Grand jury indicts DiMasi
Contract fraud alleged
By John J. Monahan TELEGRAM & GAZETTE STAFF
BOSTON – Former House Speaker Salvatore F. DiMasi allegedly received secret payments totaling $57,000 and could face up to 145 years in prison for his role in a conspiracy to illegally secure multimillion-dollar state contracts for a computer software company, according to a federal grand jury fraud indictment.
Mr. DiMasi, 64, who resigned in January amid earlier reports of the contract scandal, was released yesterday on $10,000 bond after appearing in federal court with three associates. Each faces one count of conspiracy, three counts of federal mail fraud, and four counts of federal wire fraud.
Indicted on the same charges, and appearing with Mr. DiMasi before federal magistrate Judge Robert B. Collings, were Richard D. Vitale, 64, of Boston, Mr. DiMasi’s former accountant and longtime friend; Richard W. McDonough, 64, of Foxboro, a Beacon Hill lobbyist and close associate of Mr. DiMasi; and Joseph P. Lally, 48, of North Reading, a one-time vice president of Cognos ULC, who more recently worked as a licensed reseller of the company’s software. Mr. Lally is also charged with one count of money laundering.
Each of the mail and wire fraud charges carry penalties up to 20 years in prison, a $250,000 fine and a subsequent five years supervised release. The conspiracy charge carries penalties up to five years plus three years supervised release and a $250,000 fine. Mr. Lally also faces an additional 10 years in prison if convicted of the laundering charge.
The indictment alleges the four devised a long-running scheme that began in late 2004 and continued through early 2007, in which they conspired to use Mr. DiMasi’s power and influence to direct two multimillion-dollar state computer software contracts to Cognos, with all four men receiving large sums of money for their roles.
While legislators, state officials and the public were aware of the ongoing investigation since early last year, the extent and brazen nature of the scheme detailed in the indictment released yesterday stunned Beacon Hill officials.
Gov. Deval L. Patrick called the charges “deeply disturbing” and said they constitute “a very serious breach of the public trust” that will be difficult to overcome.
“I think we all have to acknowledge how deeply troubling these charges are. All of us who work in this building have to redouble our efforts to restore the publics confidence in our, and the state government’s ability, to do the public’s business, the people’s business,” he said last night.
Republican House Minority Leader Bradley H. Jones Jr. said one-party rule of the state is to blame for “the dark shadow (that) continues to hover over Beacon Hill.”
“When one party controls the Legislature by such a vast majority, the door is left wide open for corruption, abuse of power and scandal,” he said.
Outside the courthouse yesterday, Mr. DiMasi refused to discuss details, but said, “Every decision that I have ever made as the speaker or a state representative was always made in the best interest of my constituents and the people of Massachusetts.”
His lawyer, Thomas Kiley, said he would prove his innocence in court.
“He has never, ever broken the trust of the people of the commonwealth,” Mr. Kiley said.
Thomas Drechsler, a lawyer representing Mr. McDonough, said his client legitimately lobbied for Cognos and was well within his First Amendment rights in all of his activities. “I really feel strongly this is an attack on the lobbying profession,” Mr. Drechsler said, adding his client denies any wrongdoing.
The four men are scheduled to be arraigned June 8.
According to the indictment, from March 2005 through early 2007, Mr. Lally, Mr. McDonough and Mr. DiMasi arranged to have regular payments made to Mr. DiMasi from Cognos for the speaker to use his power to secure contracts for Cognos.
Starting in April 2005, a series of monthly payments of $5,000 each from Cognos were made to a lawyer who shared a private practice law office with Mr. DiMasi, as an attorney retainer fee. Of those funds, $4,000 of each of the payments directed by Mr. Lally were given to Mr. DiMasi, supposedly as a client referral fee.
At the time the arrangement was set up, the indictment alleges, Mr. DiMasi agreed to it, saying, “It’s about time we got business like this.”
It alleges Mr. DiMasi asked to get $4,000 of every $5,000 check paid to the lawyer and that Mr. DiMasi received checks from the lawyer of $4,000 on six occasions between April and November 2005 as well as one check for $8,000. On another occasion after Cognos’ payments were interrupted, Mr. DiMasi allegedly instructed the lawyer to check with Mr. McDonough to find out why, which he did.
A short time later, Mr. Lally sent an e-mail to a Cognos executive asking him to look into the situation “fast,” adding, “We don’t want to piss anyone off this late in the game.”
The next day Cognos sent a $25,000 check to the lawyer and a short time later Mr. DiMasi told the lawyer he wanted all of that check. The lawyer then wrote and mailed a $25,000 check to Mr. DiMasi.
On Dec. 28, 2006, Mr. DiMasi instructed the lawyer to replace the check with four backdated checks in amounts of $8,000, $7,000, $6,000 and $4,000, “to further disguise the payments as typical referral fees,” which he did, according to the federal allegations.
Meanwhile, the four were arranging two large contracts for Cognos to provide the state with software.
In 2006, Mr. DiMasi had a $5.2 million budget amendment introduced and facilitated its final passage for the purchase of an Education Data Warehouse and Reporting System for the Department of Education, with the amendment specifying not less than $4.5 million be spent on software.
Mr. DiMasi never disclosed his financial ties to Cognos, which received the contract from the department.
The contract resulted in the payment of $891,000 to Montvale Solutions, a company formed by Mr. Lally as a licensed reseller of Cognos products. Montvale Solutions then paid $100,000 to Mr. McDonough and $100,000 to Mr. Vitale’s company, WN Advisors, as consulting fees, the indictment alleges.
Then in 2007, Mr. DiMasi, using legislative language provided by Mr. Lally, Mr. McDonough and Mr. Vitale on behalf of Cognos, caused provisions to be made for a $15 million purchase of performance management software by the state Division of Administration and Finance. The purchase was later canceled by the state.
The indictment said they then used Mr. DiMasi’s influence to help Cognos secure the contract from the Division of Administration and Finance.
That contract resulted in payment of $2.8 million to Mr. Lally’s firm, which in turn paid $200,000 to Mr. McDonough and $500,000 to Mr. Vitale’s firm as consulting fees.
The indictment details numerous actions by Mr. DiMasi, Mr. McDonough and Mr. Lally to ensure the contracts were funded and awarded to Cognos.
Sal DiMasi case rocks accounting co., IBM contract
The Sal DiMasi scandal now rocking the State House is taking its toll on some prominent local and national firms.
The corruption case against DiMasi – the former House speaker who was indicted yesterday with three others tied to a shady software deal – centers around Cognos ULC, a Canadian company with a longtime presence in Burlington.
DiMasi and the three others effectively steered the state contracts to Cognos, the U.S. Attorney’s office charged yesterday.
Cognos is now a subsidiary of IBM Corp., which purchased Cognos after the multimillion-dollar contracts in question were issued in 2006 and 2007. IBM, whose spokesman could not be reached for comment, voluntarily rescinded one of the state contracts, valued at $13 million, after it officially took over Cognos last year.
Another company, Vitale Caturano, a prominent Charlestown accounting firm, changed its name earlier this year amid bad publicity surrounding one of its founders, Richard Vitale, who was indicted yesterday along with DiMasi.
Caturano & Co., which was not charged with anything and which apparently wasn’t aware of Vitale’s alleged Beacon Hill antics, declined comment yesterday.
Vitale, who left his old accounting firm in 2008, is in trouble on yet another front. He was indicted by the state for allegedly using his close relationship with DiMasi to push a House bill on behalf of the Massachusetts Association of Ticket Brokers to remove price caps on ticket reselling.