Saying, “You knew exactly what you were doing,” a federal judge on Monday sentenced rich businessman Joe Nocito to a year and a day in federal prison for orchestrating the region’s largest-ever tax fraud scheme in order to build the biggest private house in Pennsylvania.
“This was a very significant crime,” U.S. District Judge Joy Flowers Conti told Nocito, 81. “Prison was required here in my judgment.”
Nocito, former CEO of Automated Health Systems on McKnight Road in McCandless, was hoping for probation in building his $30 million Bell Acres estate, Villa Noci, by fraudulently expensing all aspects of its construction over many years.
Among various reasons to avoid the lockup, he and his lawyer argued that he’s too old and infirm for prison.
The government wanted a jail term in the guideline range of 37 to 46 months.
In the end, the judge said probation wasn’t warranted considering the sheer scope of the tax fraud. She said she considered Nocito’s age but decided prison was still necessary.
“If you were younger it would have been longer, quite frankly,” she told him before a courtroom packed to overflowing with his supporters.
In addition to the prison term, the judge ordered Nocito to be on probation for three years, the first six months on home confinement somewhere other than Villa Noci. He’ll also have to pay a $250,000 fine. He’s already paid $15 million restitution to the IRS.
For his part, Nocito offered no excuses.
“I did this to myself,” he said, and offered an apology to the court, his employees, his wife and Ann Harris, the bookkeeper he roped into helping him commit the fraud and who is now a federal felon as a result.
“I apologize to this country to which I owe so much,” Nocito said before asking for mercy from the judge.
She granted it, at least in some measure.
“You have done a lot of good,” she said. “I’ve never seen so many people at a sentencing hearing.”
She noted that some were even willing to go to prison in his place, a testament to a life of hard work and good deeds driven by his Catholic faith. Conti said Nocito had lived the “American dream” of rising from poor circumstances in Pittsburgh’s Manchester neighborhood to the heights of financial success and helped many people along the way.
But despite all of that, she said Nocito needs to do some prison time.
“I wish that it were different,” she said.
Federal inmates get two months shaved off their sentences per year for good behavior, so Conti told Nocito he’ll likely end up serving about 10 months.
The sentencing closes the curtain on what Assistant U.S. Attorney Greg Melucci had likened to a Shakespearean tragedy by invoking Macbeth in describing Nocito’s “unbridled ambition” to succeed and his ultimate downfall by hoarding all of his gains.
Nocito, who controls more than 100 corporate entities, admitted that he built his 51,000-square-foot house — his neighbors call it “The Castle” — on the backs of U.S. taxpayers.
He charged every invoice that went into the place — from the pool and tennis court to the woodwork and fixtures — to his various companies to write off the cost on his taxes under false business categories. He did the same for millions of dollars in other extravagant expenses, including his fleet of high-end cars, private school tuition for his grandchildren, country club memberships and the like.
Nocito also orchestrated a scheme the U.S. attorney’s office called the “money shuffle.” In that fraud, Melucci said, he hid AHS income from the IRS by funneling it through his maze of companies. All told, the government said in previous court papers, Nocito directed a “complex scheme to cheat and deceive the IRS” out of a total of $93 million in personal and expense income.
Nocito, an accountant by training, was meticulous to his own detriment. When the IRS raided his office on McKnight, agents found a typed note Nocito wrote to himself in 2000 called “Wisdom, Thoughts and Life Lessons.”
One of his 25 commandments 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 of and it becomes a choice of giving it to the government or building the house of your dreams).”
Now he’ll be trading that dream house for the Big House, at least for a year.
Judge Conti allowed him to self-report to prison on Jan. 26 to allow him to undergo a knee replacement in November.