Two Former Executives Plead Guilty to Multistate School Sports Fraud
The former chief executive officer and chief financial officer of a sports-equipment-reconditioning company pleaded guilty Tuesday to defrauding schools in 12 states to the tune of nearly $1 million.
Mitchell Kurlander and Alan Abeshaus, the former CFO and CEO of the Easton, Pa.-based Circle System Group, respectively, pleaded guilty to conspiracy for allegedly tricking schools into paying invoices twice, creating fake price quotes from competitors, and submitting fraudulent invoices to schools, among other things.
The two were originally charged with conspiracy in federal court back in May 2011. The indictment accused Kurlander and Abeshaus of "obtaining money and other things of value" from schools "by means of a number of fraudulent business practices."
The Circle System Group allegedly sent both invoices and monthly statements to schools that "were strikingly similar in form and appearance," which caused some schools to pay for the same services twice. Over the 10-year span, the group received more than 500 duplicate payments, according to the indictment, totaling more than $970,000.
Kurlander and Abeshaus were also accused of creating fake price quotes from other companies to convince school systems to obtain their services instead. The group also allegedly submitted fraudulent invoices to schools for new equipment purchases and reconditioning services that either misrepresented the product or service provided, inflated the amount of the invoice, or both.
A large portion of the company's business was conducted with New Jersey schools, but prosecutors say the scheme spread to schools in Delaware, Florida, Georgia, Maryland, Michigan, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, and Virginia, according to the Associated Press. School districts in Pennsylvania and New Jersey alone spent more than $1.2 million with the organization from July 2003 through 2008, according to an investigation by The Express-Times, although it's unclear how much of that was fraudulent.
"According to the indictment, Kurlander and Abeshaus conspired in a marathon of fraud that cheated students, teachers, and the taxpayers who support them," said U.S. Attorney Paul J. Fishman in a 2011 statement. "What is worse, the indictment alleges that school officials took money and gifts to look the other way. Our investigation will continue to explore the scope of this disturbing deception."
In the indictment, Kurlander was additionally charged with nine counts of mail fraud and 12 counts of wire fraud, along with the conspiracy charge.
After the release of the indictment, Kurlander's lawyer said that the charges were "terribly overblown" and that his client would be pleading not guilty, according to the New York Times.
A little less than two years later, his client did plead guilty (at least to the conspiracy charge), as did Abeshaus. As a result, each man faces up to 20 years in prison.
The former CEO and CFO aren't the only ones involved in the alleged fraud, however. Back in December 2008, former Circle System Group president David Drill pleaded guilty to one count of conspiracy to commit mail fraud, which carried a maximum penalty of five years in prison and a $250,000 fine. Like Kurlander and Abeshaus, Drill was accused of utilizing fraudulent business practices to dupe schools into overpaying for sports-equipment-related services.
In November 2010, a former Long Branch (N.J.) High School athletic director also pleaded guilty on a charge of conspiracy to commit mail fraud, according to The Express-Times.
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