Hudson Reporter Archive

Athletic firm charged with ripping off schools

The former chief financial officer and chief executive officer of Circle Systems Group Inc., a leading supplier of athletic equipment and reconditioning services, have been charged with allegedly directing a long-running fraud against schools in New Jersey that included Bayonne and Jersey City.
U.S. Attorney Paul J. Fishman said a week ago Wednesday that Mitchell Kurlander, 52, of Allentown, Pa., and his father-in-law, Alan Abeshaus, 79, of Highland Beach, Fla., were charged by indictment with one count of mail and wire fraud conspiracy. Kurlander was also charged with nine substantive counts of mail fraud and 12 substantive counts of wire fraud. Both defendants surrendered to agents of the FBI and the U.S. Department of Education Office of Inspector General, and appeared before U.S. Magistrate Judge Michael A. Shipp in Newark federal court.

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“The U.S. Attorney’s Office is reviewing Circle’s dealings with our Athletic Department. “ – Dr. Patricia McGeehan
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Among the school districts Circle Systems Group did business with were schools in Jersey City and Bayonne High School.
“We have been advised by the U.S. Attorney’s Office that throughout the state, there has been an ongoing investigation regarding Circle Systems Group and its dealings with numerous Boards of Education,” said Bayonne Schools Superintendent Dr. Patricia McGeehan. “Because Circle was a vendor of the Bayonne Board of Education, the U.S. Attorney’s Office is reviewing Circle’s dealings with our Athletic Department. We advised the U.S. Attorney’s Office that we would assist them in any way possible on this issue. To date, we have not heard anything else from the U.S. Attorney’s Office.”
At the time of the charged conduct, Circle Systems Group Inc. sold and reconditioned athletic equipment, uniforms, and apparel. Although its services were marketed nationally, a large portion of Circle’s business focused on middle and high schools, colleges, and youth sports programs in New Jersey. Circle’s business depended primarily on a sales force that attempted to maintain relationships with school officials – including athletic directors, equipment managers, trainers, and coaches – who were responsible for purchasing athletic equipment and reconditioning services on behalf of the schools.
From at least 1997 to the summer of 2007, Circle allegedly engaged in a number of fraudulent business practices aimed at defrauding schools, including keeping duplicate payments by schools that should have been returned or credited back to schools, submitting fake quotes to school officials, and submitting fraudulent invoices to schools.

Duplicate payment fraud

Circle allegedly issued statements and invoices that looked so much alike, school districts often paid for the same items twice.
Circle received more than 500 such duplicate payments, collectively worth more than $970,000, from schools and other customers, and allegedly kept as much as $822,000 of these.
Kurlander allegedly instructed Circle employees to deposit the extra money into a special account called the “Z account,” so he allegedly could keep track of the duplicate payments that only he could access.
According to the indictment, Kurlander would then allegedly direct large, special bonuses to be paid to Abeshaus, who used the money, among other things, to pay down a personal mortgage on one of Circle’s buildings.
According to the indictment, the defendants allegedly would return funds to schools only if the local schools noticed the double charging.
“If the school recognized its mistake and questioned Circle about the duplicate payments, then the money would be refunded or credited to the school,” the indictment said. “Otherwise, the money would remain with Circle in the ‘Z account,’ and after a period of time, portions would be used for the benefit of at least one member of Circle’s management.”

Submission of fake price quotes

In what may lead to additional charges for some officials working for school districts around the state, Circle allegedly provided multiple price quotes, using the letterhead from four different companies so that it would appear to those purchasing products that Circle had the lowest price.
According to the indictment, Circle employees would allegedly prepare fake, higher quotes allegedly at the direction of Kurlander and others. In some instances, those quotes were submitted under circumstances in which school officials knew, or should have known, that they were fake. In addition, Circle employees would at times allegedly forge signatures on quotes and conceal the origins of those they mailed and faxed. Circle allegedly submitted hundreds of such fake quotes to at least 100 different schools, including more than 60 public schools in New Jersey and schools in approximately 11 other states.
In order to ingratiate Circle with school officials, Kurlander and others allegedly authorized Circle employees to make gifts and donations to schools and school officials, and often would take officials on golf outings and to meals. Circle routinely recouped these costs by inflating its invoices for services and goods to those schools, and by charging the schools for services never rendered and equipment never provided. Gifts provided by Circle to school officials included computers, digital cameras, flat-screen TVs, golf clubs, leather jackets, and other personal apparel.
“According to the indictment, Kurlander and Abeshaus conspired in a marathon of fraud that cheated students, teachers, and the taxpayers who support them,” Fishman said. “What is worse, the indictment alleges that school officials took money and gifts to look the other way. Our investigation will continue to explore the scope of this disturbing deception.”

Some Circle officials have already pled guilty

Three other individuals previously pleaded guilty to their involvement in the conspiracy. On Dec. 22, 2008, former Circle President David Drill pleaded guilty to conspiring to defraud, among other Circle customers, various New Jersey schools. Two school officials – former Long Branch High School Athletic Director Charles Ferrara Jr. and former Elizabeth High School Official Robert Firestone – pleaded guilty on Nov. 22, 2010, and Jan. 5, 2011, respectively, to participating in the conspiracy. Ferrara and Firestone admitted, among other things, that they received items from Circle for their personal use and directed Circle to fraudulently bill the cost of those items back to their respective schools.
Al Sullivan may be reached at asullivan@hudsonreporter.com.

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