By Matt O'Connor

Tribune Staff Writer
June 19, 1999

The patriarch and two sons of a century-old road-building business that constructed nearly every major expressway in Chicago were sentenced to federal prison terms for fraud Friday under terms of a plea agreement blasted by the judge in hindsight as being too lenient.

Referring to the sentencing agreement she had earlier approved between prosecutors and attorneys representing the three executives of Palumbo Brothers Inc., U.S. District Judge Elaine Bucklo said, "I don't like to find myself in a position of saying that a plea agreement fails to do justice because it does not adequately punish a defendant. . . . But in this case the conduct went on for years, the conduct harmed a lot of people, and it harmed the people of Illinois."

Bucklo gave Sebastian and Joseph Palumbo the maximum 21-month sentences and ordered each to pay a $250,000 fine. Their father, Peter, 72, was sentenced to a year in prison, 3 months of home confinement and a $250,000 fine. The elder Palumbo could have received as much as 15 months in prison under the plea agreement.

In pleading guilty in January, Palumbo Brothers and a second family-controlled company admitted billing for far more construction material than they used in 60 Chicago-area road projects by inflating weight tickets or creating "ghost" trucks. Although Bucklo accepted the plea deals then, she said Friday that on further reflection she concluded the prison terms called for in the agreements were "grossly below a minimum acceptable sentence."

While the government's evidence showed the Palumbos were deeply involved in a massive multimillion dollar road-building scheme that spanned decades, the plea agreement allowed them to plead guilty to less serious charges involving the cheating of workers out of overtime pay. Instead of the defendants, the corporation pleaded guilty to the road-building fraud.

Bucklo also decried the disparity in sentences for at least one co-defendant, an employee who potentially faces a longer prison term than the Palumbos even though he acted on their orders, didn't gain financially from the scheme and later cooperated with authorities in the federal probe.

By Bucklo's calculations, because of their involvement in the fraud scheme, the Palumbos should have been facing at least 3 1/2 years in prison, double the limitations imposed on her by the plea deal. = "Unfortunately, I cannot do anything about the agreement (now)," Bucklo said. "I cannot force the government to prosecute."

In an interview after the hearing, U.S. Atty. Scott Lassar defended his office's actions in the case, calling the plea deal with the Palumbos "an outstanding agreement" for the government. "We were able to get significant prison sentences for the Palumbos without having to risk a trial," Lassar said. The complicated case was expected to take four months to try. Lassar also noted that the Palumbos and their company agreed to a lifetime ban on bidding on federally funded road-construction projects, a major concession for a company that once ranked as Illinois' largest road contractor. If the case had gone to trial, the company could have been suspended from public road-building projects for five years at most.

In addition, Lassar cited the unprecedented $15 million in restitution and fines that the Palumbos and the company agreed to pay. The elder Palumbo and his two sons have to personally come up with $750,000 of that.

Bucklo had scoffed at the significance of the $250,000 fines for each of the Palumbos during the sentencing hearing. Financial records submitted as part of the case show the two sons each have net worths of $25 million or more while their father reported assets of more than $6 million, she revealed.

Defense lawyers sought home confinement for the elder Palumbo in hopes that even though he is retired, he could help run the business by telephone while his two sons serve their prison terms. Assistant U.S. Atty. John Newman, who prosecuted the case, questioned whether home confinement would be punishment, noting that at one time Peter Palumbo lived at son Joseph's palatial South Barrington farm house, with its six-car garage, a pond with a beach and an island, and a baseball field.

Bucklo ordered that the elder Palumbo serve his three months of home confinement at his less spectacular River North condominium. After sentencing the Palumbos, Bucklo imposed a 21-month prison term on another defendant in the case, Kelson Abdishi, a former Illinois Department of Transportation engineer who supervised many of the Palumbo road projects and pocketed bribes to overlook the fraud.

The indictment against the Palumbos charged them with defrauding the Laborers and Teamsters Pension funds, charges never prosecuted. The Palumbos were represented by the ploitically powerful law firm of Winston & Strawn where former Governor (Pinstripe Patronage King) James Thompson is the managing partner. Dan Webb was counsel for the Palumbos, as he was counsel for John Serpico is is disciplinary hearing and in Serpico's law suit against LIUNA for adopting the EDP under emergency conditions by vote of executive board members without ratification by rank and file. Winston & Strawn is also counsel to John Serpico on possible indictments he might face for the Capitol Bank Case .

In the fall of 1996, Capitol Bank in Chicago pled guilty to an federal grand jury indictment for accepting a local union's pension fund in return for providing below market interest rate loans to the union local's officers-ie. John Serpico. I have beeen advised that there is a ten year statue of limitations to indict Serpico. The GEB Attorney was not informed by the U.S. Attorney in Chicago that Serpico faces indictment and that there might have been room for a plea bargain in the event John Serpico testified against Arthur Coia and named him an associate of organized crime. Serpico and Caivano were not called as witnesses in Coia's disciplinary hearing-something I find strange.

Judge Blucko is the stupid judge who issued an opinion, subsequently over ruled, that federal criminal statues could not be used against the Palumbos but that their cheating the Laborers Pension/ welfare funds had to be handled under the collective bargaining agreement- an argument propounded by Sherman Carmel on behalf of the Chicago Federation of Labor no friend of the union rank and file whose money was stolen.

The whole thing stinks.