Frank Pannullo gets two years in prison for skimming $617,435 from disabled

TAMPA — Former chief financial officer Frank Pannullo was ordered to serve two years in federal prison Tuesday for engineering the diversion of $617,435 in Social Security payments from clients of the Hillsborough Association for Retarded Citizens.

U.S. District Judge Mary Scriven also ordered Pannullo to serve three years of supervised release and to pay joint restitution with the others involved in the scheme for the amount stolen.

Pannullo, 70, said he was "ashamed and embarrassed." He said his actions had ruined him professionally and financially.

"I do not have the words to adequately express how regretful, sorry, ashamed and remorseful I am for what I did," he said before the sentence was imposed.

The two-year sentence was less than what federal guidelines had suggested. The judge noted Pannullo's remorse and his prior military service in determining the lesser penalty.

Government lawyers also pointed out Pannullo's cooperation with investigators, which allowed them to secure a criminal charge and conviction against his former boss, Richard Lilliston.

The now-defunct HARC, known in later years as the Hillsborough Achievement and Resource Centers, once operated group homes and community programs for the mentally disabled.

Pannullo pleaded guilty last year to a conspiracy charge. In April, he testified as the star witness in the trial of Lilliston, who was long credited with the program's successes.

Persistent cash flow problems dogged the agency, Pannullo said. In a conversation with Lilliston in 2002, Pannullo said the boss asked him to find a solution.

His answer was a scheme that ultimately netted $617,435 in funds stolen from HARC clients' Social Security benefits.

The agency acted as a representative payee for its clients' Social Security benefits. The funds were placed into individual accounts and the agency had to report annually how much had been spent on each client.

If a client's accumulated savings exceeded $2,000, he or she would be at risk of losing need-based Supplemental Security Income.

So HARC took the excess and put it into an endowment account, which Pannullo said was used to cover the agency's operating expenses. Pannullo said he and his staff falsified numbers on a spreadsheet that was supposed to be used to keep track of each client's contribution to the fund.

Some of the stolen money went to boost the salaries of Pannullo and Lilliston and, at one point, provided an $1,800-a-month car allowance for both, prosecutors said.

When the state Agency for Persons with Disabilities began asking questions in 2009, Lilliston told Pannullo to get the clients to sign "pooled trust agreements." It was an effort to make the arrangement appear legal, Pannullo said, even though many of the clients had profound mental impairments that rendered them incapable of understanding such documents.

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Bev Wall, whose sister, Linda Loveridge, was one of the HARC clients who was made to sign the bogus agreements, sat in court Tuesday to watch Pannullo get sentenced.

"I think he got off lightly," she said afterward. "I'm glad he's struggling and I hope he struggles the rest of his life."

She said she is more angry with Lilliston, whom she called "the used car salesman of the deal." She also plans to be there for his sentencing, which is scheduled for September. A jury found him guilty of conspiring to defraud the Social Security Administration.

Marsha Weisse, who was the program's controller and later CFO after Pannullo's 2011 departure, pleaded guilty to charges related to her role in the scheme, as did former client finance manager Sandra Shepherd. Both received five years of probation.

Contact Dan Sullivan at dsullivan@tampabay.com or (813) 226-3386. Follow @TimesDan.