DA: Company defrauded township out of taxpayers' money

Published: Feb 05 2012 07:00:00 PM EST   Updated On: Feb 07 2012 06:00:52 AM EST
BETHLEHEM TWP., Pa. -

It sounded like a great deal. Bethlehem Township leaders thought they would save money by buying their streets lights from PPL, then shopping around for a better deal on electricity.

A company promised to help them do it, but prosecutors say the company took taxpayers' money -- more than $800,000 of it -- and ran.

"The expectation was that within 18 months -- from July 2nd of 2007 -- Bethlehem Township would own its lights, and thereafter, would be receiving better pricing on its electric," said Northampton Co. District Attorney John Morganelli.

Instead, a grand jury found that Municipal Energy Managers, based outside Scranton, did almost no work.

What directors P.J. McLaine and Robert Kearns were busy with was writing themselves checks, according to the grand jury report.

Bank records allegedly found more than $366,000 in checks written out to Kearns, and checks to McLaine totalling more than $600,000. Morganelli said it appears the money was used for personal expenses, including a trip to Disney World.

Both are now charged with criminal conspiracy and two related charges.

"When Mr. Kearns was asked about what this check was for at his civil deposition he said he could not recall what the money was for," said Morganelli. "When Mr. McLaine was asked at his civil deposition as to what the money was for, he couldn't recall what it was for either."

This isn't the first time McLaine has caught cops' attention. Last July, he admitted in federal court to offering hundreds of thousands of dollars in bribes to a Lackawanna County commissioner on trial for corruption.

That commissioner was sentenced to 11 years in prison last week. McLaine was offered immunity in exchange for his testimony.

Back in the Lehigh Valley, Morganelli said McLaine and Kearns also lied about how much it would cost to to buy the street lights. They allegedly charged Bethlehem Township $832,000, but PPL later said the purchase would only cost $271,000.

"It appears that the price was well overstated by MEM as to what the cost to the township should have been for this job," said Morganelli.

Bethlehem Township borrowed more than a million dollars to pay for the street lights project -- money it's still paying back with interest. So why did they hand over all that money up front?

The township's finance director told the grand jury they wanted to get the project off the ground right away.

Monday, the township adminsitrator referred all questions to their attorney.

Bethlehem Township also filed a civil suit against MEM's directors in 2010. That case is still pending.
Both defendants are scheduled to be arraigned Tuesday. A call to their attorney was not returned Monday afternoon.

According to Morganelli, Cumberland Co. authorities are also looking into MEM's activities.

This week, the Scranton Times-Tribune also reported that Scranton, Wilkes-Barre, and Tamaqua officials accused the company of not performing work it was paid for.