Tuesday, July 17, 2012

Charter School’s Former Board President and Former CEO Sentenced for Fraud Scheme

Hugh C. Clark, 65, and Ina Walker, 59, both of Philadelphia, were sentenced for their respective roles in a scheme to defraud the Philadelphia-based New Media Technology Charter School (New Media) and the Wilmington Savings Fund Society. Clark, who pleaded guilty in April to conspiracy, wire fraud, bank fraud, and theft from a federally funded program, was sentenced to 24 months’ imprisonment and five year supervised release. Walker, who pleaded guilty in January, was sentenced to six months’ imprisonment and five years’ supervised release to include 1,00 hours of community service. U.S. District Court Judge Jan E. DuBois also ordered the defendants to pay restitution in the amount of $861,000 and a special assessment of $2,800.

Clark was a founder of New Media in 2004 and served as president of the New Media board of directors. Walker was a founder and served as CEO. Both were forced to resign effective December 31, 2009. The superseding indictment charged Clark and Walker with improperly using approximately $522,000 in New Media funds to (a) pay expenses at a small private school, Lotus Academy; (b) advance Clark and Walker’s personal business ventures, including the Black Olive health food store and the Black Olive restaurant; (c) benefit Tekhen, a web design and Internet access company that Clark owned and controlled; and (d) pay their own personal expenses. At least $309,000 was fraudulently diverted from New Media to Lotus Academy, often disguised as prepaid rent or bogus security deposits. Once the funds were deposited into Lotus Academy bank accounts, the defendants spent the money on the expenses of their private school and on their personal and business ventures.

As a result of the defendants’ improper and fraudulent use of funds, New Media failed to meet its expenses, such as employee payroll checks, monthly employee withholdings and quarterly employer contributions to the Pennsylvania School Employees Retirement System, payments to the school’s athletic coaches and payments to a textbook vendor.

Clark, without notice to or approval from the New Media Board of Directors, entered New Media into a written contact to purchase a school property for the sole purpose of benefitting Lotus Academy. Clark and Walker used $15,000 of New Media’s funds as part of the $45,000 deposit for purchase of the school property. When the sale did not close and the $45,000 deposit was returned to Lotus Academy, Clark and Walker did not return the $15,000 to New Media. Rather, Clark and Walker caused the entire $45,000 to be spent in various ways, including for Lotus Academy expenses (rent and payroll), payments to the Black Olive business ventures, and a cash deposit into defendant Walker’s personal bank account to pay Walker’s personal bills.

Clark and Walker also defrauded Wilmington Savings Fund Society (WSFS) by providing false documents to obtain a $357,500 loan from the bank in 2006. The loan, obtained in Walker’s name, was used to buy a commercial property at 22-24 E. Mount Airy Avenue, which housed the Black Olive restaurant. Walker ultimately defaulted on $339,000 of the debt.

The case was investigated by the United States Department of Education Office of Inspector General and the Federal Bureau of Investigation. The School District of Philadelphia’s Office of Inspector General provided assistance in the investigation. It was prosecuted by Assistant United States Attorney Joan E. Burnes.

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