United States v. Donadeo

• Decision Date: 18 December 2018
• Docket Number: No. 17-4295,17-4295
• Citation: 910 F.3d 886
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. David DONADEO, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

910 F.3d 886

UNITED STATES of America, Plaintiff-Appellee,

v.David DONADEO, Defendant-Appellant.

No. 17-4295

United States Court of Appeals, Sixth Circuit.

Argued: December 5, 2018

Decided and Filed: December 18, 2018

ARGUED: Claire R. Cahoon, OFFICE OF THE FEDERAL PUBLIC DEFENDER, Toledo, Ohio, for Appellant. Rebecca C. Lutzko, UNITED STATES ATTORNEY’S OFFICE, Cleveland, Ohio, for Appellee. ON BRIEF: Claire R. Cahoon, OFFICE OF THE FEDERAL PUBLIC DEFENDER, Toledo, Ohio, for Appellant. Rebecca C. Lutzko, UNITED STATES ATTORNEY’S OFFICE, Cleveland, Ohio, for Appellee.

Before: CLAY, McKEAGUE, and BUSH, Circuit Judges.

OPINION

CLAY, Circuit Judge.

Defendant David Donadeo appeals the district court’s December 7, 2017 order sentencing him to a 70-month term of imprisonment and a 3-year term of supervised release following his guilty plea to charges of conspiracy to commit mail fraud, in violation of 18 U.S.C. §§ 1341, 1349, and conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h). For the reasons set forth below, we AFFIRM the district court’s sentence.

BACKGROUND

Factual Background

This case arises out of a four-year scheme to defraud the Cuyahoga Heights School District (the "District") in northern Ohio. From 2007 to 2011, a group of individuals led by District employee Joseph Palazzo defrauded the District of approximately $3.3 million. From 2009 to 2011, Defendant was part of this group.

The scheme to defraud the District worked as follows. Joseph Palazzo was the District’s Information Technology ("IT") Director, and in that capacity had the authority to purchase IT-related goods and services for the District from outside vendors. Any purchase that cost less than $10,000 required only Joseph Palazzo’s approval. He would submit an invoice to the District, and the District would issue a check to the vendor.

Joseph Palazzo abused this authority by submitting fake invoices to the District.

The fake invoices purported to be for IT-related goods and services purchased from legitimate vendors. However, the vendors were in fact shell corporations that never supplied goods or services of any kind to the District. Nevertheless, because only Joseph Palazzo’s approval was required, the District issued checks to these shell corporations based on the fake invoices. These shell corporations were established and owned by Dominick Palazzo (Joseph’s brother), Dennis Boyles, and Defendant.

Dominick Palazzo was the first to join in the scheme in 2007. He established and owned two shell corporations—"Forte Promotions" and "Laptops and More." (RE 46, Pre-Sentence Report, PageID # 291.)¹ From 2007 to 2011, these corporations deposited checks from the District totaling $2,156,331.36. Dennis Boyles was the second to join in the scheme in 2008, after being recruited by Dominick Palazzo. He established and owned one shell corporation—"Macwin-Protocol." (Id. ) From 2008 to 2011, this corporation deposited checks from the District totaling $260,167.22. Defendant was the third to join in the scheme in 2009, after also being recruited by Dominick Palazzo. He established and owned one shell corporation—"DDR Technologies." (Id. at PageID # 290–91.) From 2009 to 2011, this corporation deposited checks from the District totaling $648,035.37. Additionally, Dominick Palazzo and Defendant established and owned one shell corporation jointly—"Impact Global," doing business as "The Jump Yard." (Id. at PageID # 292.) From 2009 to 2011, this corporation deposited checks from the District totaling $268,913.40.

Thus, all told, the group led by Joseph Palazzo used five shell corporations to defraud the District of approximately $3.3 million over the course of four years.

Defendant’s involvement in the scheme stems from his friendship with Dominick Palazzo. The two first met while Defendant was a student at the University of Akron in the early 1990s. And though Defendant subsequently moved to California to pursue an acting career, they remained close. By late 2008, however, Defendant’s acting pursuits had proved fruitless, and he and his family—a wife and two young children—were in dire financial straits. Facing foreclosure on their home, Defendant was overwhelmed with anxiety about their future, and soon relapsed into an alcohol addiction

. It is at this time that Dominick Palazzo visited Defendant, and invited him to join in the scheme to defraud the District.

According to Defendant, Dominick Palazzo told Defendant about Joseph Palazzo’s IT position with the District, and said that he and Joseph "had partnered together to provide [IT] services to the District through a third-party company two years ago." (RE 48, Defendant’s Sentencing Memorandum, PageID # 320.) Dominick Palazzo explained that "since Joseph was in charge of the outsourcing, and was qualified to do the work himself, it was an opportunity for everyone to make extra money." (Id. ) Joseph "completed the work, prepared the invoice, submitted it to the District, and then collected the money," which they split between themselves. (Id. )

Dominick Palazzo then offered to "share this opportunity" with Defendant. (Id. ) All Defendant needed to do was "open a company so that Joseph could outsource the District’s IT needs to that company." (Id. ) Joseph would then "provide the services, prepare the invoices, ensure the District made payment, and then spit the profits with [Defendant] once payment was received." (Id. ) Though Defendant knew from the outset that this arrangement "presented a potential conflict of interest between Joseph and the District," he maintains that he believed it to be legal. (Id. at PageID # 321.) Thus, he agreed.

In January 2009, Defendant incorporated DDR Technologies, opened a corporate bank account, and began depositing checks from the District for IT-related goods and services that DDR Technologies was not providing. Each time the District issued a check, Joseph Palazzo retrieved it, delivered it to Defendant, and told Defendant how much money he could keep and how much money was to be returned to Joseph—typically 50%. Defendant deposited the check, returned the agreed upon amount, and then issued an IRS Form 1099 Statement falsely indicating that Joseph Palazzo had performed services for DDR Technologies in exchange for payment in that amount. At least 73 checks were ultimately issued from the District to DDR Technologies in this manner, all while Defendant remained in California.²

Later in 2009, at the urging of Dominick Palazzo, Defendant moved to Ohio. Defendant and Dominick Palazzo then established a jointly-operated corporation called Impact Global, doing business as The Jump Yard. Dominick Palazzo incorporated Impact Global, both he and Defendant opened a corporate bank account, and Defendant was purportedly set to manage The Jump Yard’s day-to-day operations. The Jump Yard was a legitimate children’s recreational center through which Defendant and Dominick Palazzo laundered funds that Impact Global received from the District. At least 30 checks were ultimately issued from the District to Impact Global in the same manner as with DDR Technologies.

To the extent that Defendant had any doubts about the legality of this scheme, they were admittedly resolved once Defendant moved to Ohio in late 2009 to help establish Impact Global. While in California, Defendant "had limited personal interaction with the Palazzo brothers," and it was "easy for [them] to ignore" any of his requests for "information regarding the IT services being provided to the District." (Id. at PageID # 322.) However, "once [Defendant] was in Ohio and working more closely with the Palazzo brothers, [they] were no longer able to conceal what was actually occurring from [Defendant] .... [Defendant] now learned that no IT services were being provided to the District." (Id. ) Rather, "the money [was] being stolen from the District [and] had been put in his companies’ bank accounts." (Id. )

Nevertheless, Defendant continued to participate in the scheme to defraud the District until the scheme was discovered in February 2011. At that time, Joseph Palazzo was suspended from his IT position with the District pending an internal investigation, and the entire group—the Palazzo brothers, Dennis Boyles, and Defendant—met at Joseph Palazzo’s house to discuss how to respond to the inevitable police investigation. Once that investigation was underway, Defendant purportedly began to believe that Dominick Palazzo posed a threat to him and his family. According to Defendant, Dominick Palazzo called him and his wife regularly "to check on him—to see where he was and what he was doing," and told him that "if anybody talks they will pay the price." (Id. at PageID # 324.) This led Defendant to fear that "[e]ven if [he] did not cooperate [with the police investigation] ... Dominick could one day presume he was cooperating and seek revenge." (Id. at PageID # 325.)

In June 2011, ten days before search warrants were executed on The Jump Yard as well as on the residences of Defendant and the Palazzo brothers, Defendant sold his interest in The Jump Yard and moved with his family to North Carolina, where they had purchased a bar and restaurant. In August 2011, Defendant abandoned the bar and restaurant and moved with his family to Germany—where Defendant’s mother-in-law resided. At this point Defendant cut off all communications with his immediate family in the United States, and there are no records of Defendant obtaining employment in Germany, using a credit card in Germany, or registering housing in Germany. A few months later, Defendant again moved with his family, this time to Spain. At this point, Defendant cut off all communications with his attorney in the United States, who had been asked by the government to negotiate Defendant’s return, and there are no records of Defendant obtaining employment in Spain, using a credit card in Spain, or registering housing in Spain. Defendant also cancelled a planned flight back to...