U.S. District Court, Southern District of New York
SDNY us atty

Co-founder of charter school network charged with laundering school funds to reduce interest rate on mortgage

April 27, 2021
Seth Andrew, cofounder of Democracy Prep Public School, and a former adviser in the Obama administration, is charged with wire fraud, money laundering and making false statements.

A man who helped found a network of charter schools allegedly stole hundreds of thousands of dollars from the schools and tried to launder the funds in order to get a lower interest rate on a mortgage for a New York City apartment, federal prosecutors say.

CNN reports that Seth Andrew, who also was a White House senior adviser in the Obama administration, faces charges of wire fraud, money laundering, and making false statements to a bank.

"Seth Andrew abused his position as a founder of a charter school network to steal from the very same schools he helped create," says Manhattan U.S. Attorney Audrey Strauss. "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."

In 2005 Andrew helped create Democracy Prep Public Schools, a network of charter schools based in New York City that is identified in the criminal complaint only as  “School Network-1.”

Andrew left the network in 2013 for a job at the U.S. Department of Education, and later became a senior adviser in the Office of Educational Technology at the White House, while he continued to be paid by the charter school network. Andrew left his role in the White House in November 2016 and severed ties with the school network in January 2017.

Federal prosecutors allege that between March and August of 2019, Andrew used his former association with the charter network to steal $218,005 of a school's reserve money by using his email address affiliated with the schools to communicate with a bank employee and make it appear that he was still associated with the school, which he was not.

By April 2019, using the money he stole from two charter schools, Andrew deposited about $1,007,716 in a bank, which made him eligible to receive a 0.5% interest rate deduction – the largest deduction a customer could receive as part of a bank promotion, prosecutors allege.

"Without the $142,524 deposited stolen funds, Andrew would have been eligible for only a 0.375% interest rate deduction," the U.S. Attorney's office said in a news release. "On August 21, 2019, Andrew purchased a residential property in New York, New York, for approximately $2,368,000."

To carry out the purchase, Andrew and his spouse obtained a mortgage in the amount of $1,776,000 with an interest rate of 2.5% –  taking full advantage of the promotion the bank was offering, the U.S. Attorney's Office asserted.

CEO Natasha Trivers said in an email to staff and students that Democracy Prep alerted the appropriate authorities once it learned about the unauthorized withdrawals.

"Seth left our network in 2013," Trivers said. "His alleged actions are a profound betrayal of all that we stand for..." Trivers' email said. "To be clear, at no time did the alleged crimes pose any risk to our students, staff or operations in any way."

About the Author

Mike Kennedy | Senior Editor

Mike Kennedy, senior editor, has written for AS&U on a wide range of educational issues since 1999.

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