Chicago Outfit operative gets four months in federal prison for welfare fraud scheme

A Chicago mob figure convicted years ago in the landmark “Family Secrets” investigation was sentenced Monday to four months in federal prison for his part in a welfare scam by falsely claiming he was paid in a series of bogus or failed businesses, including Lehman Brothers and Peanut Corporation of America.

Michael “Mickey” Marcello, 71, the half-brother of jailed Outfit boss James Marcello, pleaded guilty earlier this year to one count of theft of public funds, admitting he stole nearly $23,000 in welfare payments between September 2017 to May 2019.

Marcello, of west suburban Wooddale, has been on the loose since being charged in December 2019. His attorney, Kathryn O’Daniel, argued for probation, saying Marcello was a “low-level” participant in the scheme and that by asking for prison time, prosecutors were trying to engage in a “re-examination of the Family Secrets case.”

“He no longer engages in this behavior,” O’Daniel said during the hearing via video conference. “He doesn’t speak to these people anymore, your honor.”

But U.S. District Judge Jorge Alonso said that while the damages aren’t as high as many fraud cases brought in Chicago, that’s only because Marcello was caught relatively quickly.

“The plan was to keep stealing money for the rest of my life,” Alonso said.

The judge also said Marcello’s previous conviction for mob-related racketeering “couldn’t be much more serious,” noting Marcello’s high-profile role in the Melrose Park mob crew and the fact that the welfare fraud came just months after his release under the supervision of family secrets. the case was closed in 2015.

“Mr. Marcello wasn’t just involved (in organized crime), he was the head of operations,” Alonso said. “For a while, he ran the day-to-day operations.”

Before sentencing, Marcello apologized to the court, admitting he had “made a terrible choice” and asking for mercy as he approaches the final phase of his life. He also asked Alonso to accept his past for what it is. “I have paid my debt to society,” he said.

Marcello was one of the first defendants to plead guilty in the family secrets investigation, admitting in a plea deal with prosecutors that while a member of the Melrose Park crew, he passed information to his imprisoned brother James, then a prominent Chicago outfit boss.

He also admitted paying mobster Nicholas Calabresi $4,000 a month to buy his silence. Calabrese later became the prosecution’s star witness during a trial that ended with the conviction of some of the Outfit’s upper echelons, including James Marcello.

At Mickey Marcello’s 2008 sentencing hearing, prosecutors said he had been involved in organized crime for nearly a decade and evaded more than $1 million in taxes.

“He’s not the worst of the bunch, but when you talk about the Chicago Outfit, it’s a pretty dark and evil group,” Assistant U.S. Attorney Marcus Funk said at the time.

U.S. District Judge James Zagel sentenced Marcello to 8 and a half years in prison.

In 2009, Marcello testified in the federal trial of John Ambrose, a deputy U.S. marshal accused of leaking information about Calabrese’s cooperation to a family friend with alleged Mafia connections, knowing that the confidential information would end up in the hands of the Outfit.

Secret FBI tapes made in a Michigan prison in 2003 captured the Marcello brothers anxiously discussing whether Calabrese had flipped.

Marcello testified that he learned of Calabresi’s cooperation with law enforcement from notorious mobster John “Puji” Matasa Jr.

Ambrose was found guilty and sentenced to four years in prison.

78-year-old James Marcello is serving a life sentence in a maximum-security prison in Colorado.

Court records show Michael Marcello was released from prison in September 2012 and served three years of supervised release. In early 2016, just months after his supervised release, Marcello was drawn into a Social Security scheme by his longtime friend Walter Paredes of Rosemont, who was recruiting on behalf of imprisoned serial fraudster George Root, court records show.

Under Marcello’s plea agreement, he agreed to turn over his Social Security information to Ruth, who submitted a fraudulent employment history on his behalf. Marcello then repeatedly lied about his employment at a Social Security Administration regional office, according to the complaint.

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Among the companies Marcello claimed to have worked for was the Peanut Corporation of America, a peanut processing company that collapsed amid one of the deadliest food contamination scandals in US history.

Marcello also claimed to have worked for Lehman Brothers, the US global financial services firm whose 2008 collapse helped trigger the global financial crisis.

In court Monday, O’Daniel said the scheme was unsophisticated and “regrettably easy for the government to unravel,” especially because Root used the same contact information for each of the companies he fraudulently listed as previous employers.

“It was low-level, late-stage behavior,” she said. “Nothing my client did required sophistication. He gave his social security number and then he lied and said he was working at some places but he wasn’t.’

But Assistant U.S. Attorney Niranjan Emani noted that Marcello, who claimed to have learned his lesson when he was sentenced in the Family Secrets case, instead simply “found a new way to steal.”

“He saw an opportunity to make money fast, cheap and easy, and he went with it,” Emani said.

jmeisner@chicagotribune.com