Father and Son Executives Walk off with $33 million in Federal Program Funds – at a Cost
May 8, 2014
By: Lindsay Simmons
The Department of Justice just announced the indictment of two individuals (father and son) and their two companies for allegedly defrauding the federal government and 200 public schools districts of more than $33 million. The parties are charged with multiple counts of mail fraud and federal program bribery for allegedly misrepresenting the nature and quality of tutoring services being provided to low-income students and for fraudulently billing for such services. Each count of federal program bribery carries a maximum sentence of 10 years in prison and each count of mail fraud carries a maximum sentence of 20 years in prison. The father and son may be roommates for a long time.
Among other allegations in the indictments, the father and son allegedly falsely represented that they were properly pre-testing students with assessment exams, failed to review the results of students’ exams before purportedly providing them with “customized” tutoring materials, and provided generic materials at or below the students’ grade level rather than customized materials. They also allegedly falsified students’ progress reports and never post-test tutored students. Leaving no stone unturned, the father and son also allegedly fraudulently billed the federal government by, among other things, inflating invoices based on false attendance records and false tutoring time summaries.
In order to be paid, the companies were required to compile the number of hours spent tutoring eligible school children and submit the invoice to the school district those children attended. Those districts then paid these invoices using federal funds from the No Child Left Behind Act.
Much of the $33 million the father and son obtained, according to the indictments, ended up in five homes, five luxury automobiles, six whole life insurance policies and items of diamond jewelry. Some of this money, of course, allegedly was used to bribe the four school officials who were also indicted. Only $1.7 million (now seized) remained in the companies’ bank accounts.
The schemes set out in the indictment were carried out between 2008 and 2012. Incredibly, 19 states had approved the father and son team and their companies as supplemental educational service providers (SES) and were thus impacted by the alleged fraud. These states are the focus of the investigation.
Despite the extensive certification required to enter the SES program and the exhaustive paperwork required to establish entitlement to payment, scores of individuals in more than 200 school districts, in 19 states, over a four year period of time, were allegedly fooled. While the dollar value of this matter may not rival many of the more “celebrated” investigations in the procurement fraud arena, it is stunning and disappointing to see just how many government officials, across the nation, can be defrauded by a relatively simple father and son team. Cases like this one drive home how important it is for government officials to know more about those with whom it does business.
Lindsay Simmons is the attorney responsible for the content of this article.
© Jackson Kelly PLLC 2014