Manhattan U.S. Attorney Announces Fraud Charges Against Provider Of Services For Special Needs Preschool Students
Preet Bharara, the United States Attorney for the Southern District of New York, Thomas P. DiNapoli, the New York State Comptroller, Richard Condon, the Special Commissioner of Investigation for New York City’s Department of Education, and Brian M. Hickey, the Special Agent-in-Charge of the Northeastern Region of the United States Department of Education’s Office of Inspector General (“ED-OIG”), announced today the arrest of CHEON PARK, owner and executive director of Bilingual SEIT, a federal, New York State, and New York City funded provider of special education services and preschool programs to New York City preschool children. PARK was arrested this afternoon and presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis.
Manhattan U.S. Attorney Preet Bharara said: “Cheon Park allegedly orchestrated multiple schemes to enrich himself by taking funds intended for special needs children and diverting them into his own coffers. As today’s arrest makes clear, we will not tolerate individuals who cheat local, state, and federal government under the guise of helping children, and will do everything in our power to hold them accountable.”
New York State Comptroller Thomas P. DiNapoli said: “As alleged, Cheon Park blatantly ripped off taxpayers for hundreds of thousands of dollars, partly through kickbacks, to support his lavish lifestyle, even going as far as using the public’s money to clean his house. Our audits and investigations of special education providers have uncovered too much fraud and abuse that is depriving students with special needs of the resources intended for them. I urge the Governor to sign our bill that mandates an audit of every provider and give taxpayers assurance their money is being well-spent. I commend U.S. Attorney Preet Bharara for prosecuting Park and bringing abusers of the special education system to justice. I look forward to continuing this partnership.”
SCI Special Commissioner Richard J. Condon said: “As alleged, Park, through Bilingual SEIT, used a contract with the New York City Department of Education to misappropriate public funds for his own benefit. At the same time, Park allegedly deprived the neediest of preschool students of essential mandated services. This is one of a series of investigations that my office is conducting with the U.S. Attorney for the Southern District of New York.”
ED-OIG Special Agent-in-Charge Brian M. Hickey said: “Today’s arrest relates to allegations that Mr. Park not only knowingly and willfully abused his position of trust for personal gain, but did so at the expense of special needs students. That is completely unacceptable. Tracking down those who would cheat the children and families that rely on special education programs is a priority of our office.”
The following allegations are based on the Complaint unsealed today in Manhattan federal court:
Between 2005 and 2012, PARK engaged in a conspiracy to defraud the federal government, New York State, and New York City of millions of dollars by deliberately inflating both the amount of compensation Bilingual SEIT paid certain of its employees and contractors, and the type of work performed by certain employees on annual certified consolidated fiscal reports (“CFRs”) and financial statements submitted to the New York State Education Department (“NYSED”) and the New York City Department of Education (“NYCDOE”).
PARK owned and operated Bilingual SEIT from at least 2005 to 2012. During that time, Bilingual SEIT had a contract with the NYCDOE to provide publicly funded special education services and preschool programs to New York City schoolchildren aged three to five with physical, emotional, and/or developmental disabilities. Specifically, Bilingual SEIT received funding to provide: (1) special education itinerant teacher, commonly referred to as SEIT, services; (2) special education classes in a center-based setting for preschool students with special needs; (3) individual evaluations for preschool students with disabilities; and (4) physical, occupational, and/or speech therapy for preschool students who qualified for such services. As of September 2012, Bilingual SEIT operated out of five locations in Manhattan, Queens, and Brooklyn.
During the seven-year period that Bilingual SEIT was under contract with the NYCDOE, it claimed reimbursement for and received approximately $94.5 million in federal, New York State, and New York City funding to provide the services described above. In order to receive such money, on behalf of Bilingual SEIT, PARK was required to file a CFR supported by audited financial statements with the NYSED. The CFR and audited financial statements represented the costs that Bilingual SEIT had incurred the previous year and the justification for those costs, and included compensation Bilingual SEIT purported to pay its employees and contractors. Each year, PARK signed the certification pages for the CFRs filed with the NYSED, which relied on the CFR and audited financial statements in determining the amount of public funds to pay Bilingual SEIT per student for the services Bilingual SEIT provided to New York City preschool students.
Beginning in approximately June 2011, the New York State Comptroller’s office (the “Comptroller”) conducted an audit of Bilingual SEIT to determine whether the costs reported by Bilingual SEIT on the CFRs for the years July 2007 through 2009 were properly calculated, justified, and allowable under guidance issued by the NYSED. In July 2012, the Comptroller issued a report that concluded that nearly $1.5 million of the costs that PARK certified for the two-year audit period should have been disallowed, including money paid to 26 employees whose time and attendance could not be substantiated. As a result of the Comptroller’s report, the NYCDOE cancelled Bilingual SEIT’s classes and declined to renew its contract with Bilingual SEIT.
In fact, PARK engaged in several schemes designed to inflate the costs Bilingual SEIT represented it incurred, resulting in more public money for Bilingual SEIT, much of which, as set forth below, was kicked back to PARK.
Specifically, PARK engaged in three different fraudulent schemes. First, PARK fraudulently received funds from New York State and New York City to pay multiple individuals who performed little or no work for Bilingual SEIT. At PARK’s request and direction, these individuals then kicked back as much as 50% of the salary they fraudulently received from Bilingual SEIT to PARK. For example, PARK asked an individual who sporadically evaluated children for Bilingual SEIT (“Individual-3”) to accept payment from Bilingual SEIT in exchange for kicking back 50% of the payments to PARK. Individual-3 agreed, and kicked back approximately $3,500 a month in cash to PARK each month during the period between 2005 and 2008. During the Comptroller’s audit, PARK asked Individual-3 to sign various documents that falsely indicated that Individual-3 actually worked for Bilingual SEIT during the years 2007 through 2009.
Second, PARK fraudulently received funds from New York State and New York City to deliberately overpay other individuals who worked for Bilingual SEIT. At PARK’s request and direction, these individuals also kicked back a portion of the overpayment to PARK on a regular basis. For example, in 2006, PARK hired an individual as an office worker for Bilingual SEIT (“Individual-4”). Shortly after Individual-4 began working for Bilingual SEIT, PARK asked Individual-4 to kick back to PARK approximately $2,200 a month from Individual-4’s monthly salary. Individual-4 agreed to do so, and kicked-back approximately $2,200 a month to Park until Individual-4 stopped working for Bilingual SEIT in 2011.
Third, in addition to receiving kickbacks, PARK used Bilingual SEIT funds for his personal benefit in other ways. PARK arranged for Bilingual SEIT to pay his ex-wife and ex-sister-in-law for work they did not perform. According to various CFRs filed with the NYSED, PARK’s ex-wife served as Bilingual SEIT’s “Assistant Executive Director,” the second most senior executive at Bilingual SEIT. For the years 2006 through 2012, PARK’s ex-wife was one of the most highly compensated employees at Bilingual SEIT. According to witness interviews, as well as the audit performed by the Comptroller, PARK’s ex-wife did not function as the “Assistant Executive Director,” and, to the extent she performed any functions at all at Bilingual SEIT, she was an office worker. PARK also arranged to have Bilingual SEIT pay his ex-sister-in-law, who, according to witnesses, never worked at Bilingual SEIT. Finally, PARK also arranged for Bilingual SEIT to pay for tutoring for PARK’s children and for a Bilingual SEIT employee to clean PARK’s home twice a week.
PARK, 46, of Manhasset, New York, is charged with conspiracy to commit mail fraud, which carries a maximum term of 20 years in prison, and one count of mail fraud, which also carries a maximum term of 20 years in prison.
Mr. Bharara praised the investigative work of the Office of the State Comptroller, the Special Commissioner of Investigation for New York City’s Department of Education, the Office of Inspector General for the United States Department of Education. He also thanked the Queens County District Attorney’s Office for its assistance.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Paul Krieger, Rebecca Ricigliano, and Martin Bell are in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.