OIG Investigative Reports Press Release Chicago IL., 04/28/2014 - Niles-Based Education Firms and Executives Indicted in Alleged $33 Million Fraud; Bribes Allegedly Paid to Four School Officials Skip to main contentAbout UsContact UsFAQs Language Assistance Englishespañol中文: 繁體版Việt-ngữ한국어TagalogРусский U.S. Department of Education Search for: Toggle navigation U.S. Department of Education Student Loans Grants Laws Data About ED OFFICES Home Reports & Resources Programs/Initiatives News Office Contacts Investigation Report THE UNITED STATES ATTORNEY'S OFFICE NORTHERN DISTRICT of ILLINOIS NEWS Niles-Based Education Firms and Executives Indicted in Alleged $33 Million Fraud; Bribes Allegedly Paid to Four School Officials FOR IMMEDIATE RELEASE April 28, 2014 CHICAGO – The federal government and more than 200 public school districts in 19 states, including Illinois, were defrauded of more than $33 million by two Niles–based companies and two of their executives, who purported to provide government–funded tutoring services to low–income students, according to a federal indictment announced today. The father and son executives were also charged with paying bribes to three school officials in Texas and one state education official in New Mexico, who were also indicted for accepting bribes, in exchange for recruiting students and steering federal and state funds from school districts. Indicted were BRILLIANCE ACADEMY, INC., which contracted with school districts to provide “supplemental educational services” (SES) under the 2001 No Child Left Behind Act by tutoring students on-site at schools; its wholly-owned subsidiary, BABBAGE NET SCHOOL, INC., which contracted to tutor students through laptop computers provided to students; JOWHAR SOULTANALI, director of operations for Brilliance and Babbage; and his son, KABIR KASSAM, president of both companies, which Soultanali and Kassam now own. Soultanali, 58, of Morton Grove, and Kassam, 34, of Wheeling, allegedly obtained between $8 million and $13.6 million for themselves and their families from the more than $33 million they fraudulently obtained from school districts around the country. Soultanali and Babbage were each charged with five counts of mail fraud and three counts of federal program bribery, while Kassam and Brilliance were each charged with five counts of mail fraud and two counts of federal program bribery in a 12-count indictment returned by a federal grand jury last Thursday. The indictment also seeks forfeiture from Soultanali, Kassam, Brilliance, and Babbage of more than $33 million, including approximately $1.77 million that was seized from the companies’ bank accounts in 2010 or relinquished by Babbage in 2011, as well as Soultanali’s and Kassam’s residences, and three additional condominiums, five luxury automobiles, six whole life insurance policies, and various items of diamond jewelry purchased in 2009. Also indicted on one count each of federal program bribery were: ARTURO MARTINEZ, 52, of Rio Rancho, N.M., who was an educational administrator with the New Mexico Public Education Department; CEDRIC PETERSEN, 61, of San Antonio, who was the SES coordinator and assistant principal at Fox Tech High School in San Antonio; ARMANDO RODRIGUEZ, 54, of Corpus Christi, Tex., who was the SES coordinator at Miller High School in Corpus Christi; and BRIAN HARRIS, 33, of San Antonio, who was the SES coordinator at Sam Houston High School in San Antonio. All eight defendants – six individuals and two companies – will be arraigned on dates to be determined in U.S. District Court in Chicago. Between July 2008 and February 2012, Soultanali, Kassam, Brilliance and Babbage allegedly defrauded the United States and hundreds of public school districts nationwide by misrepresenting the nature and quality of the tutoring services the companies provided, instead providing substandard supplemental educational materials to students, falsely inflating invoices the companies submitted to school districts for purported tutoring services, and creating and distributing false student progress and improvement reports. According to the indictment, on behalf of Brilliance and Babbage, Soultanali and Kassam were approved as SES providers in Illinois, Colorado, Georgia, Hawaii, Idaho, Indiana, Louisiana, Maine, Minnesota, Montana, New Mexico, New York, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Virginia, and Washington during the 2008-09 and 2009-10 school years. Those school years are the focus of the charges. Each of the four indicted school officials allegedly received an unspecified amount of money from Soultanali, Kassam, Brilliance and Babbage, sometimes through the companies’ senior regional manager who oversaw Babbage’s activities in Texas and New Mexico. Petersen allegedly also received Caribbean cruise vacations. Martinez, who oversaw New Mexico’s SES program, was in charge of approving and auditing the state’s SES providers, and oversaw New Mexico’s migrant education program, allegedly also received meals and services at a gentlemen’s club. In order to receive payment for tutoring services, Brilliance and Babbage were required to compile the number of hours spent tutoring eligible school children and submit a bill to each local school district those children attended. Local districts then paid the defendants from federal and other funds, including funds disbursed pursuant to the No Child Left Behind Act. Under the 2001 law, if a school was considered failing after being identified for “school improvement,” school districts were required to make “supplemental educational services,” or tutoring, available to eligible children from a provider with a demonstrated record of effectiveness. The provider was to be selected by students’ parents and approved by the state educational agency. The law required local educational agencies to spend a portion of their federal funding to pay for supplemental educational services, with a maximum allotment per pupil. In marketing materials and state provider applications, Soultanali and Kassam allegedly falsely represented that: Babbage pre-tested enrolled students by administering to them the Basic Achievement Skills Inventory test, which measured students’ academic proficiency in various subjects; after reviewing the results of students’ BASI exams, Brilliance and Babbage created tutoring programs customized to address students’ academic needs; Brilliance provided students with customized tutoring workbooks, and Babbage provided students with customized laptop computer tutoring programs; once students began tutoring, Babbage provided ongoing progress reports to students’ schools and parents; and once students completed tutoring, Brilliance and Babbage post-tested students with the BASI exam to determine whether the tutoring had increased students’ academic proficiency, and provided student improvement results to schools. In fact, the indictment alleges that Babbage and Kassam intentionally failed to properly pre–test students with assessment exams and, instead, administered partial assessment exams, and in some cases, no assessment exams at all; and intentionally failed to review the results of students’ assessment exams before providing them with purportedly customized tutoring materials. Instead, they provided tutoring programs that were not configured to students’ academic needs, and in many cases, were generic tutoring programs configured at or below students’ grade level. The charges allege that Babbage and the companies’ executive director falsified students’ progress reports, and intentionally failed to post–test tutored students to determine whether the tutoring had improved their academic proficiency. Kassam directed an employee to configure a computer program to ensure that students’ post–test scores were always higher than their purported pre–test scores. As part of the fraud scheme, the defendants also allegedly engaged in fraudulent billing, including creating inflated invoices based on false attendance records, spreadsheets, and a computer program that contained false tutoring time summaries. When questioned by school districts, Soultanali allegedly lied and said that overbilling had occurred as the result of mistake. Each count of federal program bribery carries a maximum sentence of 10 years in prison and a $250,000 fine, while each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine or an alternate fine totaling twice the gross gain or loss, whichever is greater. Brilliance and Babbage face a maximum penalty of five years’ probation and a $250,000 fine on each count or an alternate fine totaling twice the gross gain or loss, whichever is greater. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent–in–Charge of the Chicago Office of the Federal Bureau of Investigation; and Thomas D. Utz, Jr., Special Agent–in–Charge of the U.S. Department of Education Office of Inspector General. The Chicago Public Schools Office of Inspector General also assisted in the investigation. The government is being represented by Assistant U.S. Attorneys Rachel Cannon and Barry Jonas. The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt. Contact: Randall Samborn, Assistant US Attorney, Public Information Officer Direct: (312) 353-5318, Cell: (312) 613-6700 Top Printable view Last Modified: 04/29/2014 How Do I Find... Student loans, forgiveness College accreditation No Child Left Behind FERPA FAFSA 1098-E Tax Form 2015 Budget Proposal More > Information About... Transforming Teaching Family and Community Engagement Early Learning K-12 Reforms More > Connect Facebook Twitter YouTube Email RSS Google+ More > MISUSED FOIA OIG Fraud Hotline Our mission is to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access. Student Loans Repaying Loans Defaulted Loans Loan Forgiveness Loan Servicers Grants & Programs Apply for Pell Grants Grants Forecast Open Grant Competitions Find Grant Programs by Eligibility Laws & Guidance No Child Left Behind FERPA Civil Rights Data & Research Education Statistics Postsecondary Education Data State Education Data Nation's Report Card What Works Clearinghouse About Us Contact Us ED Offices Jobs News FAQs Budget, Performance Notices FOIAPrivacySecurityInformation qualityInspector GeneralWhitehouse.govUSA.govBenefits.govRegulations.gov
Niles-Based Education Firms and Executives Indicted in Alleged $33 Million Fraud; Bribes Allegedly Paid to Four School Officials. Chicago, IL., April 28, 2014
Published by the Department of Education, Office of Inspector General on 2014-04-28.
Below is a raw (and likely hideous) rendition of the original report.