College Coaches, Celebrities, and Others indicted in Admissions Bribery Case

Funny sports nerd flexing fake muscle drawn on the chalkboard

Mail fraud and honest services mail fraud, in violation of Title 18, United
States Code, Section 1349. Tax Fraud coming soon?

College coaches, celebrities, and others have been charged in a sweeping admissions bribery case unsealed in federal court.  The racketeering conspiracy charges unveiled Tuesday were brought against the coaches at several schools. 

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In all, 50 defendants are targeted by the U.S. Justice Department in an alleged long-running scheme of parents cheating to get their kids into college.

Authorities say the coaches accepted bribes in exchange for admitting students as athletes, regardless of their ability.

Prosecutors say parents paid an admissions consultant $25 million from 2011 through February 2019 to bribe coaches and administrators to label their children as recruited athletes to boost their chances of getting into schools.

Prosecutors allege that fake athletic profiles were also made to make students look like strong high school athletes when they actually weren’t.

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Authorities say the consulting company also bribed administrators of college entrance exams to allow a Florida man to take the tests on behalf of students or replace their answers with his.

How? Whistleblower

The tip­ster who led fed­eral au­thor­i­ties to the big­gest col­lege-ad­mis­sions scam they have ever pros­e­cuted was Mor­rie To­bin, a Los An­ge­les fi­nan­cial ex­ec­u­tive who was be­ing in­ves­ti­gated in a se­cu­ri­ties fraud case, ac­cord­ing to a per­son fa­mil­iar with the in­ves­ti­ga­tion.

Mr. To­bin was be­ing ques­tioned in an al­leged pump-and-dump in­vest­ment scheme—in which peo­ple con­spire to in­flate the price of a stock so they can sell it at a profit—when he of­fered a tip to fed­eral au­thor­i­ties in an ef­fort to ob­tain le­niency, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter.

Mr. To­bin, who at­tended Yale Uni­ver­sity, told in­ves­ti­ga­tors that the head women’s soc­cer coach at Yale had sought a bribe in re­turn for get­ting his daugh­ter into the Ivy League school, a per­son fa­mil­iar with the in­ves­ti­ga­tion said.

Tax Consequences

Tax fraud was a pillar of the government’s case, yet none of the parents have been charged with tax crimes so far. But as long as the statute of limitations hasn’t expired, the IRS could decide to audit the parents and send them deficiency notices.

One family cited in court documents filed tax returns that falsely reported charitable gifts in 2016 of more than $1 million. That sum included a contribution to Key Worldwide Foundation, according to court documents.

If the IRS finds the parents claimed deductions on fake charitable contributions to an illegitimate charity, the agency could impose large penalties under tax code Section 6601 and Section 6662, which cover interest payments and penalties for underpayment of taxes. References to an IRS audit of the charity was a key component of the sweeping federal investigation, which has sparked massive fallout over questions of privilege and access in higher education.

Under Section 6662, the IRS can add to the tax an amount equal to 20% of the portion of the underpayment.

The IRS could also impose penalties for civil tax fraud.  The civil tax fraud penalty for that is equal to 75% of your underpayment in taxes.

The court documents may also lay the ground work for the IRS to pursue criminal tax charges, since some of the recorded conversations seem to indicate parents knew their contributions didn’t qualify for a charitable deduction.

Closing

Eventually it all unravels – remember that according to the ACFE most (more than 40%) fraud cases are uncovered by a tip.

These parents couldn’t possibly been thinking they were helping their children – Right? They were stroking their own egos! The Fraud Pentagon in play again!

FBI Complaint

Click here!

 

Jonathan T. Marks, CPA, CFE

Attribution:
ACFE
Associated Press
WSJ

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