An indictment unsealed in Federal District Court here described an elaborate, decade-long scheme by Circle System Group of Easton, Pa., to bill for work that was never done, inflate prices, collect twice for the same jobs and submit bogus contract bids. The indictment said the company curried favor with school officials by lavishing gifts like computers, televisions and golf outings on them — and recouped that money by charging the schools for fake expenses.
A partial list of those that the government said participated or were victimized in the fraud, included in the indictment, named 22 New Jersey high schools, the Newark and Jersey City school systems, and Rutgers and Monmouth Universities.
Two Circle executives, Mitchell Kurlander and Alan Abeshaus, were charged with conspiracy, and Mr. Kurlander was charged with 21 counts of wire fraud and mail fraud.
Elements of the case had been previously made public, when another executive, David Drill, and former officials at Long Branch High School and Elizabeth High School pleaded guilty to taking part in the conspiracy. But prosecutors said the new indictment showed for the first time the scope of the fraud, which they said spanned schools in 11 states.
“We’re talking about a very extensive and long-running fraud,” Eric T. Kanefsky, an assistant United States attorney, said as the defendants appeared in court here, where they were released. “Both the defendants reaped millions of dollars.”
The indictment charged that in some cases, school officials were complicit in the fraud, though it did not identify them. Law enforcement officials would not say whether anyone else could be indicted.
Mr. Kurlander’s lawyer, William A. DeStefano, called the charges “only allegations at this point, and frankly, we think they’re terribly overblown, and he will be pleading not guilty.”
Mr. Abeshaus’s lawyer, Kevin H. Marino, said the charge against his client should be dismissed because, under the law, too much time had passed since the events involved took place.
Circle was a major contractor in selling athletic equipment to schools and reconditioning used equipment. Mr. Kurlander, 52, of Allentown, Pa., was the chief financial officer, and his father-in-law, Mr. Abeshaus, 79, who lives in Florida, was described in the indictment as “the de facto chief executive officer.”
The company was bought in 2005 by Schutt Holdings, though prosecutors contend that Mr. Kurlander’s fraudulent acts continued into 2007.
Circle would submit to schools both a bill and an invoice that looked nearly identical to the bill, and schools would often unwittingly pay twice for the same work, the indictment said. The executives are charged with netting $970,000 that way, and with funneling that money into an account that was kept secret from most employees. Prosecutors said most of the money was used by Mr. Abeshaus to pay down a mortgage on the company’s headquarters.
The indictment lists more than $40,000 in gifts allegedly given by Circle to unnamed school officials, with the bulk of that spent on several schools.
It claims almost $14,000 spent on someone at Long Branch High School, including gifts of two computers, a flat-screen television, a video camera, a video-game console, music CDs and other items. More than $7,000 in gifts are shown going to someone at Elizabeth High School, including clothes, tickets to football games, a golf outing and meals.
In November, a former Long Branch athletic director, Charles Ferrara Jr., pleaded guilty in the case, and in February, Robert Firestone, a former Elizabeth official, did the same. Both admitted they had directed Circle to submit falsified bills to their schools to cover the gifts.
The indictment lists more than $6,000 in gifts, including a computer, video equipment and golf equipment given to someone at Barnegat Township High School. Calls to the Barnegat school system, and to several others that turn up repeatedly in the indictment, were not returned on Wednesday.
Circle often contributed cash to fund-raising events for schools and then fraudulently billed to cover those donations, too, prosecutors charged. They also said Circle falsified bids from its competitors, so schools could comply with multiple-bid rules.
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