White Collar Crime News

Former Irvington Mayor Michael Steele Pleads Guilty to Taking Kickbacks September 30, 2009

TRENTON – Attorney General Anne Milgram announced that former Irvington Mayor Michael Steele pleaded guilty today to rigging school district contracts and taking thousands of dollars in kickbacks as business administrator for the Irvington Board of Education.

According to Criminal Justice Director Deborah L. Gramiccioni, Steele, 53, of Easton, Pa., pleaded guilty today before Superior Court Judge Roger F. Mahon in Hunterdon County to charges of second-degree official misconduct and second-degree pattern of official misconduct. The charges were contained in a June 5 state grand jury indictment that stemmed from an investigation by the Division of Criminal Justice Corruption Bureau and the New Jersey State Police Official Corruption Bureau.

In pleading guilty, Steele admitted that he took thousands of dollars in kickbacks on school district contracts. He agreed to pay $120,000 in restitution to the Irvington Board of Education.

Under the plea agreement, the state will recommend that Steele receive a sentence of seven years in state prison – including five years without possibility of parole – on each of the charges, with the sentences to run concurrently. Steele, who retired from the school district in April 2008, will be permanently barred from public employment in New Jersey.

“Mr. Steele admitted that he took thousands of dollars in bribes generated by inflating contract costs,” said Attorney General Milgram. “That money was stolen from state and local taxpayers who pay for this struggling school district, and from students who deserve to see school funding used to improve their education, not to enrich corrupt administrators.”

Deputy Attorney General Erik Daab prosecuted the case and took the plea for the Division of Criminal Justice Corruption Bureau.

The state’s investigation revealed that Steele engaged in two separate bid-rigging schemes between 2003 and 2007 involving two contractors and approximately $1.4 million in contracts. The two contractors pleaded guilty in August 2008, admitting that they provided bribes to Steele in connection with the schemes.

Preston Lewis, 54, of Dingmans Ferry, Pa., and William Hardy, 57, of Margate, Fla., each pleaded guilty to accusations charging them with offering an unlawful benefit to a public servant for official behavior. Each of the contractors was sentenced late last year to three years of probation and a $5,000 fine. Lewis was ordered to perform 250 hours of community service, and Hardy, 150 hours. Both are barred from government contracts in New Jersey for five years.

The investigation was conducted and coordinated by Detective Kiersten Pentony, Detective Robyn Greene, Detective Harry Maronpot Jr., and Deputy Attorney General Daab of the Division of Criminal Justice Corruption Bureau, and Detective Sgt. Geoffrey P. Forker, Detective Sgt. 1st Class Joseph Celli III and Detective Sgt. 1st Class Thomas T. Goletz of the New Jersey State Police Official Corruption Unit. The state Department of Education assisted in the investigation.

“This case began with a tip from a person who was suspicious about the large sums of money that one contractor was receiving from the Irvington Board of Education,” said Director Gramiccioni. “We urge anyone who has information about possible misconduct by public officials to call our confidential tipline 1-866-TIPS-4CJ. Our investigators will thoroughly investigate any leads.”

The investigation revealed that Steele, whose annual salary was $120,000, would purchase maintenance supplies for the district – including cleaning chemicals, asphalt repair compounds and salt for melting snow – from Hardy’s maintenance supplies company, WH Chemical Group in Margate, Florida, and the company would pay Steele a “bonus” of between $5,000 and $20,000 per order. WH Chemical Group received approximately $900,000 in district contracts.

Steele would call Hardy and ask him the quantity of products he needed to buy to get a kickback in a particular amount. Steele would then order supplies in the quantities stated by Hardy, and Hardy would send the kickback to Steele. While WH Chemical Group would provide the agreed upon quantities of supplies to the district, Steele created false purchase orders that inflated the quantities. WH Chemical Company could not match the prices offered by competitors, so Steele made it appear that the company was providing more supplies to beat the other bids.

In the second scheme, Steele rigged bids to award contracts to Lewis, a Lakewood-based contractor who owned Lone Star Consulting, a construction company, and BMG Security, a security camera installation company. Steele rigged bids on at least 29 school contracts involving those companies between January 2003 and December 2007 and inflated the contract prices to build in thousands of dollars in kickbacks for himself.

Steele would contact Lewis about school district projects and instruct him to prepare a cost estimate. Steele would then tell Lewis to inflate the estimate to include a kickback and submit the inflated bid to the school district. Steele or Lewis would prepare two fraudulent competing bids for the project in higher amounts. Because Lewis’s company always had the lowest bid, the Board of Education would award his company the contract. After he completed the work and received a check from the district, Lewis would meet with Steele to provide the kickback in cash.