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DiMasi, 3 associates charged with rigging of state contracts

Ex-speaker allegedly got $57,000 payout

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By Andrea Estes and Matt Viser
Globe Staff / June 3, 2009

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Former Massachusetts House speaker Salvatore F. DiMasi and three friends were indicted yesterday by a federal grand jury for allegedly orchestrating a scheme that allowed DiMasi to pocket tens of thousands of dollars in payments from a software company while he was using his powerful office to make sure the company won state contracts.

The indictment on a battery of public corruption charges marked yet another stunning turn for a politician who, just a year ago, was considered by many to be the most influential official in the state. Now DiMasi, who resigned in January, faces up to 20 years in prison on each of the seven counts of mail and wire fraud and up to five years for conspiracy. DiMasi yesterday denied wrongdoing.

The indictment paints an unflattering picture of a band of longtime associates, led by DiMasi, successfully plotting - over golf games, at Democratic fund-raisers, and in incriminating e-mails that even referred to the speaker as "Coach" - to rig two computer software contracts, helping assure state approval for them. The charges follow a series of stories in the Globe.

DiMasi's role was to push the performance management software contract through the machinations of state government, according to the indictment.

Joseph Lally, the sales agent for the company, Cognos ULC, applied equal parts pressure and money to the cause, according to the indictment. Cognos lobbyist Richard McDonough and Richard Vitale, DiMasi's former campaign treasurer and accountant, traded on their friendships with the speaker, according to the indictment.

All four received significant payouts when the contracts were signed by the state - $57,000 in the case of DiMasi, much of it in monthly installments, and hundreds of thousands to the other three, according to the indictment. All four were indicted yesterday and appeared in US District Court, tieless and beltless.

A fifth recipient of Cognos money, Steven Topazio, DiMasi's law associate, was not indicted and appears to have been pivotal to the government's case. The indictment alleges that Topazio was a conduit for monthly $4,000 payments to the speaker, under the guise that Topazio was performing corporate law work for Cognos.

"It's about time we got business like this," DiMasi told Topazio, according to the indictment. The associate was not identified in the indictment but the Globe, in stories in July and October, reported that Topazio was on the Cognos payroll.

DiMasi, 64, arrived at the federal court at 2:15 yesterday, accompanied by his wife, Deborah; his lawyer, Thomas Kiley; and his spokesman, David Guarino. After an initial court appearance before US Magistrate Judge Robert Collings, who released each of the men on a $10,000 bond, DiMasi read a brief statement outside the courthouse.

"Every decision I ever made as speaker or state representative was always made in the best interests of my constituents and of the people of the Commonwealth of Massachusetts," DiMasi said, clutching his wife's hand.

After reading his statement, the DiMasis drove off in his lawyer's Jaguar.

The 33-page indictment also portrays officials in Governor Deval Patrick's administration as bowing to intense pressure from DiMasi and his staff to award the larger contract to Cognos. Patrick said last night that when his administration later became aware of problems with the contract, it reported them to the state inspector general.

"Many of these allegations involve events before we got here at the State House," Patrick said. "I'm also proud to say that our team recovered every single dollar that was spent on the contract," Patrick added. One of two contracts was canceled. He would not take further questions about the level of involvement of his staff.

A few months before the contract was awarded, McDonough is alleged to have contacted an unnamed official in the governor's office to let him know the contract "was important to the speaker and wanted to make sure it went to the right vendor." According to prosecutors, DiMasi also met directly with Administration and Finance Secretary Leslie Kirwan, who is not identified by name.

In another instance, Lally wrote in an e-mail to a Cognos executive that he was dealing with a "rogue" secretary - Kirwan, who was expressing reservations about the contract award - and had appealed to her "boss" to help "handle the situation."

The "boss" was not a reference to Patrick but to David Morales, Patrick's deputy chief of staff, said two state officials who have been briefed on details of the investigation. Administration officials declined to make Morales available last night for an interview.

Acting US Attorney Michael Loucks, at a news conference announcing the indictments, said no other officials will face charges in the case.

The indictment provided the first allegations that Cognos money found its way directly to DiMasi. At one point in 2006, when the monthly payments from Cognos did not arrive on time, DiMasi asked Topazio to find out what was wrong, prosecutors alleged. After discovering a bookkeeping error, Cognos sent a $25,000 check to Topazio for the missed payments. DiMasi "wanted all of it," prosecutors alleged, and Topazio gave him the entire amount.

McDonough, a lobbyist and close friend of DiMasi's, was paid $25,000 a month by Cognos; Lally, the Cognos sales agent who helped secure two multimillion-dollar state software contracts for the company, earned more than $2 million in commissions; and Vitale, an accountant and former DiMasi campaign treasurer, made $600,000.

In all, prosecutors identified 80 "overt acts" by the group designed to take advantage of DiMasi's position to obtain contracts from the state, stretching back to 2004.

As far back as October 2006, several months before either contract was signed, DiMasi played golf with the Cognos chief executive at DiMasi's country club in Ipswich, the indictment says. Cognos documents state that Robert Ashe was the company's chief executive at the time.

And when the larger of the two Cognos contracts, a $13 million statewide technology contract, was finally signed in August 2007, the indictment says, a Cognos official sent an e-mail to Lally, saying in part, "Please be sure to thank Dick and Sal for getting the contract closed."

IBM, which purchased Cognos in 2007, did not respond to requests for comment yesterday.

DiMasi's indictment, which follows a series of Globe stories detailing the awarding of the software contracts, makes him the third consecutive House speaker to face criminal charges. DiMasi resigned from the House on Jan. 27 after months of investigations by the state Ethics Commission, the Massachusetts inspector general's office, Secretary of State William Galvin, and the US attorney's office.

DiMasi repeatedly denied ever asking anyone to choose Cognos specifically, although he has acknowledged advocating for the type of software Cognos manufactures. He also denied ever socializing or playing golf with Cognos executives. The company for several years sponsored a golf tournament that DiMasi helped run to honor Vitale's brother, a Saugus police officer killed in the line of duty.

Thomas Drechsler, who represents McDonough, said he was "disappointed" by the indictments and insisted McDonough did nothing wrong. The indictments, he said, charge McDonough with doing "what lobbyists are paid to, lobby on behalf of his clients. That is a constitutional right protected by the First Amendment."

Vitale's lawyer asserted his client's innocence. "Dick Vitale is not a criminal," Martin Weinberg said in a statement. "He is an ethical and principled businessperson. I am confident he will be acquitted."

Lally's lawyer, Robert M. Goldstein, said, "Joe Lally is an accomplished businessman who has excelled in sales with many different companies, including at Cognos. Mr. Lally at all times believed his conduct to be entirely legal, purely ethical, and looks forward to establishing his innocence at trial."

The indictment alleges that from December 2004 through about February 2008, DiMasi, Lally, McDonough, and Vitale conspired to devise a scheme under which DiMasi used his influential position to help Cognos obtain the multimillion-dollar software contracts from the state.

The indictment alleges DiMasi and the others arranged to have Cognos pay $5,000 a month to DiMasi's law associate, Topazio, who is identified only as a "private attorney" in the indictment. Topazio and DiMasi shared office space, and Topazio paid DiMasi referral fees, the Globe has reported. Topazio's lawyer, Frank Corso, could not be reached for comment.

The indictment says that Lally, at the time a Cognos vice president, arranged to have Topazio paid as local counsel for Cognos, even though Topazio protested that he lacked experience in such corporate legal work. No one ever asked Topazio to do actual legal or lobbying work, the indictment says.

DiMasi got the lion's share of the $5,000 payments, according to the indictment. Each time Cognos gave Topazio a $5,000 check, Topazio wrote a check to DiMasi for $4,000, it alleges. DiMasi received a total of $57,000 in proceeds from Cognos, according to the indictment .

The indictment also describes a $250,000 third mortgage Vitale gave DiMasi on his North End condo on June 22, 2006, a month after Vitale formed WN Advisors, the company that received consulting fees from Lally. The indictment did not say how DiMasi benefited from the loan, if at all.

Lally left Cognos in February 2006 to start his own software firm. But before he left he told his replacement "never to cancel" the contract with Topazio, who was a friend to "Sal." But in June 2006, a Cognos official told Lally he was "getting questions as to who he is and what he has done for us. Considering the nature of this relationship, I can't answer those questions."

Lally then responded, "Do I need to talk to someone? I would not cancel this."

In 2006, the indictment alleges, DiMasi made sure that budget amendments provided a $4.5 million earmark to support a Department of Education purchase of Cognos software.

When the monthly checks from Cognos stopped coming near the end of 2006, DiMasi asked Topazio to find out what was wrong, the indictment says.

In an e-mail to a Cognos executive, Lally warned that they had to look into why the payments had stopped, saying, "We don't want to piss anyone off this late in the game," the indictment said.

After discovering the payments had stopped because of a bookkeeping error, Cognos sent a $25,000 check to the lawyer, who gave the entire payment to DiMasi, the indictment says.

The indictment also alleges that DiMasi used his influence to push through an emergency bond bill that contained authorization to spend $15 million on a software contract that was being steered to Cognos.

When a Cognos executive raised concerns that the state's secretary of administration and finance appeared to be stalling the deal, Lally assured him in a June 2007 e-mail that DiMasi would "push it through," the indictment says.

"Sal said when he wants something done within his domain he is ultimately going to get what he wants," Lally wrote in the e-mail, the indictment said.

Shelley Murphy of the Globe staff contributed to this report.