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Geoffrey Berman, the United States Attorney for the Southern District of New York, announced the unsealing of an indictment, which charges seven Monsey, Monroe and Spring Valley residents with conspiracy to commit wire fraud and wire fraud charges.
Those charged include Monsey residents Simon Goldbrenner, 55, Ben Klein, 39, Sholem Steinberg, 39, and Aron Melber, 42. Monroe resident Moshe Schwartz, 45, and Spring Valley residents Peretz Klein, 64, and Susan Klein.
Scarpino said that the E‑rate 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 percent. 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.
According to the indictment, Peretz Klein, Susan Klein, Ben Klein and Steinberg allegedly held themselves out as vendors to schools participating in the program. Corporations they controlled requested more than $35 million in E-rate funds, of which they received more than $14 million from 2010 to 2016.
Goldbrener and Schwartz allegedly held themselves out as consultants during the scheme, assisting schools that wanted to participate in the program. They filed documents that resulted in the millions of dollars in payouts. Melber, an official at a private religious school in Rockland, participated in the scheme with the other five, during which time his school received more than a million dollars in E-rate funds.
However, the schools never received any of the millions of dollars of equipment or services.
In return for their participation in the scheme to defraud the E‑rate program, certain schools and school officials received a variety of benefits from the suspects, 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, and free services for which the E‑rate program authorizes partial reimbursement but for which the schools did not—contrary to their statements in filings—make any payment at all.
“As alleged, for years, these defendants stole money from the E‑rate program, billing the E-rate program for equipment and services which were not in fact provided. The defendants allegedly fraudulently obtained millions of dollars in E rate funds to which they were not entitled, and which should lawfully have been spent to help provide access to technology to educate underprivileged children,” Berman said in a statement.
“This indictment is important not only because fraudsters should be held to account for their crimes, but also because the next generation of students should have access to telecommunication services, internet access, and related equipment, irrespective of their means and in spite of the fact that people like the defendants seek to line their own pockets at the expense of underprivileged children.”
FBI Assistant Director in Charge William Sweeney added that “schools have to fight for every dollar these days to supply their students with the high-tech, expensive equipment and technology they need in this day and age to succeed in life. The suspects in this investigation allegedly used funding from a program designed to give underprivileged schools internet access to pad their own bank accounts. To add insult to injury, school officials, who see the day-to-day struggle to even find money for pencils and paper, were allegedly involved in the scheme”
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