A former D.C. government official pleaded guilty yesterday to charges that he steered millions of dollars in city contracts to two area companies in exchange for trips to Florida and Las Vegas, the use of luxury cars, designer watches, sports tickets, cash and other gifts.
Michael Lorusso, 39, who was fired in January 2003 as deputy director of the D.C. Office of Property Management, said in a plea agreement that he violated city contracting rules and used his government position to financially benefit the two companies. He pleaded guilty in U.S. District Court to two bribery conspiracy charges.
In court documents, prosecutors identified one of the firms as International Builders Inc., a contractor that was hired to do construction work at One Judiciary Square, a municipal building. The owner of that company, Fernando J. Villegas, 42, also pleaded guilty yesterday to bribery conspiracy.
The second firm was identified in court documents only as "Company X." The filings described the firm as an "unindicted co-conspirator" that leased property to the city, including office space at 77 P St. NE and an impoundment lot in Prince George's County.
The U.S. attorney's office declined to identify Company X because it has not been charged. According to city records, the office space and impoundment lot were leased to the city by Douglas Jemal, a prominent developer who has leased property to the District for years.
Jemal previously has denied making any payments to Lorusso and has said that his company received no preferential treatment from its leases with the city. Asked about yesterday's developments, his attorney, John M. Dowd, said, "If Company X is Douglas Jemal, there's no bribery."
Prosecutors said the investigation is continuing. As part of their plea agreements, Lorusso and Villegas agreed to cooperate in the probe. Both were permitted to remain free pending sentencing.
The charges followed an investigation by the FBI and the D.C. inspector general's office into Lorusso's activities. A subcommittee of the D.C. Council, led by Jim Graham (D-Ward 1), conducted extensive hearings last year into some of the business deals cited in the charging papers yesterday.
Mayor Anthony A. Williams (D) issued a statement saying that the city has put new leaders in place at the Office of Property Management, along with controls to prevent abuse from taking place again.
"Regrettably, a District employee violated the trust that we placed in him," the mayor said.
Lorusso, who was deputy director of the office from November 2000 until he was dismissed, faces a prison sentence of 57 to 71 months, according to the plea agreement. Villegas faces up to five years in prison and a fine. Prosecutors could ask the court to impose lesser sentences depending upon the value of their cooperation.
Kenneth L. Wainstein, the U.S. attorney for the District, called Lorusso and Villegas "a perfect match" and said they had "a compact that was based on their mutual desire to enrich themselves at the expense of the D.C. taxpayer."
Charging documents filed by Assistant U.S. Attorney Mark H. Dubester said Lorusso took actions in 2001 and 2002 that benefited the two companies.
The actions involving Villegas's firm included awarding more than $8 million in construction contracts, or "task orders," to IBI, often without competitive bidding; excusing IBI from performing substantial portions of the contract but without reducing the payments IBI received; exercising lax oversight on IBI's work; and helping the firm bill and receive payment for work that was never completed. Lorusso also conspired with Villegas to steer a lucrative city contract for furniture to another Villegas company.
The D.C. contracts resulted in more than $2 million in profits for Villegas and his company, according to court documents.
In return, prosecutors said, Lorusso received part ownership in the furniture company; a $3,000 Cartier watch; a $6,000 plasma TV; airfare and a hotel room for a trip to Florida; $25,000 to help pay a personal debt; and use of a BMW sport-utility vehicle leased for $843 a month and Villegas's 1999 Mercedes-Benz. IBI funds also paid more than $200,000 in moving costs to a company owned by an associate of Lorusso, though no moving services were provided, prosecutors said in court papers.
In dealings with Company X, according to court documents, Lorusso signed a $998,000-a-year lease to rent 4800 Addison Rd., in Prince George's County, as an impoundment lot; signed a lease to spend more than $100 million over 10 years to lease office space at 77 P St. NE; proposed spending about $12.5 million to buy the impoundment lot; and helped engineer a series of additional payments for repairs and improvements to Company X-owned property.
Prosecutors say Company X provided Lorusso with cash; a Rolex watch; $1,000 in car repairs; airport limousine service; and tickets in Company X's box at MCI Center for Washington Wizards and Capitals games. He also got lodging and cowboy boots during two trips to Las Vegas.
During Graham's council hearings last year, claims were made that Jemal and Lorusso, who is from a Boston-based family of real estate agents, had inflated the appraisal and sales price of the impoundment lot. Other questions were raised about Lorusso's stewardship.
"We held 63 hours of hearings, and we turned over our findings to the FBI," Graham said yesterday. The council committee's inquiry and suspicions, he said, had been "vindicated" by the guilty pleas.