as an employee of Company-1, was thereby made the School District’s Director of Environmental Services, and worked full-time in the School District, as its agent, with authority to act on its behalf. GALLAGHER, as Director of Environmental Services, had influence over which contractors were awarded work by the School District, and over whether, when, and how contractors were assigned work and paid for work.
MAURO ZONZINI owned and wholly controlled a construction company in Westchester County (the “Company”). The Company contracted with the School District to do masonry work, and was hired each year by the School District as its time and materials contractor for masonry work.
From in or about 2009 through in or about 2013, GALLAGHER engaged in a corrupt, criminal scheme, in which he solicited, demanded, and accepted bribes in the form of cash payments, intending to be influenced and rewarded in connection with the School District’s business and transactions with the Company. The bribe payments that GALLAGHER solicited, demanded, and accepted were paid by ZONZINI. Routinely, after the School District paid the Company for work performed, GALLAGHER met in person with ZONZINI in a parking lot, where ZONZINI provided GALLAGHER with a kickback in the amount of ten percent of the payment the Company had received from the School District. In this way, GALLAGHER received dozens of cash bribe payments from ZONZINI, over the course of at least approximately four years, which together amounted to more than $150,000. GALLAGHER solicited, demanded, and accepted the bribe payments intending to be influenced in and rewarded for the School District’s decisions to award the Company contracts for masonry work, to assign masonry projects to the Company, and to make timely payment to the Company.
To avoid detection of his corrupt scheme, GALLAGHER concealed the cash bribe payments he received from ZONZINI. GALLAGHER did so, as he admitted during a secretly recorded conversation, by keeping the payments “in my car or in my trunk.” In some instances he used the cash to make payments directly toward living expenses, without depositing it in his bank account. For example, during the corrupt scheme, GALLAGHER used the bribe money to make credit card payments, car payments, and, as he admitted during the secretly recorded conversation, “I paid for some college.”
GALLAGHER was arrested yesterday and was presented in the federal court in Harrisburg, Pennsylvania. He will be arraigned on the Indictment in the United States Courthouse in White Plains at 11:00 a.m. today, before United States Magistrate Judge Paul E. Davison.
GALLAGHER, 53, of Harrisburg, Pennsylvania, is charged with one count of bribery, which carries a maximum sentence of 10 years in prison.
ZONZINI, 52, of South Carolina, pled guilty to two counts: (1) bribery of a public official, which carries a maximum sentence of 10 years in prison, and (2) tax evasion, which carries a maximum sentence of five years in prison. The defendant will be sentenced at a future date.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge. The case is assigned to United States District Judge Nelson S. Román.
Mr. Kim praised the outstanding investigative efforts of the United States Postal Inspection Service, the Internal Revenue Service, Criminal Investigation, and the Office’s criminal investigators. He also thanked the U.S. Department of Education’s Office of Inspector General for its assistance.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Kathryn Martin and Benjamin Allee are in charge of the prosecution.
Zonzini Cooperation Agreement
Under the terms of his cooperation agreement with the U.S. Attorney’s Office, in exchange for accepting a two-count Criminal Information charging him with paying bribes to an agent of the City School District of New Rochelle from 2009 to 2013 and evasion of federal income tax from 2010 to 2013, Zonzini is required to file amended 2010-2013 tax returns with the Internal Revenue Service, and amend corporate tax returns ending 2010-2013 and will pay past back taxes and penalties.
Zonzini will amended his reported taxable income for 2010 to 2013 from $271,173 to $746,441. From 2010 to 2013, Zonzini paid $53,180 in federal incomes taxes. Under the agreement he will pay an additional $148,415. Zonzini has agreed to not to contest civil fraud penalties. Zonzini will pay restitution. The restitution order will be used as the basis for a civil assessment, the amount of which Zonzini may not contest.
In exchange, Zonzini agrees to “truthfully and completely” disclose “all information with respect to the activities of himself and others concerning all matters” about which the DOJ inquires of him, information which can be used for any purpose.
The federal charging document states that Zonzini’s company performed work for “several municipalities and school districts in Westchester”. Talk of the Sound is aware of business relationships between Zonzini’s company and the City of New Rochelle, the City of Mount Vernon, the Heritage Homes Project with the New Rochelle Municipal Housing Authority, the Town/Village of Scarsdale, as well as the City School District of New Rochelle. Zonzini was also actively involved with the Police Commissioner Patrick Carroll, the New Rochelle Police Foundation and the New Rochelle Police Advisory Board.
Under the agreement, Zonzini must attend all meetings at which the DOJ requests his presence, must produce all documents requested of him by the DOJ or any other law enforcement agency, must testify truthfully before any grand jury or court proceeding upon any matter which the DOJ requests, shall inform the DOJ of all crimes which he has committed or investigations or prosecutions which he has been the subject of, and shall commit no further crimes. Zonzini is under the full control of the DOJ and designated investigators.
If Zonzini complies with the agreement, he will not be prosecuted further for the crimes he has plead guilty to and his failure to report to the IRS all of his cash income from his business from in or about the early 1990’s.
The sentence Zonzini will receive is at the sole discretion of the court and the DOJ makes no promise as to what sentence Zonzini will receive which, by statute, on Counts 1 and 2 can be up to 15 years. However, if he cooperates fully, the DOJ will file a motion on his behalf starting this.
If Zonzini fails to live up to the agreement he will lose various protections in the agreement but cannot withdraw his guilty plea; he may be prosecuted for additional crimes including perjury and obstruction of justice and any information he has provided to the DOJ can be used against him.