Scams of Immense Proportions

Almost a year ago, the following brief item, written by Daniel Wilco, appeared in the Atlanta Journal-Constitution:

“Two men have been indicted on charges they defrauded Delta and Northwest Airlines of $22 million between 2004 and 2013.

“Michael Yedor and Paul Anderson have been charged with conspiracy to commit mail fraud and 96 counts of mail fraud.

“Anderson, 57, of Apple Valley, Minn., had worked for Northwest since 1979. When Delta and Northwest merged in 2009, Anderson became an employee of Delta.

“According to the indictment, Anderson and Yedor, 62, of Los Angeles, engaged in a scheme to defraud Northwest and, later, Delta, by submitting false invoices on behalf of a company that Yedor purportedly owned, named Airborne Voice and Data.

“The invoices sought payment from Delta and Northwest for services provided by Airborne Voice and Data that the pair knew the company had never provided.

“Yedor sent the fraudulent invoices to Anderson, who approved them, causing the airlines to pay about $22 million to Airborne over a nine-year span. In exchange for approving the invoices, Anderson received a portion of the proceeds.

“The two were indicted on June 10, with the indictment unsealed on June 21, only after Yedor was arrested after authorities located him and his yacht.

“’The longevity and scope of the scheme to defraud Delta is simply astonishing,’ said United States Attorney Sally Quillian Yates.”

My favorite part of this story is the next-to-last paragraph—the fact that the two were indicted “only after Yedor was arrested after authorities located him and his yacht.”

Yes, perhaps the yacht was a clue that its owner might have some undisclosed source of considerable extra income.

At the time that it was published, the story reminded me of a section of Blind Date, a novel by one of my favorite authors, Jerzy Kosinski. The main character of the novel, George Levanter, is an émigré from Poland, and the passage recounts how he gradually created a “paper existence” for the fictional bureaucrats who could then approve all of the paperwork needed for him to escape the Iron Curtain.

But now the story seems also more directly analogous to much of what is occurring with the privatization of public education.

Consider the following opening to an article by Catherine Candisky and Jim Siegel to the Columbus Dispatch:

“A North Side charter school expects to spend more of the tax dollars it receives this school year on rent than on teachers and staff.

“Imagine Columbus Primary Academy projects building-lease payments of $700,000, making rent the school’s top expense, eating up more than half its annual state revenue, according to a school financial report. The school expects to pay $614,000 on salaries and benefits this year.

“Similar arrangements are in place for the other five Imagine Schools in Franklin County.

“Who is charging the charter schools such high rent? A company called SchoolHouse Finance—which is a subsidiary of Imagine.”

The authors go on to clarify that the rents being charged–and the resulting profits being generated—are several times higher than what the market demands. To put it more plainly, this practice is not simply an example of a justifiable business expense that has the appearance of a scam.

And lest you think that this story is an anomaly, over the last year, the Toledo Blade and the Cincinnati Inquirer have run similar stories about charter school chains operating in their metro regions.

In the higher education, I would suggest that equally dubious analogies can be found in the discrepancy between the “salaries” of upper administrators and the total taxable compensation that they receive, as well as in the cozy arrangements between corporations and administrators that create conflicts of interest. Recall the post that I recently did on the career shift announced by Ohio State University’s CFO Geoff Chatas: https://academeblog.org/2015/04/26/higher-eds-version-of-the-revolving-door/.

I will have more to say about Chatas, as well as about Kosinski and Ohio’s charter schools, in future posts.

The complete article by Catherine Candisky and Jim Siegel is available at: http://www.dispatch.com/content/stories/local/2014/10/12/charters-lease-deals-scrutinized.html.

 

 

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