Case Document 129 Filed 11/20/13 Page 1 of 26 UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF UNITED STATES OF AMERICA NO. 33CR-10-338 V. (Judge Caputo) RAPHAEL J. MUSTO, Defendant. SECOND SUPERSEDING INDICTMENT FILED 571' . oi Count 1 UV 2 0 2013 18 U.S.C. 1343, 1346 and 2) PE (Honest Services Wire Fraud) DEPU73, CLER The Grand Jury Chargesi 1. Beginning in or about 2005 to on or about 2010, in the Middle District of and elsewhere, the defendant, RAPHAEL J. MUSTO and others known and unknown to the grand jury, devised and intended to devise a scheme and artifice to defraud the citizens of the Commonwealth of of their right to the honest and faithful services of RAPHAEL J. MUSTO, through bribery and kickbacks and the concealment of material information. Case Document 129 Filed 11/20/13 Page 2 of 26 THE RIGHT TO HONEST SERVICES 2. At all times material to this indictment, the defendant RAPHAEL J. MUSTO, was a member of the Senate of elected to serve the 14th Senatorial District and as such was a public official. During relevant times of this indictment, SENATOR MUSTO served on various committees of the Senate, including the Environmental Resources and Energy Committee, Appropriations Committee, and Community and Economic Development Committee. He likewise served on various government boards and authorities, including the Infrastructure Investment Authority (PENNVEST), the Low-Level Waste Advisory Committee, and the Mining and Reclamation Board. As a public official, the defendant had a fiduciary duty to the Commonwealth of the Senate of and the public. 3. This fiduciary duty is based in the law and further defined by the Public Official and Employee Ethics Act, 65 Pa. C.S.A. ?1101, et seq. As member of the Senate, the defendant held a public trust and "any effort to realize personal financial gain I I I Case Document 129 Filed 11/20/13 Page 3 of 26 through public office other than compensation provided by law is a violation of that trust". 65 ?1101.1(a) 4. law also prohibits any public official from soliciting or accepting "anything of monetary value, including a gift, loan, political contribution, reward or promise of future employment, based on an understanding of that public the vote, official action or judgment of the public official would be influenced thereby." 65 1103(c), 1109(a). Public officials are prohibited, as a part of their fiduciary duty to the public, from engaging in any conduct which constitutes a conflict of interest. See, 65 1109(a). 5. It is a crime under law for any person to make or receive cash campaign contributions for the benefit of any candidate in excess of $100. See, 25 P.S. 3254 and 3550. The willful failure to report all contributions and account for all expenditures on the applicable campaign finance report required by 25 P.S. ?3246 constitutes a crime under law. See, 25 P.S. 3249 and 3502. 6. Under law, public officials are required to file a truthful and complete annual statement of financial interests with the Case Document 129 Filed 11/20/13 Page 4 of 26 Ethics Commission. 65 Pa C.S. 1104. All of the statements of public officials are available to the public for their review. 65 Pa C.S. 1104(e). 7. In violation of his duties to the public, SENATOR MUSTO was unlawfully influenced in his official duties by bribes and kickbacks he received from individualsaknown and unknown to the grand jury. PURPOSE OF THE SCHEME 8. The purpose of the scheme and artifice was for the defendant to secretly use his official position to enrich himself by soliciting and accepting bribes and kickbacks from individuals and businesses in exchange for favorable official action. MANNER, MEANS AND METHODS 9. Beginning in 2005, representatives of a construction company, hereinafter referred to as "Company provided a stream of benefits to SENATOR MUSTO with the intent to garner SENATOR MUSTO's support in his official actions taken which were to the benefit of "Company From 2005 through 2009, SENATOR MUSTO accepted Case Document 129 Filed 11/20/13 Page 5 of 26 these things of value from representatives of "Company in exchange for past, present and future favorable official action. 10. In January 2006, SENATOR MUSTO entered into a contract with "Company to perform repairs and renovations to a property then-owned by SENATOR MUSTO. In December 2006, at the conclusion of the renovations, the defendant was billed approximately $47,900 for the work performed on the property. 1 1. To give the appearance that the defendant had paid in full for the services rendered, the defendant issued a check in the full amount due on the contract to "Company However, representatives of the construction company subsequently reimbursed the defendant approximately $25,000 in cash. 12. In 2007, "Company contracted to have approximately $10,000 worth of additional repairs done to this property at the request of the defendant. "Company did not bill, and the defendant did not I compensate them for the repairs done. . 13. In addition, from the time period of 2005 to 2008, "Company provided the defendant with annual holiday gifts, which were of Case Document 129 Filed 11/20/13 Page 6 of 26 sufficient value to obligate the defendant to disclose them on his statements of financial interests. 14. Prior and subsequent to receiving these things of value from "Company the defendant utilized his position as a Senator and member of various government boards and authorities to advocate for and attempt to advance various projects beneficial to "Company and individuals affiliated with "Company For example, in 2006, SENATCR MUSTO wrote letters to state government agencies asking that grants be awarded to "Company for the construction of a multi-million dollar commercial development in Lackawanna and Luzerne Counties. 15. In 2010, SENATOR MUSTO further advocated for "Company by inducing local officials to assume the cost of certain highway and road obligations related to road maintenance for Company A's commercial development project by promising to get additional state grant funding for the municipality's highway and road needs. Local officials acquiesced to SENATOR MUSTO's request and assumed these Case Document 129 Filed 11/20/13 Page 7 of 26 obligations, which benefitted "Company by saving it the cost of ongoing road maintenance. 16. In an effort to conceal from public disclosure his ongoing financial relationship, involving bribery and kickbacks, with "Company and its representatives, the defendant knowingly and intentionally filed materially false annual statements of financial interests. Specifically, in the statements of financial interest filed with the Ethics Commission for calendar years 2005, 2006, 2007, and 2008, the defendant failed to report his receipt of these things of value from "Company and it representatives, knowing that the filing of a false statement of financial interests is a criminal offense under law. See, 65 ?1109(b). 17. Beginning in or about 2005 through 2010, in the Middle District of and elsewhere, the defendant RAPHAEL J. MUSTO, being aided and abetted by others known and unknown to the grand jury, having devised a scheme to defraud the public of their right to his honest services through bribes and kickbacks and using fraudulent Case Document 129 Filed 11/20/13 Page 8 of 26 pretenses, representations and promises for the purpose of executing the scheme to defraud and attempting to do so, knowingly caused wire communications to cross state lines. For example, on December 27, 2006, the defendant issued a check to the "Company for approximately $47,900 which was cashed into a bank account causing a wire communication to cross state lines. In violation of Title 18, United States Code, 2, 1343 and 1346. Case Document 129 Filed 11/20/13 Page 9 of 26 Count 2 18 U.S.C. 1341, 1346 and 2) (Honest Services Mail Fraud and Mail Fraud) The Grand Jury further charges that3 18. The allegations contained in paragraphs 1 through 17 of this Indictment are fully incorporated herein. 19. Beginning on or about 2005 through 2010, in the Middle District of and elsewhere, the defendant RAPHAEL J. MUSTO, being aided and abetted by others known and unknown to the grand jury, having devised a scheme to defraud the public of their right to his honest services through bribes and kickbacks and using means of 1 fraudulent pretenses, representations and promises, for the purpose of executing the scheme to defraud and attempting to do so, knowingly caused to be delivered by the United States mail or by a commercial carrier various items in furtherance of the scheme. For example, on March 1, 2006, the defendant issued a letter sent through the United States mail which was in support of a state grant for a commercial development project undertaken by "Company (Ease Document 129 Filed 11/20/13 Page 10 of 26 In violation of Title 18, United States Code, 2, 1341 and 1346. 10 Case Document 129 Filed 11/20/13 Page11' of 26 Count 3 18 U.S.C. 666(a)(1)(B) (Corrupt Receipt of Bribe/Reward for Official Action Concerning Programs Receiving Federal Funds) The Grand Jury further charges that3 20. The allegations contained in the other counts in this Indictment are hereby re'alleged and incorporated by reference as if fully set forth herein. 21. As an elected senator for the Commonwealth of the defendant was an agent of a number of government entities, including, but not limited to, the Commonwealth of 22. The Commonwealth of as well as other government boards and authorities where SENATOR MUSTO served as an agent, annually received federal assistance in excess of $10,000 during each one'year period beginning on January 1, 2005, and extending through December 31, 2009. 23. Beginning in 2005 through 2009, in the Middle District of and elsewhere, the defendant, 11 Case Document 129 Filed 11/20/13 Page 12 of 26 RAPHAEL J. MUSTO, did knowingly, intentionally and corruptly solicit and demand for his own benefit, and did accept, and agree to accept, from representatives of "Company things of value as described in the paragraphs above, intending to be influenced and rewarded in connection with the business he conducted as a senator. In particular, things of value were given by representatives of "Company and accepted by the defendant in connection with official actions taken and intended to be taken by SENATOR MUSTO to help facilitate public grants and loans to "Company which were more than $5,000 in value. In violation of Title 18, United States Code, 2 and 666(a)(1)(B) and 12 Case Document 129 Filed 11/20/13 Page 13 of 26 Count 4 18 U.S.C. 666(a)(1)(B) (Corrupt Receipt of Bribe/Reward for Official Action Concerning Programs Receiving Federal Funds) The Grand Jury further charges that 24. The allegations contained in the other counts in this Indictment are hereby re-alleged and incorporated byireference as if ful1y= set forth herein. 25. In or about October 2009, in Luzerne County, within the Middle District of the defendant, RAPHAEL J. MUSTO did knowingly, intentionally and corruptly solicit and demand for his own benefit, and did accept, and agree to accept, from another person, herein after referred to as "Participant a cash payment, intending to be influenced and rewarded in connection with the business he conducted as an agent of the Commonwealth of and the Infrastructure Investment Authority. At all times relevant to this indictment and this offense, both entities received federal funding in excess of $10,000 in each calendar year. 13 Case Document 129 Filed 11/20/1'3 Page 26. At various times beginning in 2008 through 2010, SENATOR MUSTO utilized his position as senator and as a member of the Infrastructure Investment Authority, to award multi-million dollar loans and grants to various municipal authorities in Northeast 27. In and around October 2009, Participant an individual affiliated with a municipal authority that benefitted from this conduct, paid SENATOR MUSTO approximately three thousand dollars in cash. SENATOR MUSTO accepted this payment both as a reward for his prior official action advocating for the municipal authority affiliated with Participant #1 as well as part of a stream of benefits intended to influe nce the defendant in his future official conduct on behalf of Participant #1 and the municipal authority. In violation of Title 18, United States Code, 2 and 14 Case Document 129 Filed 11/20/13 Page 15 of 26 Count 5 18 Use. 1343, 1346 (Honest Services Wire Fraud) The Grand Jury further charges that 28. The allegations contained in the other counts in this Indictment are hereby re-alleged and incorporated by reference as if fully set forth herein. THE RIGHT TO HONEST SERVICES 29. As articulated above, SENATOR MUSTO had a fiduciary duty to the Commonwealth of the Senate of and the public. PURPOSE OF THE SCHEME 30. The purpose of the scheme and artifice was for the defendant to secretly use his official position to enrich himself by soliciting and accepting bribes and kickbacks from individuals and businesses in exchange for favorable official action. MANNER. MEANS AND METHODS 31. SENATOR MUSTO participated in a scheme and artifice to secretly use his official position to enrich himself by soliciting and 15 mCase Document 129 Filed 11/20/13 Page 16 of 26 accepting a stream of benefits from an individual, herein referred to as "Participant as bribes and kickbacks for his official action. This stream of benefits, which began in the 1990's and continued through 2008, included meals, home repairs, transportation, and cash. 32. In an effort to conceal from public disclosure his ongoing financial relationship with Participant the defendant knowingly and intentionally filed materially false annual statements of financial interests which did not disclose his receipt of the above referenced things of value. 33. For example, in and around the summer of 2006, Participant #2 was then affiliated with a municipality in Luzerne County which had a multi-million dollar loan application pending before the Infrastructure Investment Authority Relying upon the previously provided stream of benefits, Participant #2 sought SENATOR MUSTO's assistance moving the application to approval. After . PENNV EST notified the municipality that loan was scheduled for a vote by the board and approval, Participant #2 met SENATOR MUSTO and paid him approximately one thousand dollars in cash for his prior official 16 Case Document 129 Filed 11/20/13 Page 17 of 26 action taken on behalf of the municipality and to influence his future official actions. SENATOR MUSTO accepted this payment as part of a stream of benefits intended to influence the defendant in his future official conduct on behalf of Participant #2 and for the above'referenced municipality. In or about October 24, 2006, after receipt of the $1,000 payment and the other things of Value, SENATOR MUSTO Voted for and succeeded in obtaining a multimillion dollar loan for the municipality. Thereafter, SENATOR MUSTO engaged in other official acts supporting a supplemental loan application for the municipality. 34. Also, in and around June 2008, Participant #2 sought SENATOR MUSTO's assistance with loan applications pending before PENNVEST. These loan applications were for a municipal authority affiliated with Participant #2 and sought in excess of one million dollars. With the intent to influence SENATOR MUSTO to act on these applications, in July 2008, Participant #2 paid SENATOR MUSTO approximately one thousand dollars in cash. SENATOR MUSTO accepted this payment, both as a kickback for his past official action advocating for the government entities affiliated with Participant #2 and Case Document 129 Filed 11/20/13 Page 18 of 26 as part of a stream of benefits intended to influence his future official conduct. After receipt of this kickback and other things of value, SENATOR MUSTO voted for over a million dollars in loans for this municipal authority associated with Participant 35. From on or about 1990, and continuing thereafter until on or about 2010, in Luzerne County, within the Middle District of and elsewhere, the defendant, RAPHAEL J. MUSTO, being aided and abetted by others known and unknown to the grand jury, having devised a scheme to defraud the public of their right to his 5 honest services through bribes and kickbacks and using fraudulent pretenses, representations and promises for the purpose of executing the scheme to defraud and attempting to do so, knowingly caused wire communications to cross state lines. For example, September 25, 2007, PENNV EST issued an electronic communication to the municipality referenced in Paragraph 33 offering an $11,000,000 loan for the project, which caused a wire communication to cross state lines. In violation of Title 18, United States Code, 1343, 1346. 18 Case Document 129 Filed 11/20/13 Page 19 of 26 Count 6 18 U.S.C. 666(a)(1)(B) (Corrupt Receipt of Bribe/Reward for Official Action Concerning Programs Receiving Federal Funds) 36. The allegations contained in the other counts in this The Grand Jury further charges thati Indictment are hereby re'alleged and incorporated by reference as if fully set forth herein. 37. In or about July 2008, in Luzerne County, within the Middle District of the defendant, RAPHAEL J. MUSTO, did knowingly, intentionally and corruptly solicit and demand for his own benefit, and did accept, and agree to accept, from Participant #2 something of value, intending to be influenced and rewarded in connection with a business, transaction, and series of transactions of the Commonwealth of and PENNVEST involving something of value of $5,000 or more. SENATOR MUSTO was an agent of the Commonwealth of and PENNVEST, both of which received federal benefits in excess of $10,000 in a one-year period. As more specifically alleged in Paragraph 34, in July 2008 SENATOR 19 Case Document 129 Filed 11/20/13 Page 20 of 26 MUSTO corruptly accepted and agreed to accept approximately one thousand dollars in cash and other benefits from Participant with intent to be influenced and rewarded for his official actions in favor of the million dollar loan applications at PENNVEST. In violation of Title 18, United States Code, 2 and 20 Case Document 129 Filed 11/20/13 Page 21 of 26 Count 7 (False Statements to Government Agent) 18 U.S.C. l00l 36. The allegations contained in the other counts in this Indictment are hereby re-alleged and incorporated by reference as if fully set forth herein. 37. On or about April 8, 2010, in Luzerne County, within the Middle District of the defendant, RAPHAEL J. MUSTO knowingly and willfully made a false material statement and representation in a matter within the jurisdiction of the Federal Bureau of Investigation, in that the defendant, knowing that agents with the Federal Bureau of Investigation were investigating the defendant's receipt of cash from representatives of "Company made material false statements concerning his receipt of these funds. Specifically, SENATOR MUSTO denied that he had taken any cash from representatives for "Company knowing, then and there, that the statement was false because he had in fact received approximately $25,000 in cash from a representative of "Company 21 Case Document 129 Filed 11/20/13 Page 22 of 26 All in Violation of Title 18, United States Code, Section 1001. "Case I Document 129 Filed 11/20/13 Page 23 of 26 Count 8 (False Statements to Government Agent) 18 U.S.C. 1001 38. The allegations contained in the other counts in this Indictment are hereby re-alle ged and incorporated by reference as if fully set forth herein. 39. On or about April 8, 2010, in Luzerne County, within the Middle District of the defendant, RAPHAEL J. MUSTO knowingly and willfully made a false material statement and representation in a matter within the jurisdiction of the Federal Bureau of Investigation, in that the defendant, knowing that agents with the Federal Bureau of Investigation were investigating the defendant's receipt of cash from Participant made material false statements concerning his receipt of these funds. Specifically, SENATOR MUSTO stated that he had forgotten about an envelope of cash and intended to have it returned to Participant #1 knowing, then and there, that he did not intend to return the cash and had subsequently visited Participant #1's office to thank Participant #1 for the cash. 23 Case 3:10-crioo338-ARC" Hpage 24 of 26 All in violation of Title 18, United States Code, Section 1001. Case Document 129 Filed 11/20/13 Page 25 of 26 FORFEITURE ALLEGATION Upon conviction of any of the offenses charged in Counts 1 through 8 in this Indictment, the defendant, RAPHAEL J. MUSTO shall forfeit to the United States pursuant to 18 U.S.C. 981(a)(1)(C)2, any property, real or personal, constituting, or derived from, proceeds traceable to said violationlsl, including but not limited to1 a) the $6,500 in cash seized on April 8, 2010, from various envelopes at 262 Market Street, Pittston, and b) the $25,000 cash payment received from representatives of "Company If any of the property described above as being subject to forfeiture pursuant to Title 18, United States Code, Section 981, as a result of any act or omission of the defendant a. cannot be located upon the exercise of due diligence; b. has been transferred or sold to, or deposited with, a third person; has been placed beyond the jurisdiction or the court; has been substantially diminished in value; or e. has been commingled with other property which cannot be subdivided without difficulty, Case Document 129 Filed 11/20/13 Page 26 of 26 'it is the intent of the United States, pursuant to 21 U.S.C. 853(p), to seek forfeiture of any other property of said defendants up to the value of said property listed above as being subject to forfeiture. A TRUE BILL I PETER J. SMITH 2 UNITED STATES ATTORNEY 26