Two PennDot managers and eight employees were charged Monday with overbilling the state transportation agency by about $1.2 million over three years - the latest ripple in an ongoing investigation into its Southeastern District.
Attorney General Kathleen G. Kane alleged that the managers, assigned to the office of the Pennsylvania Department of Transportation covering Philadelphia and its suburbs, accepted kickbacks from highway inspectors "in exchange for turning a blind eye to fraudulent time sheets and mileage reports."
The managers, who no longer work for PennDot, were identified as Alex Morrone, 50, of Norristown, the district's assistant permits manager, and William Rosetti, 36, of Philadelphia, the district's Philadelphia permit manager.
Erik Olsen, chief deputy in the Attorney General's Office, said that the arrests were part of a larger investigation and that more were likely.
"Every door we've opened has led to two or three other doors," he said after the defendants were arraigned on charges including bribery, theft, and participating in a corrupt organization.
Nearly all of the defendants or their lawyers declined to comment on the charges.
Brian Collins, the lawyer for Christopher Lauch, an inspector from Dover, Del., who is alleged to have bribed Rosetti, did not dispute the allegations, but said, "Mr. Lauch acted honorably and is going to come out OK."
The charges stem from an investigation that began after March 2013 when agents in the attorney general's Bureau of Criminal Investigation obtained evidence of widespread abuse within the Highway Occupation Permit Program in District 6, according to the prosecutor's office.
The permits are needed for construction and any other encroachment on interstates, U.S. routes, and state highways. PennDot pays inspectors, directly and through outside firms, to ensure that permit holders comply with regulations.
The grand jury found that "nepotism and cronyism" resulted in many of the defendants being hired by both the PennDot district office and two regional consulting firms, enabling their conspiracy to "continue and flourish," according to prosecutors.
The inspectors were paid more than $500,000 they did not earn, prosecutors contend, and the two firms - Construction Methods & Coordination Inc. and CZOP Spector Inc. - were allegedly paid more than $700,000 for their employees' unearned overtime.
In a statement, Kane said the ongoing probe of the district office "has exposed nearly $5 million in fraud in Philadelphia and the surrounding counties."
Eugene Blaum, a PennDot spokesman, responded to Wednesday's charges with a statement saying that the agency had already begun a review of the district's operations.
"These actions in no way reflect the value and integrity of PennDot," he said.
Charged besides Morrone, Lauch, and Rosetti were John J. Laspada, 40, of Philadelphia; Brandon M. Grosso, 33, of Boothwyn; Frank L. DiMichele, 49, of Norristown; Joseph DeSimone, 34, of Philadelphia; John J. Cavanaugh, 61, of Philadelphia; David Betzner, 72, of Port St. Lucie, Fla.; and Generoso F. Palmieri, 60, of Glenside.
Betzner did not appear Wednesday but is expected to be arraigned before the end of the week, said a spokesman for Kane.
All of the men were expected to appear at preliminary hearings on Dec. 29, although Lauch, Rosetti, and DiMichele waived those hearings Wednesday.
Each man was released on $200,000 unsecured bail.