It also makes you wonder, since people are so untrustworthy, if properly enforced regulation is such a bad thing. These people should have been caught the instant they diverted that first million to themselves.
From the New York Times: Couple Accused of Stealing Millions Intended for Preschoolers’ Meals
A Staten Island couple stole at least $2.5 million in federal funds meant for nutritious meals for preschoolers, prosecutors asserted in a criminal complaint unsealed on Friday._____________
The complaint accused the couple, Joanna Fan and her husband, Ziming Shen, of siphoning money over five years from accounts at the nonprofit Red Apple Child Development Center preschool chain, of which Ms. Fan, also known as Xiao Ping, is the executive director. The complaint accused the couple of using the money to make mortgage payments on several Manhattan condominiums and to benefit their private business interests, which include Preschool of America Inc., a chain of about a dozen for-profit preschools in Manhattan, Brooklyn and Queens.
The couple surrendered to agents of the United States Agriculture Department on Friday morning and were arraigned before Magistrate Judge James Orenstein of United States District Court in Brooklyn. They pleaded not guilty and posted bail of $750,000 each.
The judge restricted their movement to parts of New York and ordered them to surrender their passports.
“They’re going to defend this vigorously, and obviously all the facts have not come out,” Barry W. Agulnick, Mr. Shen’s lawyer, said after the arraignment.
The charge, theft from programs receiving federal funds, is punishable by up to 10 years in prison and a fine, said Robert Nardoza, a spokesman for the United States attorney for the Eastern District of New York. “As alleged in the complaint, this amounts to one of the largest lunch money thefts in history,” Mr. Nardoza said.
Red Apple Child Development Center runs six preschools in Queens, Brooklyn, Manhattan and Staten Island. Between 2002 and 2010, the preschools received $13.5 million from the Agriculture Department through a program intended to help institutions provide healthy meals and snacks to children and adults.
Audits by the New York State Health Department and the federal Agriculture Department since 2005 revealed a pattern of false submissions to the Agriculture Department, including lying about how many children were getting the meals, the complaint charges. For example, the complaint says, in January 2009, Ms. Fan submitted records claiming that 188 children had consumed 4,700 meals and snacks, when other records showed that 116 children ate 2,900 meals and snacks.
The complaint charges that in 2008, Ms. Fan issued a check for $200,000 from the federal lunch money account to make personal condominium payments, and also withdrew $110,000 to pay her personal income taxes. Between 2005 and 2010, the complaint asserts, $2.7 million went to Supermarnet, a company Mr. Shen owned, to provide meals to the preschoolers. But the complaint said invoices indicate the company spent only $24,000 for food during that period.
In all, according to the complaint, Ms. Fan stole approximately $1.8 million of program funds in 2008 and 2009. She acknowledged in a written statement to the Agriculture Department that she had taken the money, but stated that she had “borrowed” it, the complaint charged.
Ms. Fan has been a trustee of Red Apple since it was founded in 1997, and a review of recent federal tax records showed that the couple has profited in other ways. The corporation paid Mr. Shen $455,000 in 2008 for classroom rent. Ms. Fan received $105,000 annually for her work as executive director.
Red Apple had revenue of roughly $11 million in 2008. Previous annual filings showed that about half of that was from federal payments.
In August 2004, John C. Liu, the city comptroller, who was then a city councilman, spoke in support of the organization. It had been cut off from receiving city contracts for three years because a Red Apple executive allegedly tried to bribe a city inspector to ignore a falsified certificate of occupancy, The Daily News reported at the time.
A spokesman for Mr. Liu said he believed at that time that that Red Apple should again receive city funds because it had cut ties with that official and because it remained the largest provider of prekindergarten services to the Asian community.
But Mr. Liu was also sensitive to appearances; according to the spokesman, Matthew Sweeney, in July 2004 Mr. Liu returned a $500 campaign contribution that Ms. Fan had given him nine days earlier, piqued because Ms. Fan had asked for a meeting immediately after sending in the money. “Other than that, no money has been accepted from anyone at this company,” Mr. Sweeney said on Friday.
Last year, the City Education Department sent the comptroller two contracts with Red Apple for prekindergarten, totaling just over $1 million. They lacked extra monitoring that was required after the bribery charges, and they were not approved, the comptroller’s office said. There are no active Red Apple contracts with the city.
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