THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Key witness paints DiMasi as cash-driven conspirator

Lally describes a 4-man scheme to win kickbacks

Joseph Lally was a codefendant in the case, but agreed to testify in exchange for a reduced sentence. Joseph Lally was a codefendant in the case, but agreed to testify in exchange for a reduced sentence.
By Milton J. Valencia
Globe Staff / May 19, 2011

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Joseph P. Lally Jr. testified in federal court yesterday that he wanted to clear his conscience by telling of the bribery scheme he orchestrated with Salvatore F. DiMasi when DiMasi was speaker of the Massachusetts House and with DiMasi’s two associates to help a Burlington software company win state contracts.

“The truth is, I entered into a conspiracy with these three defendants to commit a crime,’’ Lally, a 50-year-old former salesman and vice president of Cognos, told jurors in US District Court in Boston.

Lally, the prosecution’s key witness, provided the most damaging testimony to date in DiMasi’s public corruption trial, detailing a conspiracy over three years to use the power of the speaker’s office to manipulate the legislative process in favor of Cognos.

In his five-hour testimony, he put DiMasi at the center of the conspiracy, saying that DiMasi told him and one of the associates during a Father’s Day golf outing in 2006 that “I’m only going to be speaker for so long, so it’s important we make as much hay as possible.’’

Lally, DiMasi, and associates Richard Vitale and Richard McDonough did exactly that, he told jurors, successfully steering two contracts totaling $17.5 million toward Cognos in exchange for hundreds of thousands of dollars in kickbacks.

Lally said he used the $2.8 million in commissions he received from Cognos to pay $300,000 to McDonough, a lobbyist, and $600,000 to Vitale, a financial adviser. Both are longtime friends of DiMasi.

Lally said Vitale told him: “He didn’t get a dime of this money. It all went to Sal.’’

DiMasi, he testified, was also receiving separate kickbacks from lobbying fees that Cognos was paying one of his law associates. Those payments, prosecutors said, totaled $65,000.

“He said let’s make as much hay as possible, so that’s what I did,’’ testified Lally, sitting back in his chair.

Lally was a codefendant in the case, but agreed to cooperate with authorities and to testify in exchange for a reduced sentence, with prosecutors recommending he serve two to three years in prison, rather than the 10 years he faced.

DiMasi maintains his innocence. From the onset of the trial, the defense lawyers have worked to attack Lally’s credibility, calling him a liar who name-dropped and brought about a false theory of a bribery scheme.

Under cross-examination later yesterday by Vitale’s attorney, Martin Weinberg, Lally acknowledged that he has lied to friends, co-workers, even family members and that he bragged about meetings with high-profile figures that never took place. He lied on his taxes, he said, and lied to his wife about the taxes.

Weinberg asserted that Lally agreed to testify for prosecutors to avoid prison and save his assets, pointing out that authorities were seeking forfeiture of his boat and nearly $1 million home.

Lally said he had lost all his assets to creditors since the bribery scheme unraveled and acknowledged he was seeking to avoid prison time, so that he can support his three children.

But he also maintained that his testimony was truthful, that “I’m here to clear my conscience.’’

Lally outlined the web of connections in the case that began in the early 1990s, when he was a salesman for software companies and befriended McDonough.

When Lally joined Cognos in 1996, he then hired McDonough as a lobbyist. In that time, Lally said, he also met DiMasi, then a state representative from the North End, and they became acquaintances, going to dinner and golfing. DiMasi even attended Lally’s wedding, according to a video shown to jurors yesterday.

All along, Lally said, he was pitching Cognos software to DiMasi, knowing that state education officials had an interest in the product.

In 2004, when DiMasi was elected speaker, Lally said he was approached by McDonough about helping DiMasi earn income. In his new role, DiMasi could no longer count on earnings from his private law firm.

McDonough, Lally testified, suggested that he put DiMasi law associate Steven Topazio on the Cognos payroll, saying they had a referral fee arrangement that could be used to funnel money back to the speaker.

Lally said he knew the arrangement would be a sham, but “I was going to keep the whole game going and eventually reap some benefits from it . . . from the speaker.’’

In 2005, Lally said yesterday, McDonough introduced him to Vitale, who told him he could help secure the contract for the Department of Education software. He would have to pay Vitale $100,000, Lally said he was told by the pair.

“That’s what I was told I needed to do in order to get the speaker to get the funding through,’’ he said. Lally told the court he asked Vitale how the money would get to DiMasi, and he was told that the speaker would benefit from a $250,000 line of credit that Vitale established on his behalf.

Ultimately, the state awarded a $4.5 million contract for Department of Education software to Cognos.

Meanwhile, Lally proposed a larger $15 million enterprise contract that would provide the state with open access to Cognos software, which would be the largest contract the company ever received. Lally said he asked Vitale how he could get it accomplished.

“I said two to three hundred thousand? He said, ‘How about $500,000,’ and I agreed,’’ Lally testified. “That was my understanding of what I needed to do to get the speaker to fund the project.’’

In 2007, the state signed an enterprise contract with Cognos for $13 million, thanks, according to Lally, to the work of DiMasi and his associates.

“I was living pretty much the high life’’ after the contracts were signed and kickbacks were paid, Lally said. He had been told by Vitale, he said, that DiMasi was going to resign from the Legislature and join one of Vitale’s companies, to benefit from the secret payments.

The Globe started writing a series of stories about the deals in spring 2008. Lally said the players involved started to get nervous: McDonough suggested he and Lally should frisk each other at meetings to ensure neither was wearing a wire. They engaged in shouting matches over the deals, Lally testified.

DiMasi believed that a move by Cognos to reimburse the state the $13 million could quiet the controversy, Lally said; Vitale would also repay him the $500,000. “Works for me,’’ Lally said he told Vitale.

Lally said he, McDonough, and Vitale met in Vitale’s offices at one point, and DiMasi said during a conference call, “If one of us breaks, we all fall.’’

Milton Valencia can be reached at mvalencia@globe.com.