Wealthy North Hills health services executive Joe Nocito kept a handwritten document in his office dated from September 2000 called “Wisdom, Thoughts and Life Lessons.”
Among the goals he wrote down was to “maintain the lifestyle of the ‘millionaire next door’ (at least until you achieve the stage in life where you have all the material things you want, your next generation is well taken care and it becomes a choice of giving it to the government or building the house of your dreams).”
He did build the house of his dreams, the largest private house in Pennsylvania, in Bell Acres.
But in front of a federal judge on Thursday, he finally admitted that the enormous edifice was built on tax fraud.
After years of sparring with the U.S. attorney’s office, Nocito pleaded guilty to conspiracy to defraud the U.S.
Nocito, 80, the owner of Automated Health Systems in McCandless, admitted that between 2006 and 2012, he conspired to write off millions of dollars as business expenses against other companies he controlled in the construction of the 39,000-square-foot house he called Villa Noci and his neighbors deride as “The Castle.”
He also admitted that he fraudulently expensed millions for other personal expenditures, such as his fancy cars, tuition to private schools for his grandchildren and country club memberships.
In all, Nocito’s schemes enabled him to avoid paying $4 million in personal income taxes between 2006 and 2021 and an estimated $11 million in corporate taxes.
Nocito, in consort with his bookkeeper and his former controller, conspired to conceal AHS income by shuffling millions through his various companies and falsely describing the transfers as management, administrative or consulting expenses. That action caused him to under-report company profits over many years.
As part of his plea, Nocito agreed to pay restitution to the IRS of $15.8 million.
A former accountant, Nocito controlled AHS, Nocito Enterprises, Palace Development, Jonolley Properties and Donotti Properties, among other entities.
The IRS began looking at him in 2012. Agents discovered that he concealed taxable corporate income by illegally classifying millions in Villa Noci building costs and personal expenses as business expenses and moving income through his companies in what a former U.S. attorney called an “elaborate shell game” to duck the IRS.
In court, Assistant U.S. Attorney Greg Melucci outlined numerous examples of Nocito’s specific steps in carrying out his scheme.
In May 2008, for example, Nocito had a Jonolley Properties check made payable to Aqua Pool Inc. for $237,000 for the installation of a pool at Villa Noci. Nocito then directed that the payment be classified as “consulting” in the Jonolley books and deducted as a business expense on the Jonolley corporate tax return for 2008.
In January 2009, Nocito had a Palace Development Co. check made payable to Nelmark Electric for $40,942 for electrical work at the mansion. Nocito had that check marked down as “consulting” on the Palace Development ledgers and deducted it as a business expense on the 2009 Palace corporate return.
Nocito did the same, again and again, for architectural work, his tennis and basketball court, statues, kitchen design, artwork and the like.
Nocito also expensed personal expenses in a similar way.
In June 2010, for example, he had a Jonolley check made payable to Ferrari Maserati of Long Island, N.Y., for $20,000 as a down payment on his $240,000 Ferrari California sports car. That check was marked as “travel” on the Jonolley books and deducted as a business expense on the Jonolley 2010 tax return.
Nocito even expensed his fitness program. In January 2007, he executed a Nocito Enterprises check for $5,000 payable to Stick it to Fitness for a personal trainer. The payment was classified as “advertising” on the Nocito Enterprises books and deducted as a business expense on the 2007 return.
Melucci said Nocito’s bookkeeper, Ann Harris, who has pleaded guilty, would testify that when construction invoices for the giant house or Nocito’s personal expenses were delivered to him, he often placed a sticky note on the invoices telling her to prepare a check drawn on one of his companies and how to fraudulently classify it as a business expense.
“The bookkeeper would testify that this occurred on a regular basis between 2006 and 2011,” Melucci said.
The IRS determined that $5.6 million in construction and personal expenses were deducted through Jonolley, $5 million through Nocito Enterprises, and $1.7 million through Palace Development.
Melucci said another corporate officer, identified earlier in court papers as former controller Dennis Sundo, would testify to the shuffling of corporate income among various entities to disguise the movement of funds.
In February 2010, for example, Nocito signed nine AHS checks made payable to a Nocito Enterprises account for amounts ranging from $275,000 to $395,000.
Nocito then directed that all the payments be falsely classified as “management fees” in the AHS books with the sole purpose of lowering the company’s corporate taxable income.
The payments were fraudulently deduced as business expenses on the AHS tax return for 2010. U.S. District Judge Joy Flowers Conti said she would sentence Nocito in March. Federal guidelines call for up to five years in prison.
Nocito remains free on bond until then.