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Indictment: Marchionda Laundered $600K to Support ‘Lavish Lifestyle’

October 3, 2017
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YOUNGSTOWN, Ohio – Dominic Marchionda diverted “at least $600,000 from city of Youngstown funds” to companies he controlled and then to himself in order “to support his lavish lifestyle,” states the 101-count indictment against the downtown developer handed down Monday by a Mahoning County grand jury.

The criminal enterprise, the indictment states, amounted to a “Ponzi Scheme” that involved Marchionda and eight unnamed individuals as well as Rubino Construction Inc., the company founded by Marchionda and his father-in-law, Fernando Rubino, in 1994; U.S. Campus Suites, Erie Terminal Place LLC, Wick Properties LLC; Villa Di Tuscany LLC; and other entities also not named. Rubino was charged with 56 criminal counts, U.S. Campus seven, Erie Terminal four, Wick Properties 16, and Villas Di Tuscany 16.

Marchionda’s Stambaugh building project where a DoubleTree by Hilton is said to be on track to open in the first quarter of 2018, is mentioned as a beneficiary of the municipal and state funds that he allegedly diverted. Work on that project continued Monday afternoon, said a member of the Rubino Construction crew who declined to give his name.

In a statement late Monday, an attorney for Marchionda, John McCaffrey of Cleveland, touted his client’s investments in downtown. “He has taken dilapidated, abandoned buildings and breathed new life into them,” McCaffrey said, “and will defend his years of development work with evidence in a court of law.”

The function of the “criminal enterprise,” as described in the indictment, was “to create sources of money/funds” for Marchionda “to maintain and continue the Ponzi Scheme” so that he could “continue to live his lavish life style and enrich himself.”

The indictment makes multiple claims of money laundering with funds being transferred to Marchionda-linked companies and subsequently to Marchionda, who spent it, on one occasion, according to the indictment, to fund payroll for his NYO Property Group, as well as to make purchases at Sam’s Club, contribute to the “the Holy Family [church] Facilities fund,” [pay] real estate taxes, dental bills … medical expenses, the Poland Swim Club [and] personal bounced check fees.”

Other individuals within the enterprise are identified only as John Does 1 through 8.

The indictment states the enterprise began functioning in spring 2009 with a $25,000 bribe “to a city official from a Youngstown-based business to ensure that the Flats at Wick project would obtain city approval and to ‘take care of Dave.’” The document elsewhere makes reference to John Doe 1 being told that “we needed to take care of” John Doe 8.

A spokesman for Ohio Auditor Dave Yost would not confirm that John Doe 8 is David Bozanich, Youngstown city finance director.

The indictment, jointly released by Attorney General Mike DeWine, Auditor Dave Yost and Mahoning County Prosecutor Paul Gains, stem from government loans and grants Marchionda and his business entities received to support development projects in and near downtown.  The criminal counts include aggravated theft, theft, receiving stolen property, attempted grant theft, tampering with records, telecommunications fraud, money laundering and engaging in a pattern of corrupt activity.

“What our investigators found is deeply disturbing,” Yost said in a statement. “Our team has worked this investigation for more than two years. They were tenacious and tireless in seeking justice, and there is more to come.”

In March, authorities executed search warrants at Marchionda’s house and the NYO offices. Warrants also were executed at two properties connected to  Bozanich, who has been heavily involved with the city’s economic development efforts over three decades, as well as the residence and property of attorney Steve Garea.

Agents retrieve evidence March 16 from Marchionda’s home at 7886 Via Attilo in Poland Township .

According to the indictment, Marchionda and his companies received government assistance for projects that included:

  • Flats at Wick – State of Ohio/federal brownfield loan, $1.2 million water and sewer grant from Youngstown, $2 million Youngstown float loan.
  • Erie Terminal — $570,000 Youngstown water grant, Youngstown float loan, Ohio Department of Development brownfield funds, ODOD energy loan though the American Recovery and Reinvestment Act.
  • Wick Tower — $500,000 Youngstown water grant money and a float loan.

“Within the scope of the enterprise and to further its affairs, Dominic Marchionda received in his joint bank account at least $600,000 from the city of Youngstown funds and spent it on personal items,” the indictment states. “This amount does not include state of Ohio/United States government monies Marchionda also received and spent or monies that Marchionda wrongfully exercised control over transferring to other companies for the benefit of those companies.”

According to the indictment, Marchionda submitted false invoices on the Erie Terminal project to receive city water funds and city float loan money, for example. In the winter of 2012, he submitted a correct billing record to First National Bank and the architect in charge of the Erie Terminal project asserting that 59% of the plumbing work had been completed, but submitted a fake billing record to the city that asserted 96% of that work had been done. With that false information, the city authorized a $350,000 payment from its water fund to Erie Terminal LLC.

Also, under the July 2014 development agreement with Wick Properties, the entity created for the Wick Tower project, the city issued a $500,000 grant for the developer to provide “site specific sanitary and storm sewer water infrastructure and water service to the project site.” The agreement called for the city to provide funds “by a check issued jointly to the developer and a contractor providing sanitary and storm sewer infrastructure and water service improvements to the project site upon submission of an invoice from contractor.”

Komar Plumbing Co. Inc. in Poland submitted three invoices for payment to Rubino Construction Inc., which the forms identified as the project “owner,” accompanied by itemized expense sheets. Three checks totaling $500,000 — $249,685.37 in August 2014, $200,049.86 in February 2015 and $50,264.77 last July — were jointly made out to Wick Properties and Rubino.

The indictment also outlines a 2009 transaction in which, two months after receiving the $1.2 million water grant, another Marchionda entity, DJM Rental Properties, paid the city $1 million for a surplus Elm Street fire station the city has previously authorized for sell for $10 to DJM. Under Bozanich’s direction, those funds were placed into the city’s general fund “in violation of Ohio law.” Marchionda took the remaining $200,000 and transferred $70,000 to another affiliated company and subsequently to himself, spending the money on such items as medical expenses, the Poland Swim Club, personal checking account overdrafts and other personal bills.

In addition, the indictment accuses Marchionda of depriving the Par Golf Tournament and/or the Rich Center for Autism at Youngstown State University of between $1,000 and $7,500.

Marchionda’s attorney, McCaffrey, bluntly denies any improper activity.

“Dominic Marchionda believes in the rebirth of downtown Youngstown. He has taken dilapidated, abandoned buildings and breathed new life into them. He has renovated, rehabilitated and refurbished long-forgotten downtown properties for modern-day use,” the attorney said. “He risked a great deal, personally and professionally, in pursuing his dream for Youngstown.

The state alleges that Marchionda’s development success was accomplished through theft and deceit,” the statement continued. “It refers to his redevelopment projects and efforts as a ‘Ponzi scheme.’ Mr. Marchionda rejects the state’s characterizations and will defend his years of development work with evidence in a court of law.”

In November 2015, the state issued subpoenas for “any and all documentation” for grant monies directed toward the development of the Erie, Wick and Flats projects.

Marchionda’s attorney at the time, Michael J. McGee, filed a legal complaint against the state questioning whether the state auditor is a “policing agency” and arguing that the subpoenas violate his client’s Fifth Amendment right against self-incrimination.

Lawyers for Marchionda dropped their complaint against the state in February 2016 and the subpoena was withdrawn, according to attorney McCaffrey. This January a second set of subpoenas was issued, culminating in the March raids authorized by sealed search warrants a Mahoning County Common Pleas judge issued.

Marchionda is scheduled to be arraigned Oct. 10.

MORE BACKGROUND:
March 17, 2016:
Agents Searching NYO, Marchionda’s Home Refuse to Provide Search Warrants
Jan. 14, 2017:
City Provides Records of Marchionda Grant Payments

Pictured at top: Dominic Marchionda appears before the city’s Design Review Committee to discuss his Stambaugh Building hotel project.

Published by The Business Journal, Youngstown, Ohio.