Federal judge hears arguments about disputed proceeds in 'Kids for Cash' scandal

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edited by blazinaA Luzerne County man who pleaded guilty in the Kids for Cash scandal shouldn’t be allowed to get his hands on nine-figure proceeds from a pending court settlement, attorneys told a federal judge Wednesday.

“I’ve dealt with these defendants for a long time,” attorney Bernard M. Schneider, representing plaintiff Gregory R. Zappala and his business interests, told U.S. District Chief Judge Joy Flowers Conti. “This money comes to them, it’s going to Switzerland, Costa Rica or Belize, and nobody’s ever going to see it.”

The defendant, developer Robert J. Powell, was originally Mr. Zappala’s partner but later served an 18-month federal prison sentence for withholding information and being an accessory to crime. Powell paid nearly $3 million in bribes to two Luzerne County judges, who are now in federal prison, in return for their orders sending adjudicated juveniles to the child care facilities that he and Mr. Zappala controlled as part of their businesses, Western PA Child Care and PA Child Care.

Mr. Zappala has maintained that he knew nothing of the bribes or of other Powell dealings. The lawsuit before Judge Conti, filed last month, claims that Powell’s acts cost Mr. Zappala and his businesses nearly $100 million, and seeks triple damages.

At Wednesday’s status conference, Mr. Schneider said that Powell and the Powell Law Group could be in line for as much as $200 million of a pending $5.1 billion settlement in a class-action environmental lawsuit against creosote maker Anadarko Petroleum Corp. Powell Law Group represents around 4,000 of the 6,000 plaintiffs, according to Powell’s attorneys.

The settlement is awaiting the approval of a federal judge in the Southern District of New York. Mr. Zappala’s side contends that Powell’s windfall should be used to pay his damages.

Mr. Schneider said that although Powell pleaded poverty in a court proceeding last year, he subsequently paid off millions of dollars in debt and “bought a Maserati, bought a Mercedes, a total of $217,000 into those cars. Our information is he’s traveling to Switzerland.”

Mr. Schneider said the spent funds are almost certainly related, directly or indirectly, to the pending settlement. He asked Judge Conti to take action to prevent any more money from the settlement from flowing to Powell.

Attorneys John R. McGinley and Stephen Sinaiko, representing Powell and a related company, said there was no urgency because even if the New York judge finalized the settlement, money would not flow for months. Mr. Schneider countered that money could flow to Powell within 32 days of the judge’s approval of the settlement.

Judge Conti set a hearing date for Sept. 24, though it could be pushed forward to Sept. 12 or back to Oct. 6, depending on progress in the Anadarko case.

Mr. Zappala’s complaint alleged racketeering, unjust enrichment and other torts by Powell and his associates. He is the brother of Allegheny County District Attorney Stephen A. Zappala Jr., who is not a party to the case.


Rich Lord: rlord@post-gazette.com, 412-263-1542 or on Twitter @richelord. First Published August 13, 2014 2:01 PM


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