NEW YORK, JULY 25 -- Paul A. Marguglio, who charged the taxpayers for four jobs while he was executive director of the Passaic, N.J., housing authority, pleaded guilty today to conspiring to defraud the federal government and evading taxes on $55,000 in kickbacks.
At the same hearing in U.S. District Court in Newark, August C. Michaelis, the longtime attorney for the Passaic Housing Authority, pleaded guilty to lying to a House subcommittee, aiding Marguglio's scheme and helping him evade taxes on $150,000 in kickbacks paid by Michaelis.
The two men, whose guilty pleas follow those of three other Passaic housing officials, face up to 10 years in prison and fines of $500,000. Both promised to cooperate with the ongoing probe.
As the Housing and Urban Development Department's corruption scandal has spread across New Jersey, the executive directors of public housing authorities in Perth Amboy, Carteret and Woodbridge have also pleaded guilty to various crimes.
Marguglio, 60, became a symbol of rampant fraud within HUD when auditors disclosed last January that he had earned more than $245,000 in 1988. According to today's plea, Marguglio was earning $84,000 a year as executive director when he took on three other job titles -- modernization officer, contracting officer and purchasing officer -- that netted him an additional $125,000 in pay between August 1988 and last December.
Marguglio, who had three government cars at his disposal, ran the agency as a family affair for 18 years. His wife, Louise, was paid $95,000 over a three-year period in which she worked only one day, according to a HUD audit. The agency also employed Marguglio's stepdaughter, stepson and two nephews.
"When you have a housing authority as pervasively corrupt as this one, it sets a tone that demoralizes everyone involved with the authority," said Michael Chertoff, the U.S. attorney in Newark. "The effect of this kind of corruption is really to poison the attitude that people have about these kinds of programs."
Michaelis, 76, admitted that he lied last March when he told the House Government Operations subcommittee on employment and housing, headed by Rep. Tom Lantos (D-Calif.), that he was unaware of the corruption. "I agree Mr. Marguglio was not very clever. I think he was a little greedy," Michaelis told the panel. Marguglio refused to answer the panel's questions.
HUD suspended Michaelis after auditors found that the Passaic authority paid him more than $480,000 in legal fees over three years. HUD also fired Marguglio and took control of the housing authority.
"We've acknowledged responsibility for the problems and we're looking to put this behind us," said Marguglio's lawyer, Charles Walsh. Former Passaic officials have admitted that they hid records from HUD and bought federally funded equipment for Marguglio's home.