Manhattan U.S. Attorney Announces Lawsuit And$2 Million Civil Settlement With Academic Advantage, And Civil And Criminal Charges Against Former Academic Advantage Employees, In Scheme To Defraud Federal Government Into Paying For Tutoring Services That

Preet Bharara, the United States Attorney for the Southern District of New York, 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”), today announced a number of civil and criminal actions relating to a fraudulent scheme to submit false claims for reimbursement on behalf of THE ACADEMIC ADVANTAGE (“ACADEMIC ADVANTAGE”), an educational services provider, in connection with a federally-funded program that provided after-school tutoring services to public school children. The civil actions announced today include: (1) the filing of a civil fraud lawsuit against ACADEMIC ADVANTAGE and nine of its former employees — ARLETTE HERNANDEZ, EDWIN GUZMAN, LUZ MERCEDES, NILSA DALMASI, KRISTIN JOYNER, RAYVON JONES, ALICIA MCKAY, TERESA OSORIO and AYESHA YOUNG (collectively, “INDIVIDUAL DEFENDANTS”) — in connection with the company’s submission of fraudulent claims for reimbursement between 2010 and 2012; (2) the settlement of the civil claims against ACADEMIC ADVANTAGE for $2 million and admissions of wrongdoing; and (3) the settlement of the civil claims against EDWIN GUZMAN and LUZ MERCEDES for $61,819 and $101,758, respectively, and admissions of wrongdoing. The criminal actions include: (1) the filing of a Criminal Complaint charging ARLETTE HERNANDEZ with fraud; and (2) the guilty pleas of EDWIN GUZMAN and LUZ MERCEDES to criminal fraud charges.

U.S. District Judge Lewis A. Kaplan approved the civil settlements with ACADEMIC ADVANTAGE, GUZMAN and MERCEDES yesterday. HERNANDEZ was arrested on March 5, 2014, and presented that day before U.S. Magistrate Judge James L. Cott. GUZMAN pled guilty to a Criminal Information before U.S. District Judge Andrew L. Carter on January 9, 2014, and MERCEDES pled guilty to a Criminal Information before U.S. Magistrate Judge Kevin N. Fox on February 6, 2014.

Manhattan U.S. Attorney Preet Bharara said: “With the actions announced today, we continue our push to clean up corruption in the tutoring of our school kids. Having previously exposed schemes by Princeton Review and TestQuest to fraudulently bill the government for tutoring services that they never provided, we now hold a third company, Academic Advantage, accountable for engaging in identical misconduct. And we also hold nine former employees of Academic Advantage to account – criminally, civilly or both – for their roles in the fraudulent billing scheme. This should serve as a reminder both to educational services providers and their employees that if they seek to cheat the system, we will hold them accountable.”

ED-OIG Special Agent-in-Charge Brian M. Hickey said: “The Supplemental Education Services (SES) program provides critical resources for deserving students who seek to improve their academic performance. The actions announced today against Academic Advantage and nine of its employees allege that Academic Advantage billed and retained SES payments for students it did not tutor. That is unacceptable. Tracking down those who would cheat this important program is a priority of our office.”

According to the Civil Complaint against ACADEMIC ADVANTAGE and the INDIVIDUAL DEFENDANTS, the allegations in the Criminal Complaint against HERNANDEZ, the Criminal Informations against GUZMAN and MERCEDES, and the Civil Settlements with ACADEMIC ADVANTAGE, GUZMAN, and MERCEDES, all of which were filed in Manhattan federal court:

From 2010 through 2012 (“Covered Period”), the New York City Department of Education (“NYCDOE”) received funds from the federal government to pay for Supplemental Educational Services (“SES”), which included after-school tutoring for students attending underperforming public schools. The NYCDOE entered into contracts with private entities to provide SES tutoring to students in New York City public schools. Students were eligible to receive SES tutoring if they met certain criteria, such as attending a school that had been identified as needing improvement or restructuring for at least two years. Private entities contracted by the NYCDOE to provide SES tutoring were required to have each student who attended a tutoring class sign a daily attendance sheet. A representative from the entity was also required to sign the attendance sheet, certifying that SES tutoring had been provided to all of the students whose signatures appeared on the attendance sheet.

ACADEMIC ADVANTAGE

During the Covered Period, ACADEMIC ADVANTAGE contracted with the NYCDOE to provide SES tutoring to students in New York City. ACADEMIC ADVANTAGE employed individuals whom it referred to as “Site Managers” to supervise its SES program at particular New York City public schools. The Site Managers supervised other employees, known as “Program Aides,” who were also assigned to those schools. Employees with the title “Director” supervised the Site Managers and Program Aides. Of the INDIVIDUAL DEFENDANTS, AYESHA YOUNG was a Director and the rest were Site Managers.

The Billing Scheme

During the Covered Period, ACADEMIC ADVANTAGE obtained federal funds by falsely reporting that it had provided SES tutoring to certain students when no SES tutoring had, in fact, been provided to those students. As part of the scheme, ACADEMIC ADVANTAGE repeatedly submitted to the NYCDOE bills for students who had not actually received any tutoring.

As part of the civil settlements, ACADEMIC ADVANTAGE admitted that:

• Site Managers routinely forged student signatures on daily attendance sheets to make it appear that more students had attended Academic Advantage’s SES tutoring classes than had, in fact, attended;
• Site Managers instructed Program Aides to forge student signatures on daily attendance sheets;
• Program Aides followed the instructions they received from those Site Managers and forged student signatures on daily attendance sheets;
• Site Managers and Program Aides instructed students to sign daily attendance sheets for SES tutoring classes that those Site Managers and Program Aides knew the students either had not attended or would not be attending; and
• Site Managers routinely signed false certifications on daily attendance sheets, falsely certifying that after-school tutoring had been provided to all of the students whose purported signatures appeared on the sheets, even though the Site Managers knew that tutoring had not been provided to many of those students.

ACADEMIC ADVANTAGE further admitted that some Directors knew – while others deliberately ignored or recklessly disregarded – that Site Managers and Program Aides were forging student signatures on daily attendance sheets or otherwise falsifying student attendance records. ACADEMIC ADVANTAGE also admitted that it used the falsified daily attendance sheets to prepare invoices that it then submitted in connection with its SES tutoring program, and that the invoices ultimately resulted in ACADEMIC ADVANTAGE being paid federal funds for SES tutoring that it never provided.

HERNANDEZ has been charged civilly and criminally with forging student signatures on daily attendance sheets, with instructing Program Aides to forge student signatures on daily attendance sheets, and with signing false certifications on daily attendance sheets. During the Covered Period, HERNANDEZ was observed by others forging student signatures on daily attendance sheets. She was also observed possessing a completed daily attendance sheet for a tutoring session that had not yet taken place. Moreover, during the Covered Period, there were more than 200 instances where HERNANDEZ reported students as being present for after-school tutoring on days when the students were absent from school.

In connection with his guilty plea and civil settlement, GUZMAN has admitted to forging student signatures on daily attendance sheets, to instructing Program Aides to forge student signatures on daily attendance sheets, and to signing false certifications on daily attendance sheets. GUZMAN has agreed to the entry of a judgment against him in the amount of $61,819.

Similarly, in connection with her guilty plea and civil settlement, MERCEDES has admitted to forging student signatures on daily attendance sheets and to signing false certifications on daily attendance sheets. MERCEDES has agreed to the entry of a judgment against her in the amount of $101,758.

The remaining INDIVIDUAL DEFENDANTS have been charged civilly with, among other things, forging student signatures on daily attendance sheets, prompting Site Managers or Program Aides to forge student signatures on daily attendance sheets, and/or signing false certifications on daily attendance sheets. The charges against them remain pending.

HERNANDEZ, 32, of New York, New York, was charged with one count of conspiring to make false statements and one count of making false statements, and faces a maximum sentence of 10 years in prison.

GUZMAN, 39, of New York, New York, pled guilty to one count of conspiring to make false statements, and LUZ MERCEDES, 48, of New York, New York, pled guilty to two counts of conspiring to make false statements and one count of making false statements. GUZMAN faces a maximum sentence of five years in prison, while MERCEDES faces a maximum sentence of 15 years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

This is the third coordinated proceeding this Office has brought against New York City SES providers and their employees for falsifying attendance records and billing for tutoring they did not provide. In 2012 and 2013, this Office filed civil charges against The Princeton Review, Inc. (“Princeton Review”), and civil and criminal charges against several of its former employees. In 2013, this Office filed civil charges against TestQuest, Inc. (“TestQuest”), and civil and criminal charges against several of its former employees. Princeton Review settled the civil charges against it by admitting misconduct and committing to pay the Government up to $10 million. TestQuest settled with the Government for $1.75 million and admissions of wrongdoing. The following former employees of Princeton Review and TestQuest have pled guilty to criminal fraud charges, settled civil fraud charges, or both: Robert Stephen Green, Ana Azocar, Zorayma Azocar, Michael Logan, and Sandra Allen.

Mr. Bharara thanked the Office of the ED-OIG for its extraordinary assistance in this case.

The criminal cases are being handled by the Complex Frauds Unit, and Assistant U.S. Attorneys Joseph P. Facciponti and Christopher B. Harwood are in charge of the prosecution.

The civil cases are being handled by the Civil Frauds Unit, and Assistant U.S. Attorney Christopher B. Harwood is in charge of each of the matters.

The charges contained in the Criminal Complaint against HERNANDEZ are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

U.S. v. Academic Advantage, et al. Complaint
U.S. v. Academic Advantage, et al. Settlement
U.S. v. Mercedes Court-Endorsed (Academic Advantage) Settlement Agreement
U.S. v. Arlette Hernandez Complaint
U.S. v. Luz Mercedes Information
U.S. v. Edwin Guzman Information