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CUYAHOGA HEIGHTS, Ohio - A former employee of the Cuyahoga Heights School District was sentenced to more than 11 years in prison for the theft of more than $3.4 million from the district, said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio.
Joseph M. Palazzo, 31, of Independence, previously pleaded guilty to conspiracy to commit mail fraud, conspiracy to commit money laundering, and wire fraud.
U.S. District Judge Benita Pearson sentenced Palazzo to 136 months in prison and ordered him to pay $3.4 million in restitution.
“This defendant stole millions of dollars that were to be used to educate the children of the Cuyahoga Heights School District,” Dettelbach said in a news release. “Our office will continue to go after those who would abuse the public trust.”
Palazzo was employed by the Cuyahoga Heights School District as its information technology director until February 2011.
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's scheme consisted of diverting millions of dollars in district funds to his personal use and the personal use of others.
Palazzo submitted false invoices to the district and approved these false invoices himself or forged the signature of another in the approval section, according to court documents.
These false invoices were for services never performed.
The companies named on the invoices did not supply such goods to or perform such services for the district and were nothing more than “shells,” according to court documents.
Palazzo's actions caused the district to send money to these "shell" vendor corporations which were owned by others working with Palazzo.
The shell vendor corporation owners 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.
As a result of this scheme, the district had a total loss of $3,333,448.
Palazzo also engaged in a second scheme to defraud the district.
It involved Palazzo purchasing various personal electronic items, such as iPads, cameras and television, from legitimate vendors then falsely reporting those invoices to the district as being used for school purposes. Palazzo sold them to third-parties at a discounted price and kept the money from such sales for his own personal use, according to the information.
As a result of the second scheme, the district lost $76,214.
This case was investigated by Special Agents of the Internal Revenue Service Criminal Investigation and the Federal Bureau of Investigation, both located in Cleveland, with the assistance of the State of Ohio Auditor’s Office, the Cuyahoga County Sheriff’s Office, and the United States Postal Inspection Service.
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