NEWARK, N.J. -- Two cousins pleaded guilty Wednesday to charges they plotted to bilk $1.3 million from a Morris County paperboard company.
Under a plea bargain arrangement, James Derrico, 44, of Mamaroneck, N.Y., pleaded guilty to tax evasion charges for failing to report money fraudulently obtained from the Whippany Paperboard Co. of Whippany.
His cousin, Joseph Derrico, 40, of Closter, N.J., pleaded guilty to a charge of conspiracy to transport the illict proceeds of the scheme across state lines.
Both men face a maximum of five years in prison and a $10,000 fine at sentencing Aug. 21 by U.S. District Judge H. Lee Sarokin.
Federal authorities said the two men and Salvatore Merendino and Robert Drain, of Hawley, Pa., were involved in a conspiracy to falsify records so they could collect payments from Whippany for truckloads of waste paper that were never delivered.
The Derricos operated three garbage collection companies that supplied waste paper to the now-defunct Whippany firm, and Drain acted as the inside man at the company.
In his position as a scaleman, weighing incoming paper shipments, Drain prepared bogus weight tickets for nonexistent paper and used the false records to direct payments to Merendino.
Merendino had set up a shell company, Passaic Paper Stock Inc., to collect the cash payoffs, which he funneled to the Derricos after removing his share, authorities said. Drain received weekly cash payments based on the number of tickets he prepared.
Merendino pleaded guilty Tuesday to a charge of filing a false income tax return in 1977, while Drain admitted his role in the conspiracy in February.
Drain was also involved in another scheme to defraud Whippany with Dominick Iafrato, 56, president of the Frank Iafrato Corp., a paper supply firm in Staten Island, authorities said.
Iafrato pleaded guilty in March to defrauding Whippany out of $954,000 worth of paper supplies that were never delivered. Both schemes were uncovered by the Internal Revenue Service investigators and FBI agents.
