Former White House education adviser under President Barack Obama has pleaded guilty to wire fraud after being charged with stealing $218,000 from a charter school network he founded. Andrew founded Democracy Prep in 2005 joining the Department of Education in 2013, becoming a senior adviser in Obama’s White House’s Office of Educational Technology.
Seth Andrew, 42, stole the $218,000 from a charter school network he founded in order to get a lower interest rate on a multi-million-dollar Manhattan apartment.
Seth Andrew, 42, a founder of Democracy Prep, entered the plea on Friday in Manhattan federal court to wire fraud, admitting that he moved money in 2019 from the charter school network to other bank accounts without authorization.
‘I am truly sorry for what I have done,’ Andrew told Judge John P. Cronan. ‘What I did was wrong and I deeply regret my actions.’
‘And, as I stand before you today, I have tremendous remorse for the impact it has had on the schools, the alumni and my own family.’
Andrew had also been charged last April with money laundering and making a false statement to a bank. He faces up to 20 years in prison at his scheduled April 14 sentencing, but will likely get much less time.
In 2005, Andrew was a founder of Democracy Prep when it started in New York City.
The school, which teaches mostly lower-income people of color, helped raise test scores for economically challenged children in Harlem. It then expanded across the United States.
In spring 2013, Andrew left his role as a superintendent of the school’s network to work in the U.S. Department of Education and as a senior adviser in the Office of Educational Technology at the White House. The job lasted until November 2016.
In court papers, authorities said Andrew stole $218,000 from the schools he helped create and then used the money to obtain the best interest rate his bank offered on a mortgage for a $2 million Manhattan apartment he bought with his spouse.
Prosecutors said that in 2019, two years after severing ties with Democracy Prep, Andrew looted escrow accounts for the network’s schools so he and his wife could buy the $2.37 million apartment located on pricey Central Park West in Manhattan.
The stolen money helped Andrew qualify for a $1.78 million mortgage with a 2.5% interest rate, a half-point reduction and the largest his bank allowed, prosecutors said. Andrew’s wife, CBS News anchor, Lana Zak, was not accused of wrongdoing.
On March 28, 2019, authorities said that Andrew closed two of the three of the school’s escrow accounts that were to be accessed only if the school dissolves.
For the first closed account, received a bank check in the amount of $71,881.23 made payable to Democracy Prep Charter School. The second bank check was for the amount of $70,642.98 and was also made payable to Democracy Prep Harlem.
On the same day, Andrew entered a Manhattan bank and opened a business bank account in the name of Democracy Prep.
To open that account, Andrew communicated to a bank employee that he was a ‘key executive with control of’ the charter school network, which ‘was a lie’. He deposited the $71,881.23 check into the account but not the second.
On April 2, 2019, Andrew used an ATM machine in Baltimore, Maryland, to deposit the second check. Authorities said it appeared that he ‘waited to deposit Check-2 because it was made payable to’ Democracy Prep Harlem and not Democracy Prep Charter School.
Had he tried to deposit the second check when he opened the ‘fraud account’ it would not have been honored by the bank, prosecutors said.
On October 17, 2019, Andrew closed the third escrow account and received a check made payable to Democracy Prep Endurance in the amount of $75,481.10, authorities said.
Four days later, he is said to have deposited that check into an account that he opened at a different bank.
About a month later, Andrew obtained a check for the total of $144,473.29, which constituted the funds allegedly stolen from two of Democracy Prep’s escrow accounts.
He then deposited those funds into the same account where the $75,481.10 was deposited.
Within the same week, Andrew rolled the funds in the account ‘into a certificate of deposit’.
‘That certificate of deposit matured on May 20, 2020, which earned Andrew $2,083.52 in interest,’ the statement reads.
The statement continued to say that he ‘then transferred the funds from the certificate of deposit – including the funds stolen from the escrow accounts – into a bank account held in the name of a particular civic organization that Andrew currently controls, thereby concealing the money’s association’ with Democracy Prep and depositing the stolen money into an account under his ‘complete control’.
Andrew admitted that he tried to make it appear as though the money he took from the schools came from a civic organization he controls as he moved money from the school’s network accounts to his personal accounts and later to the nonprofit’s account from March to October of 2019.
He said he told bank employees he had the authorization to transfer the Democracy Prep funds when he did not.
In a release, U.S. Attorney Damian Williams said ‘Andrew, a former White House adviser, admitted today to devising a scheme to steal from the very same schools he helped create.’
He added: ‘Andrew now faces time in federal prison for abusing his position and robbing those he promised to help.’
Andrew has agreed to pay the entire $218,000 back to the Charter School Network.
Democracy Prep now operates 24 schools with more than 7,000 students in New York, New Jersey, Louisiana, Nevada and Texas.
It has called Andrew’s unauthorized withdrawals “a profound betrayal.”
His sentencing is scheduled for April 14, when he faces up to 20 years in prison, although prosecutors and defense lawyers agreed in a written plea deal that a sentence ranging from 21 to 27 months in prison was appropriate.