Feds Say Loren-Maltese Insurance Fraud Conviction Should Stand

Federal prosecutors say the fraud conviction of former Cicero, Ill., president Betty Loren-Maltese should stand, even after a U.S. Supreme Court decision on “honest services” laws.

Loren-Maltese served 6 1/2 years in prison for fleecing taxpayers of more than $12 million in a mob-related insurance scam. She was released from prison earlier this year.

In a petition filed last month, she claimed a high court ruling limiting the use of honest services laws negated her conviction.

She’s asking a judge to vacate her 2002 conviction and lift any financial sanctions, including the auction of her home.

A judge has postponed the home auction.

Prosecutors said in a response that Loren-Maltese was guilty of honest services fraud, even under the reworked definition of the law.

Loren-Maltese and her co-defendents were convicted of stealing from Cicero taxpayers in the amount of $10 million dollars from 1992 through 1996 by creating a bogus insurance company.

Investigations went on for years in this small, blue-collar suburb just outside the Chicago city limits that has been known as a haven for corruption since the 1920s, when Al Capone made it the hub of his bootlegging empire.

Others convicted were alleged Cicero mob boss Michael Spano Sr. and Emil Schullo, one-time head of the Cicero police department. After 12 days of deliberation jurors returned guilty verdicts against Loren-Maltese, Spano and five other defendants on conspiracy charges arising from a scheme to direct premium payments to a company they controlled. The jury acquitted former Cicero treasurer Joseph DeChicio on all counts.

Prosecutors in the high profile case were successful in proving that Specialty Risk Consultants, an insurance firm set up in 1992 by John LaGiglio, one of the defendants, was linked to Spano, who funded the operation. Cicero’s medical insurance, which had been provided by Travelers, was subsequently changed to Specialty Risk by decision of the town’s supervisory board, headed by Loren- Maltese, whose late husband Frank “Baldy” Maltese served as town assessor, and according to witnesses had “guaranteed” to Spano that the insurance business would be directed through Specialty.

According to an Associated Press report, costs for medical coverage rose from $50,000 per week to $128,000 per week; however so much was being siphoned off that the city fell behind in its health care payments — at one point it owed $750,000.

Associated Press reports contributed to this story.