School Officials Participate in Sports Equipment Reconditioning Fraud
As a postscript to <a href="http://www.cityethics.org/content/jersey-sting" target="”_blank”">the Jersey Sting</a>,
on Wednesday, according to <a href="http://www.justice.gov/usao/nj/Press/files/Kurlander,%20Mitchell%20et%2…; target="”_blank”">a
Justice Department press release</a>, the former CFO and CEO of a
company that reconditioned and sold athletic equipment to schools and
universities were <a href="http://www.justice.gov/usao/nj/Press/files/pdffiles/2011/Kurlander,%20M…; target="”_blank”">indicted
on charges</a> of duplicate payment fraud, the submission of fake price
quotes, and the fraudulent inflation of invoices with respect to
schools mostly in New Jersey.<br>
<br>
The company would send an invoice and a statement in such a way that
many schools would pay each of them, and the company would not return
the duplicate payment. The company would send in quotes from mythical
companies so that a school's multiple price quote requirement would be
met (school officials actually requested these fake quotes), and the
company would effectively get a no-bid contract. The company would give
all sorts of gifts to school officials, as well as donations to schools
themselves, and pay for them by inflating their invoices and charging
for services never rendered and equipment never provided.<br>
<br>
One of the more clever schemes the company participated in with schools
was to provide a way for schools to use up all the money in their athletic budget
by the end of the fiscal year by drafting fraudulent documents that
would make future purchases appear to have occurred during the present
fiscal year. And then the company would not let those responsible for
paying bills know about this scheme, so that the work was paid for again the
next year.<br>
<br>
Two school officials pleaded guilty to charges related to this fraud a
couple of years ago, but no further school officials were indicted on
Wednesday.<br>
<br>
According to <a href="http://www.nj.com/hudson/index.ssf/2011/05/bayonne_and_jersey_city_are_…; target="”_blank”">an
article in Wednesday's Jersey <i>Journal</i></a>, among the charges relating
to school officials, one gets into campaign finance. The company is
charged with making a $450 contribution to a city council candidate who
was a school athletic director, but the candidate did not report the
contribution. Another Jersey school official purchased $2,300 in
clothing on his account with the company, and it was billed to the
school district as "repair work on pitching machines."<br>
<br>
This case provides a good complement to the Jersey Sting, which involved primarily elected officials. Employees in positions of trust, without proper oversight, can get caught up in the same sort of conduct.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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