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Intro and update to college admissions scandal

Lots of things going on behind closed doors that have drawn the focused attention of the U.S. Attorney in Boston. Image courtesy of Adobe Stock.

The pretend-to-be-an-athlete-in-a-sport-you-have-never-even-played scandal in higher education is one of many issues I have not focused on over the last year or more.

Family issues have pulled me away from blogging. Hope to start getting caught up on the massive changes taking place around us. I’ll begin with the college admissions disaster.

(Article cross-posted from my other blog, Nonprofit Update.

Brief background:

A large number of parents were paying Mr. William “Rick” Singer to help their children get into colleges where their kids wouldn’t otherwise gain admission.

More background:

The schemes, according to a long string of articles covered in most newspapers which I won’t link, included techniques such as:

  • Creating fake profile of the student being a competitive athlete when the student had not even played the sport.
  • Paying to have another person take your SAT or ACT tests.
  • Hiring a proctor to oversee extra-testing time and then correcting answers.

Flow of cash was complicated, as expected. Most of the dollars went to a non-profit foundation set up by Mr. Singer. He then distributed portions of the money to college sports coaches, proctors, and other participants. Some of the payments went directly from the parents to the colleges.

Oh, by making those payments to a charity, the payments became tax deductible. So there is also a tax fraud angle for all the involved parents to ponder. You can easily guess someone from IRS Criminal Investigations is involved in each of the cases.

Current status:

Another father was just charged.

The investigation isn’t done.

Lots of parents have lawyered up.

The scandal started with 50 people being charged, including 33 parents from 30 families. Tally now stands at 51 persons charged with 23 guilty pleas or agreements to plead guilty. I think that makes the running total 34 parents from 31 families.

Just a few articles for your consideration

Wall Street Journal – 6/28/19 New Parent Is Charged in College-Admissions Scandal. Another father agreed to a plea of one felony count. He paid $250K to get his son admitted to USC. This scheme was to falsely present him as a volleyball athlete. A soccer coach at USC, who the article says has already pleaded guilty, helped create a fake profile showing the student to be a volleyball player. I will make a wild guess that is the coach in the LA Times article mentioned below.

This is the first person charged since the initial round of charges.

The box score now stands at 51 people formally charged with 23 of those agreeing to plead guilty or already having entered their guilty plea, according to the article.

Jason Bramwell at Going Concern on 6/27/19 Accountant in College Admissions Scandal Will Find Out in October When He’ll Get Admission to Prison.  (You gotta’ love the title of that article!)

The accountant at the charity handling the funds pleaded guilty on 6/27 to one felony count of conspiracy to commit racketeering. He signed an agreement to cooperate with the feds and agreed to enter a guilty plea back on 5/31, according to the article.

He receipted the payments received from parents. Also admitted to the judge he sent $21M to college coaches and administrators. I’ll guess that amount also includes payments to the test proctors. Other reports I’ve read indicate the parents paid around $25M. Eventually we may see more details on the cash flows, which my accountant brain would like to understand.

DoJ has recommended a sentence of five years.

I tend not to mention the names of individuals, especially before conviction. Since this person has entered a guilty plea and is mentioned in lots of online articles, I will mention his name because I’ll keep an eye on his prison status down the road. He is Steven Masera, age 69. I already mentioned Mr. Singer’s name.

Mr. Masera is not yet listed in the Bureau of Prison inmate locater database. There is a listing for a Mr. William Singer, but the person listed (inmate 35211-066) is currently age 86 and was released way back in 1986.  Sixty seconds of on-line research (which I won’t link) indicates Mr. Singer was either 58 or 59 years old (take your pick of articles) back in the spring.

Los Angeles Times – 5/31/19 –Bookkeeper for mastermind of college admissions scandal will plead guilty. A few additional tidbits. Article explains the letters the accountant sent to parents allowed them to claim a tax deduction for the payments made.

Mr. Masera is the second person who was charged with racketeering to plead guilty. A coach from USC is the other. The other 10 drawing a racketeering charge have entered not guilty pleas. Article says that group includes coaches from USC, Wake Forest, Georgetown, and UCLA.

The investigation is not done.  New York Times – 5/1/19 – L.A.’s Elite on Edge as Prosecutors Pursue More Parents in Admissions Scandal. Article says an unspecified number of parents have received target letters and a larger group of parents are concerned they will eventually be targets. Three students have received target letters, which hints there may be prosecutions of some students.

For an indirect indication of the potential size of the scandal, consider this article was based on interviews with seven criminal defense attorneys (one of whom has four clients) and over a dozen parents who are worried about potential charges. That is just the people this reporter could find and who were willing to talk to an NYT reporter. I would make a wild guess that group of over a dozen worried parents is a small portion of the parents who have potential exposure.

At the time of this article, 50 people had been charged and 20 have reached a plea deal or have already signed one.

For some deeper background: Wall Street Journal – 3/13/19 –The Tip, the Yale Coach and the Wire: How the College Admissions Scam Unraveled. At that point, there were 30 families involved with 33 parents charged initially.

Graph in article shows amount paid by each family.

Tally of students involved at each college:

  • 17 USC
  • 3 Georgetown
  • 1 each, Stanford, UCLA, Yale, Wake Forest, Northeastern, San Diego
  • 13 others or unknown

The case started when one guy was the subject of a securities fraud investigation by the feds. He flipped on the coach of the Yale women’s soccer team. He paid $1.2M for his child to get into Yale, with $400K of that amount going to the coach.

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2 thoughts on “Intro and update to college admissions scandal

  1. James R Pinneo on said:

    I’ve only followed this half-heartedly. I realize the crime isn’t violent, or necessarily harms anyone. Aside from the fact that a child may have missed out on an opportunity because of the cheating on test scores. But this is a “money” crime, and they’ll recieve “money” sentences. In 6 or 12 months when its all died down in the media, most of these parents will plea down to probation or community service. I realize throwing these people into prison doesn’t do society a whole lot of favors, but just once, *just once*, I’d like to see the high-and-mightys shitting their pants for a change.

    • Hi Jim:

      I get it. I really do.

      Let me share some other stories I have followed:

      Mid-level managers or the top dogs of mega-banks engaging in systematic wrong-doing draw massive fines in the billions of dollars range so it is the bank that writes the check which comes out of capital which drives share prices which means the stockholders pay the fine. If you are not upset yet, check the mutual funds in your retirement account to see how many megabanks are listed as investments held by the funds.

      A large bank in Switzerland has a subsidiary which will do all the paperwork (incorporation, staff the board of directors, file corporate reports, open bank accounts) to create a string of shell companies to allow their customers to cleanly launder money and repatriate it in clean funds and has been openly referring their clients to this subsidiary. Said bank has admitted in consent decree they have been helping their clients launder money since *before* there was a US income tax.

      Depending on what fiasco a person pays attention to, a range of other illustrations could be put on the table.

      On the other hand, we do need to keep in mind there are ripple effects of a criminal conviction beyond the potential jail time.

      I’ve noticed a trend since the Enron/Worldcom/etc. days that the exit price of being tangled up as a player in these kind of federal investigations is no longer a plea deal to the equivalent of jaywalking but a felony. Low level participants in those financial fiascos who testified for the feds pleaded to one or two felony charges. The few negotiated outcomes I’ve noticed in the admissions scandal involve a felony plea.

      A federal felony.

      Ponder that for a moment. If you have any kind of a state license for your job, in California you will probably lose the license. There goes your way of making a living. I’m guessing the felony plea will cost your job if you are at a high level in a publicly traded company. If you are in the public eye (think of a previously employed actress for example) your contracts are wiped out. Reputational damage will be severe for many, but not all, of the players.

      One trivial consequence will be legal fees. I will make a completely wild guess the attorney fees will be in the range of $10K to $50K to negotiate a settlement and even wilder guess of $50K to $200K for full blown trial. If one was able to pay a ‘fee’ of anywhere from $15K to $250K to gain admission, then the legal fees will be no big deal.

      We shall see how the sentences work out, but based on my vague knowledge of sentencing guidelines gained from looking closely at a few cases, I’ll guess there will be prison time for the players. We shall see soon.

      I still agree with your conclusion. Probably lots of people feel that way. Since I’m making lots of guesses, I’ll guess if we see long string of people drawing prison time, there won’t be a lot of sympathy in the air.

      Thanks for taking time to comment.

      Jim

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