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ABOVE + BELOW – Seth Andrew

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https://www.wbrz.com/news/former-obama-white-house-advisor-arrested-on-accusations-of-fraud-money-laundering/

 

A former White House advisor and spouse to a well-known national news anchor was arrested on charges of fraud and money laundering. 

Seth Andrew, husband to CBS News anchor Lana Zak and former education advisor in the Obama White House, found himself under arrest on Tuesday, according to CNN.

This was a far cry from the seemingly promising career path the entrepreneur had forged for himself in years past.

At only 26 years of age, the Harvard-educated businessman founded Democracy Prep Public Schools in Harlem. His work resonated with many, including former President Barack Obama. By the time Andrews was about 35 years old, he had a key role with the White House. He became senior advisor and superintendent-in-residence at the U.S. Department of Education and senior advisor in the Office of Educational Technology. 

But seven years later, the now 42-year-old businessman was taken into custody on April 27 in Manhattan, New York. 

According to CNN, the charges against Andrew stem from claims that he stole hundreds of thousands of dollars from the very schools he’d helped to found, and that he’d attempted to launder the funds in order to get a lower interest rate on a mortgage for a Manhattan apartment.

Andrew was charged by prosecutors in the US Attorney’s Office for the Southern District of New York with wire fraud, money laundering, and making false statements to a bank.

Officials say Andrew helped create the network of charter schools based in New York City in 2005, and left the network in 2013 for a job at the US Department of Education, and later became a senior adviser in the Office of Educational Technology at the White House, where he continued to be paid by the charter school network.

Prosecutors add that Andrew left his role in the White House in November 2016 and cut ties with the school network in January 2017.

CNN says this was verified with the charter school’s CEO, Natasha Trivers, who issued a statement via email that said, “Seth left our network in 2013. His alleged actions are a profound betrayal of all that we stand for and to you and your children, the scholars and families that we serve. To be clear, at no time did the alleged crimes pose any risk to our students, staff or operations in any way.”

Trivers added that the activity did not have “any adverse effect on our scholars or the functioning of our schools” and that the school system has since instituted financial safeguards, which lead to the discovery of the withdrawals.

According to a criminal complaint filed on April 20, prosecutors allege Andrew used his former association with the network of schools to steal $218,005 of the school’s reserve money between March and August of 2019.

Officials claim Andrew used his email address affiliated with the schools to email a bank employee and convince them he was still associated with the school.

The complaint goes on to state that after allegedly stealing the school network’s money, Andrew “attempted to conceal the source of the stolen funds … and make it appear that the stolen funds belonged to a non-profit organization that Andrew founded, and currently appears to control.”

Prosecutors say Andrew misrepresented that he “lawfully controlled” the money in order to obtain a discounted mortgage interest rate to buy an apartment in Manhattan.

After being taken into custody Tuesday, he was released on a personal recognizance bond, officials say.

According to CNN, Andrew’s attorney says he will plead not guilty.

Andrew and his wife, Lana Zak, have three children

USA DOJ ANNOUNCEMENT: Former White House Adviser Arrested For Stealing $218,000 From Charter Schools He Founded

Department of Justice
U.S. Attorney’s Office
Southern District of New York

Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a complaint charging SETH ANDREW with wire fraud, money laundering, and making false statements to a financial institution, in connection with a scheme in which ANDREW stole $218,005 from a charter school network that he founded.  ANDREW was arrested this morning in New York, New York, and will be presented today before U.S. Magistrate Judge Gabriel W. Gorenstein.

Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, Seth Andrew abused his position as a founder of a charter school network to steal from the very same schools he helped create.  Andrew is not only alleged to have stolen the schools’ money but also to have used the stolen funds to obtain a savings on a mortgage for a multimillion-dollar Manhattan apartment.  Thanks to the FBI’s diligent work, Andrew now faces federal charges for his alleged scheme.”

FBI Assistant Director William F. Sweeney Jr. said:  “Locking into the lowest interest rate when applying for a loan is certainly the objective of every home buyer, but when you don’t have the necessary funds to put down, and you steal the money from your former employer to make up the difference, saving money in interest is likely to be the least of your concerns. We allege today that Andrew did just that, and since the employer he stole from was a charter school organization, the money he took belonged to an institution serving school-aged children. Today Andrew himself is learning one of life’s most basic lessons – what doesn’t belong to you is not yours for the taking.”

As alleged in the Complaint unsealed today[1]:

In 2005, SETH ANDREW helped create “School Network-1,” a series of public charter schools then based in New York City.  In the Spring of 2013, ANDREW left School Network-1 and accepted a job in the United States Department of Education and, thereafter, as a senior adviser in the Office of Educational Technology at the White House.  While employed at the Department of Education, and at the White House, ANDREW was paid by School Network-1.  In November 2016, ANDREW left his role in the White House and, shortly thereafter, in January 2017, ANDREW officially severed his relationship with School Network-1.

School Network-1 comprises several charter schools throughout United States including several in New York City.  Pursuant to an agreement with the New York State Board of Regents, School Network-1’s New York-based charter schools must maintain an “escrow account” that may be accessed only if the school dissolves.  Three such escrow accounts, for three New York City-based School Network-1 schools, were opened by ANDREW and other School Network-1 employees at  “Bank-1” in 2009, 2011, and 2013.  As to each of those three accounts – Escrow Account-1, Escrow Account-2, and Escrow Account-3 – ANDREW was a signatory and had access to the funds in them.  However, pursuant to the charter agreement, the funds in the Escrow Accounts were reserved in case the school dissolved, and the funds could not be moved by ANDREW, or anyone, without proper authorization.

After he severed his relationship with School Network-1, on March 28, 2019, ANDREW entered a Bank-1 branch in New York City and closed both Escrow Account-1 and Escrow Account-2.  Bank-1 provided ANDREW a bank check in the amount of $71,881.23 made payable to “[School Network-1] Charter School” (“Check-1”) and a second bank check in the amount of $70,642.98 to “[School Network-1] Harlem Charter” (“Check-2”).  Check-1 and Check-2 represented the funds that were in Escrow Account-1 and Escrow Account-2, respectively.

The same day that ANDREW closed Escrow Account-1 and Escrow Account-2, ANDREW entered a Manhattan branch of a different FDIC-insured bank (“Bank-2”) and opened a business bank account in the name of “[School Network-1] Charter School” (“Fraud Account‑1”).  To open that account, ANDREW represented to a Bank-2 employee that he was a “Key Executive with Control of” School Network-1 Charter School, which was a lie.  ANDREW then deposited Check-1 into the account but, that day, ANDREW did not deposit Check-2.

Five days later, on April 2, 2019, ANDREW used an ATM machine in Baltimore, Maryland, to deposit Check-2 into Fraud Account-1.  It appears ANDREW waited to deposit Check-2 because it was made payable to “School Network-1 Harlem Charter” and not “School Network-1 Charter School.”  Had he tried to deposit Check-2 when he opened Fraud Account-1 it would not have been honored by Bank-2.

At the time ANDREW deposited Check-1 and Check-2 into a Bank-2 bank account, ANDREW was contemplating obtaining a mortgage from Bank-2 to purchase a residential property.  At that time, Bank-2 offered certain customers, as a promotion, more favorable mortgage interest rates if those customers maintained a certain amount of funds in Bank-2 accounts.  Specifically, for every $250,000 on deposit, up to a total of $1 million, Bank-2 would lower that qualifying customer’s mortgage interest rate by 0.125%.  Thus, in total, if a qualifying customer maintained $1 million or more of his/her funds in Bank-2 accounts that customer would receive a 0.5% interest rate deduction on a Bank-2 mortgage.  But to take advantage of the interest rate deduction promotion, Bank-2 required that the funds a customer deposited be funds owned by the customer or, in some instances, a business the customer owned, controlled or was lawfully associated with.  Bank-2 did not permit a customer to utilize money owned by someone else to gain the benefit of the interest rate deduction promotion.

By April 2019, because of the $142,524 ANDREW deposited in Bank-2, using the money he stole from two charter schools, ANDREW deposited a total of approximately $1,007,716 with Bank-2, and therefore became eligible to receive a 0.5% interest rate deduction – the largest deduction a customer could receive from Bank-2’s promotion.  Without the $142,524 deposited stolen funds, ANDREW would have been eligible for only a 0.375% interest rate deduction.  On August 21, 2019, ANDREW purchased a residential property located in New York, New York, for approximately $2,368,000.  To effectuate that purchase, ANDREW, and his spouse, obtained a mortgage from Bank-2 in the amount of $1,776,000 with an interest rate of 2.5% –  taking full advantage of the promotion Bank-2 offered.

On October 17, 2019, ANDREW closed out Escrow Account-3 and received a check (“Check-3”) made payable to “[School Network-1] Endurance” in the amount of $75,481.10.

On October 21, 2019, ANDREW deposited Check-3 into an account that he opened at a third bank (“Fraud Account-2”).  Approximately one month later, ANDREW obtained a check from Bank-2 for $144,473.29, which constituted the funds stolen from Escrow Account-1 and Escrow Account-2, and ANDREW ultimately deposited those funds into Fraud Account-2.  Five days later, ANDREW rolled the funds in Fraud Account-2 into a certificate of deposit.  That certificate of deposit matured on May 20, 2020, which earned ANDREW $2,083.52 in interest.  ANDREW then transferred the funds from the certificate of deposit – including the funds stolen from the Escrow Accounts – into a bank account held in the name of a particular civic organization that ANDREW currently controls, thereby concealing the money’s association with School Network-1, and depositing the stolen money into an account under ANDREW’s complete control.

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ANDREW, 42, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, one count of money laundering, which carries a maximum sentence of 20 years in prison, and one count of making a false statement to a bank, which carries a maximum sentence of 30 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the FBI.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Ryan B. Finkel is in charge of the prosecution.

The charges in the Complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.


[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.