Seven Defendants Plead Guilty To Defrauding Federal Program That Provided Technology Funding For Rockland County Schools
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today the guilty pleas of all seven defendants previously charged with defrauding the federal “E-Rate” program, designed to provide information technology to underprivileged schools, in connection with private religious schools in Rockland County, New York. PERETZ KLEIN, SUSAN KLEIN, SIMON GOLDBRENER, MOSHE SCHWARTZ, BEN KLEIN, SHOLEM STEINBERG, and ARON MELBER, each pled guilty in White Plains federal court to one count of conspiring against the United States.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Each of these defendants has now admitted his or her role in a massive scheme that stole millions of dollars from the E-Rate program. That money should have been spent to help educate underprivileged children. Instead, it went to line the defendants’ pockets. Now they will answer for their crimes.”
According to the allegations made in the Indictment and the Informations to which the defendants pled guilty, as well as the defendants’ admissions in court:
The E-Rate program distributes funds to schools and libraries mostly serving economically disadvantaged children, so that those institutions can afford needed telecommunication services, internet access, and related equipment. Over 30,000 applications from schools and libraries seeking funds to serve economically disadvantaged children were received each year during the relevant time period; every year, requests for E-Rate funds have exceeded funds available. In order to obtain those funds, educational institutions certify that they are purchasing equipment and services from a private vendor; if approved, the program defrays the cost by up to 90%. The educational institution is supposed to enter into an open bidding process in order to select a vendor, and the educational institution and vendor submit a series of certifications that they comply with a number of requirements of the E-Rate program. A school applying for E-Rate funds may employ a consultant, but that consultant must be independent of the vendors competing to sell E-Rate funded equipment and services.
The schools at issue in this case never received millions of dollars’ worth of these items and services for which the defendants billed the E-Rate program. In other cases, the schools and the defendants requested hundreds of thousands of dollars of sophisticated technology that served no real purpose for the student population. For example, from 2009 through 2015, one day care center that served toddlers from the ages of 2 through 4 requested over $700,000 – nearly $500,000 of which was ultimately funded – for equipment and services – including video conferencing and distance learning, a “media master system,” sophisticated telecommunications systems supporting at least 23 lines, and high-speed internet – from companies controlled by certain defendants. In still other instances, the schools received equipment and services that fulfilled the functions for which the schools had requested E-Rate funds (such as providing the school with internet access), but the schools and the defendants materially overbilled the E-Rate program for the items provided, in order to enrich themselves at the expense of the underprivileged children the program was designed to serve.
The defendants also perverted the fair and open bidding process required by the E‑Rate program. Defendants who held themselves out as independent consultants working for the schools in truth worked for and were paid by other defendants who controlled vendor companies. These defendants presented the schools with forms to sign or certify,