Judge grants expedited hearing in racketeering suit against law firm

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A federal judge in Pittsburgh will hear an expedited injunction request later this month brought by investment banker Gregory Zappala, who is trying to block his former business partner from hiding millions in the wake of the “kids-for-cash” scandal involving two juvenile detention centers they ran in Butler and Luzerne counties.

U.S. District Judge Joy Flowers Conti on Wednesday set Aug. 22 as the date when she will hear Mr. Zappala’s argument that she should freeze up to $200 million he says convicted businessman Robert Powell and his law firm are about to receive as the result of a class-action environmental suit in Luzerne County.

Mr. Zappala, brother of Allegheny County District Attorney Stephen A. Zappala Jr., sued Mr. Powell in July, saying he and his companies, including Western PA Child Care, PA Child Care, Gladstone Partners and others, were duped and victimized by Mr. Powell and his firm, Powell Law Group.

In court filings, Mr. Zappala and other plaintiffs say Mr. Powell stole $6 million from them directly and cost them $95 million in damages in fallout from the scandal, in which Mr. Powell paid $2.9 million in kickbacks to two corrupt juvenile court judges to entice them to send juveniles to the private detention centers.

Mr. Powell, who was released from federal prison last year, had recruited Mr. Zappala to help build the detention centers, and Mr. Zappala now controls them.

Mr. Zappala and the plaintiffs said in the suit they knew nothing of the secret payments to the judges and other malfeasance exposed by the federal investigation and have been left with “crushing debt and litigation costs” as a result of damaged reputations from association with Mr. Powell.

In their injunction request, the plaintiffs said Mr. Powell’s law firm is about to receive $150 million to $200 million in legal fees from an environmental suit brought by Luzerne County residents against a creosote maker and have asked the judge to order that the money be held so that they can collect judgments against the firm.

The request indicates the plaintiffs are worried that Mr. Powell and his partners will squirrel away the windfall, perhaps in Switzerland, where he is known to travel, or will otherwise dispose of it before the plaintiffs can collect.

The suit is asking for triple damages, provided for in RICO suits, totaling $286 million.


Torsten Ove: tove@post-gazette.com or 412-263-1510. First Published August 6, 2014 12:00 AM

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