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, awarding E-Rate funded contracts to companies owned
by several defendants. As a result of
false and misleading filings, the defendants received millions of dollars in E-Rate
funds for equipment and services that they did not in fact provide and which
the schools did not use, and the defendants purporting to act as consultants
accepted payments totaling hundreds of thousands of dollars from the vendors,
despite falsely presenting themselves as independent of the vendors.
In return for their participation in the scheme to defraud
the E‑Rate
program, certain schools and school officials received a variety of improper
benefits from certain defendants , including: a percentage of the funds
fraudulently obtained from E-Rate for equipment and services that were not in
fact provided to the schools; free items paid for with E-Rate funds but not
authorized by the program, such as cellphones for school employees’ personal
use and alarm systems and security equipment (which the E-Rate program does not
authorize) installed at the schools; and free services for which the E-Rate
program authorizes partial reimbursement (such as internet access) but for
which the Schools did not – contrary to their statements in filings – make any
payment at all.
PERETZ KLEIN, SUSAN KLEIN, BEN KLEIN, and SHOLEM STEINBERG
held themselves out as vendors to schools participating in the E‑Rate
program. Corporations controlled by
these defendants requested over $35 million in E‑Rate funds, and received over $14
million in E‑Rate funds, from in or about 2010 to in or about
2016. Each of these defendants has now
admitted that the companies they controlled did not in fact provide much of the
equipment for which they billed the federal government.
SIMON GOLDBRENER and MOSHE SCHWARTZ held themselves out as
consultants who worked for educational institutions, supposedly helping schools
to participate in the E-Rate program by, among other things, holding a fair and
open bidding process to select cost-effective vendors. GOLDBRENER and SCHWARTZ have now admitted
that they were in fact paid hundreds of thousands of dollars by the vendors to
complete and file false E-Rate documents that circumvented the bidding process
and resulted in the payment of millions of dollars to the vendors.
ARON MELBER was an official at a private religious school in
Rockland County, New York, that participated in the E-Rate program with some of
the defendants. MELBER has now admitted
that he filed false certifications with the E-Rate program, falsely claiming to
have obtained authorized E‑Rate funded equipment and services
from vendors selected through a fair and open bidding process.
Each defendant pled guilty to one count of a conspiracy to
commit wire fraud, in violation of Title 18, United States Code, Section 371,
which carries a maximum sentence of five years in prison and a $250,000
fine. The maximum potential sentences
are prescribed by Congress and are provided here for informational purposes
only, as the sentence for each defendant will be determined by United States
District Judge Kenneth M. Karas, to whom the case is assigned.
*
* *
PERETZ KLEIN, 66, of Spring Valley, New York, pled guilty
today before United States Magistrate Judge Judith McCarthy. As part of his plea agreement, PERETZ KLEIN
also agreed to forfeit $1,144,288.37, and to pay restitution of the same
amount. PERETZ KLEIN is scheduled to be
sentenced by Judge Karas on June 17, 2020.
SUSAN KLEIN, 59, of Spring Valley, New York, also pled
guilty today before Judge McCarthy. As
part of her plea agreement, SUSAN KLEIN also agreed to forfeit $1,144,288.37,
and to pay restitution of the same amount.
SUSAN KLEIN is scheduled to be sentenced by Judge Karas on June 17,
2020.
SIMON GOLDBRENER, 57, of Monsey, New York, pled guilty on
February 3, 2020, before United States Magistrate Judge Paul E. Davison. As part of his plea agreement, GOLDBRENER
also agreed to forfeit $479,357.18, and to pay restitution of the same
amount. GOLDBRENER is scheduled to be
sentenced by Judge Karas on June 8, 2020.
MOSHE SCHWARTZ, 46, of Monsey, New York, pled guilty on
February 6, 2020, before Judge Davison.
As part of his plea agreement, SCHWARTZ also agreed to forfeit
$275,160.00, and to pay restitution of the same amount. SCHWARTZ is scheduled to be sentenced by
Judge Karas on June 8, 2020.
BEN KLEIN, 41, of Monsey, New York, pled guilty on January
24, 2020, before United States Magistrate Judge Lisa Margaret Smith. As part of his plea agreement, BEN KLEIN also
agreed to forfeit $412,586.37, and to pay restitution of the same amount. BEN KLEIN is scheduled to be sentenced by
Judge Karas on May 22, 2020.
SHOLEM STEINBERG, 41, of Monsey, New York, pled guilty on
January 30, 2020, before Judge McCarthy.
As part of his plea agreement, STEINBERG also agreed to forfeit
$191,423.50, and to pay restitution of the same amount. STEINBERG is scheduled to be sentenced by
Judge Karas on May 12, 2020.
ARON MELBER, 44, of Monsey, New York, pled guilty on January
30, 2020, before Judge McCarthy. As part
of his plea agreement, STEINBERG also agreed to forfeit $127,654.55, and to pay
restitution of the same amount. STEINBERG
is scheduled to be sentenced by Judge Karas on May 8, 2020.
Mr. Berman thanked the Federal Bureau of Investigation, the
Federal Communications Commission - Office of the Inspector General, and the
Rockland County District Attorney’s Office for their outstanding work on the
investigation. This case is being
handled by the Office’s White Plains Division.
Assistant United States Attorneys Michael D. Maimin, Hagan Scotten, and
Vladislav Vainberg are in charge of the prosecution.
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