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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.
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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.
Jim Margolin, Nicholas Biase