Former Obama White House adviser Seth Andrew arrested for charter school theft
Seth Andrew at a TEDx talk
Source: TEDx talks | Youtube
Seth Andrew, who served as an education adviser to the Obama White House, was arrested Tuesday morning for plotting to steal $ 218,005 from a network of public charter schools that based, said federal authorities.
Andrew, 42, was arrested in New York City, where he and his wife, CBS News anchor Lana Zak, have a residence valued at more than $ 2 million.
The founder of Public democracy preparation schools is accused of using more than half of the money allegedly stolen from this network to maintain a minimum bank account which gave him a more favorable interest rate on a mortgage on his Manhattan residence and that of Zak. Zak has not been charged in this case.
Prosecutors said Andrew in 2019 – more than two years after severing ties with Democracy Prep – looted a series of escrow accounts he previously created for individual schools within the Democracy Prep network and then used their funds to open a business account in the name of one of the schools of a bank.
A surveillance photo of a bank, which was included in a criminal complaint, shows Andrew at that bank, where he was closing one of the school’s escrow accounts in October 2019.
Andrew is seen in this photo wearing a yellow hat, which an FBI agent noted in the complaint “is essentially Andrew’s” calling card “,” as it signifies a connection to Democracy Prep “and its leadership. “
He is charged with wire fraud, money laundering and misrepresenting a financial institution, according to the United States Attorney’s Office for the Southern District of New York, which is pursuing the case. The charges carry a maximum possible jail term of 30 years, but Andrew is almost certain to have much less time than that if convicted, given federal sentencing guidelines.
In a statement, US lawyer Audrey Strauss said: “Seth Andrew abused his position as founder of a charter school network to steal the same schools he helped create.”
“Andrew would not only have stolen money from schools, but also used the stolen funds to save on a mortgage for a multi-million dollar apartment in Manhattan,” Strauss said.
In an appearance later Tuesday in Manhattan US District Court, a judge ordered Andrew’s release on a personal recognizance of $ 500,000, which will have three co-signers.
As a condition of this bond, Andrew and Zak must return their passports, and Andrew’s trip was limited to New York, several counties north of the city, Long Island and Vermont.
Andrew is next due in court on May 27.
Zak, who has three children with Andrew, did not immediately respond to a request for comment.
Andrew’s criminal defense attorney Michael Yaeger told CNBC Andrew would “plead not guilty” to the case. He declined to comment further.
Arne Duncan, who as President Barack Obama’s Education Secretary supervised Andrew, declined to comment on the criminal case.
Natasha Trivers, the current CEO of Democracy Prep, in an email to families, alumni and academics across the network, said that a “series of financial guarantees” instituted after taking office in 2019 “has led directly to find out about Seth’s disallowance. withdrawals. “
Democracy Prep, which Andrew founded in 2005, then informed authorities and cooperated with the criminal investigation, she said.
“Seth left our network in 2013,” Trivers wrote. “His alleged actions are a profound betrayal of everything we stand for and of you and your children, academics and the families we serve. To be clear, at no point did the alleged crimes pose a risk to our students, staff or operations in any way. “
Trivers added: “The finances of the network remain strong, and at no time has any of Seth Andrew’s activities had a negative effect on our academics or the functioning of our schools.”
Democracy Prep operates schools in the Bronx and Harlem in New York, as well as in Camden, New Jersey, Las Vegas, San Antonio and Baton Rouge, Louisiana.
Last week, Andrew retweeted a Twitter message from Democracy Prep that said the network “is looking for an incredible team of teachers, leaders and staff who are interested in educating responsible citizen-scholars!”
Andrew is currently CEO of Democracy Builders, which markets itself as a “social sector studio that has launched over $ 1 billion in businesses that are changing the face of education, democracy and technology around the world.” This organization last year purchased the former Marlboro College campus in Marlboro, Vermont for $ 1.725 million, with the aim of creating a school called Degrés de Liberté.
In a statement released to CNBC later Tuesday, the board of directors of Democracy Builders said that “after learning of the allegations against Mr. Andrew, the board of directors held an emergency meeting to dismiss Mr. Andrew from his position as Chairman of the Board and restrict his immediate access to all accounts and financial resources. “
“The Board of Directors takes its fiduciary role and responsibilities seriously and will ensure that contributions to the Democracy Builders Fund are used for the mission and intended purposes of Democracy Builders and its various projects and programs,” said the board.
Andrew, while working at Democracy Prep, accepted a position with the US Department of Education in 2013, shortly after Obama began his second term. He then became a senior advisor in the Office of Educational Technology at the White House.
During his tenure in the Obama administration, Andrew continued to be paid by Democracy Prep, officials said. He severed ties with the network in January 2017, the same month Obama left office.
Andrew is accused in a criminal complaint of scamming the charter school network in 2019 by taking funds from escrow accounts he had opened for individual schools in the network years before and depositing much of the money. money in a bank he was trying to get. a mortgage of.
He reportedly received a lower interest rate on his $ 1.776 million mortgage due to the use of stolen funds from schools to maintain a large deposit in the bank that was loaning him the money to buy a house of $ 2.37 million in New York.
Andrew and his wife got a mortgage rate of just 2.5%, which is 0.5% less than they should have paid because they had over $ 1 million on deposit with the lender.
“Without the $ 142,524 of stolen funds deposited, Andrew would only have been entitled to a deduction from the interest rate of 0.375%,” the US attorney’s office noted.
FBI Deputy Director William F. Sweeney Jr. said in a statement, “Hitting on the lowest interest rate when applying for a loan is definitely the goal of every homebuyer. but when you don’t have the funds to deposit, and you steal your old employer’s money to make up the difference, saving money in interest will probably be the least of your concerns. “
“We are claiming today that Andrew did just that, and since the employer he robbed was a chartered school organization, the money he took belonged to an institution serving children of age. school, ”added Sweeney. “Today Andrew himself is learning one of life’s most basic lessons – what doesn’t belong to you isn’t yours.”
A spokeswoman for CBS News made no immediate comment on Zak and the case.
Correction: President Barack Obama entered his second term in 2013. An earlier version misinterpreted the timing.