New York man gets prison term, large forfeiture in phone scam

Tuesday, January 10, 2006

KANSAS CITY, Mo. -- The second of two brothers who pleaded guilty last year to bilking millions of dollars from the federal government by inflating expenses at a telephone company was sentenced Monday to four years and nine months in federal prison.

Richard T. Martino, 46, of Tuckahoe, N.Y., a reputed member of an organized crime family, has also paid $5.5 million of the $5.9 million he was ordered to forfeit to the government, U.S. Attorney Todd Graves said, with the remaining $400,000 to be paid later this week.

Graves said the government plans to use the money and other restitution totaling $8.9 million for restitution for victims of the crimes.

Martino and his brother, Daniel D. Martino, 55, of Hawthorne, N.Y., both pleaded guilty in federal court here last February to taking part in a conspiracy to commit mail and wire fraud.

Richard Martino, alleged by the government to be a member of the Gambino organized crime family, also pleaded guilty to one count of mail fraud. He had pleaded guilty a week earlier in New York to federal charges in a separate case.

Controlling owners

The brothers were controlling owners of Local Exchange Company LLC, a Maryland holding company that owns the Cass County Telephone Co., based in Peculiar, Mo. The company, known as CassTel, serves about 8,000 customers in Cass County and a small number of customers in Kansas.

The government said the Martinos and CassTel president Kenneth M. Matzdorff decided in January 1998 to inflate the expenses of the telephone company so it would qualify for millions of dollars in subsidies and disbursements from the National Exchange Carriers Association and the Universal Service Administrative Co.

Richard Martino also controls Overland Data Center, a company from Overland Park, Kan., that provides software support and information technology, and F.S.E. Consulting Corp., a New York company of which Daniel Martino is president.

Matzdorff, 48, of Belton, Mo., pleaded guilty last January in a separate but related case to conspiracy to commit mail and wire fraud. Matzdorff hasn't been sentenced, but he has already forfeited $2.5 million to the federal government.

Daniel Martino was sentenced in November to five years in prison, and he has forfeited $500,000. The Martino brothers must serve their prison terms without parole.

The Martinos admitted their roles in a conspiracy to defraud the Universal Service Administrative Co., which disperses federal subsidies to rural telephone companies, and the National Exchange Carriers Association, which handles tariff filings and revenue distribution among carriers.

Inflated expenses

The government said CassTel's inflated expense figures resulted in the company receiving about $5.4 million in overpayments from the association between 1998 and 2003. It said there was also a $3.5 million overpayment in subsidies from Universal Services.

Graves said the Martinos and Matzdorff have admitted to creating false invoices in which Overland Data Center billed CassTel about $11 million for software support and information technology support. The actual value of the service performed was estimated at only $240,000.

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