Seth Andrew gets a year and a day in jail over prep school fraud

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Seth Andrew gets a year and a day in jail over prep school fraud

Thu, 07/28/2022 - 6:09pm -- tim

Seth Andrew gets a year in jail over scheme to steal from charter schools he founded

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Seth Andrew was arrested in April 2021 on three counts of federal financial fraud. He was then removed from leadership roles in Democracy Builders Fund, which then owned the former Marlboro College campus, and Degrees of Freedom, the program that was supposed to develop on the site. Jeff Potter/Commons file photo

Vermont Business Magazine Damian Williams, the United States Attorney for the Southern District of New York, announced in a press release dated today that SETH ANDREW was sentenced to 366 days in prison in connection with his execution of a scheme to defraud Democracy Prep Public Schools (“DPPS”), a charter school network that he founded, of more than $218,000.  United States District Judge John P. Cronan imposed today’s sentence.

An educational entrepreneur, Andrew was the public face of the nonprofit that purchased the Marlboro College campus in 2020. Democracy Builders acquired the Marlboro College campus after the assets of the liberal arts college were absorbed into Emerson College in Boston.

After more than a year of "messy" negotiations and legal haggling, the campus was acquired last September by the operators of the Marlboro Music Festival.

U.S. Attorney Damian Williams said: “Seth Andrew was sentenced today for stealing from those who once trusted him.  Andrew committed this crime to attempt to punish non-profit charter schools because they declined his offer to return as their leader.  Thankfully, the victim of Andrew’s crime was resilient, and its important work continues.  Today’s sentence sends a message that those who engage in fraud schemes and steal from others will face appropriate consequences for their conduct.”      


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According to previous filings in this case:

In 2005, SETH ANDREW helped to found Democracy Prep Public Schools, a series of public charter schools then based in New York City.  In the Spring of 2013, ANDREW left DPPS and accepted a job in the United States Department of Education and, thereafter, as a senior advisor in the Office of Educational Technology at the White House. In November 2016, ANDREW left his role at the White House.  Shortly thereafter, in January 2017, ANDREW officially severed his relationship with DPPS.

Under New York state regulations, DPPS’s New York-based charter schools must maintain an “escrow account” that may be accessed only if the school dissolves.  Three such escrow accounts, for three New York City-based-DPPS schools, were opened by ANDREW and other DPPS employees, at  a bank (“Bank-1”) in 2009, 2011 and 2013, respectively (“Escrow Account-1,” “Escrow Account-2,” and “Escrow Account-3”, collectively, the “Escrow Accounts”).  ANDREW was a signatory and had access to the funds in the Escrow Accounts.  However, pursuant to the charter agreement, the funds in the Escrow Accounts were reserved in case the schools dissolved, and the funds could not be moved by ANDREW, or anyone, without proper authorization.

In early 2019, apparently frustrated with decisions made by DPPS, and his inability to exercise control over the organization, ANDREW sought to rejoin DPPS.  On March 10, 2019, ANDREW sent an email to several members of DPPS, including its Chairman, offering to return as “President,” in exchange for “$25k/month as [a] salaried employee and basic frugal expenses,” plus a $250,000 bonus if he met deliverables ANDREW outlined.  ANDREW further stated that “every single day that goes by, this situation becomes exponentially more difficult and the ability to pull out of a nosedive becomes harder. So after 24 hours, my monthly salary expectation will go up every day that we’re not under a signed contract.” 

DPPS declined ANDREW’s offer.  Eighteen days later, on March 28, 2019, ANDREW entered a Bank-1 branch in New York City and closed both Escrow Account-1 and Escrow Account-2.  Bank-1 provided ANDREW a bank check in the amount of $71,881.23 made payable to “Democracy Prep Charter School” (“Check-1”) and a second bank check in the amount of $70,642.98 made payable to “Democracy Prep Harlem Charter” (“Check-2”). 

The same day that ANDREW closed Escrow Account-1 and Escrow Account-2, ANDREW entered a Manhattan branch of a different FDIC-insured bank (“Bank-2”) and opened a business bank account in the name of “Democracy Prep Charter School” (“Fraud Account‑1”).  To open that account, ANDREW misrepresented to a Bank-2 employee that he was a “Key Executive with Control of” DPPS and supported that misrepresentation by sending emails sent to the Bank-2 employee from a DPPS email account.  ANDREW then deposited Check-1 into Fraud Account-1. Five days later, on April 2, 2019, ANDREW used an ATM machine in Baltimore, Maryland to deposit Check-2 into Fraud Account‑1. 

On October 17, 2019, ANDREW closed out Escrow Account-3 and received a check (“Check-3”) made payable to “Democracy Prep Endurance” in the amount of $75,481.10.  On October 21, 2019, ANDREW deposited Check-3 into an account that he opened at a third bank (“Fraud Account-2”). 

Approximately one month later, ANDREW obtained a check from Bank-2 for $144,473.29, which constituted the funds stolen from Escrow Account-1 and Escrow Account-2.  ANDREW ultimately deposited those funds into Fraud Account-2, combing all of the stolen funds, then worth approximately $219,954.  Five days later, ANDREW rolled the stolen funds in Fraud Account-2 into a certificate of deposit.  That certificate of deposit matured on May 20, 2020, which earned ANDREW $2,083.52 in interest.  ANDREW 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 Democracy Builders, another nonprofit that ANDREW then-controlled, thereby concealing the money’s association with DPPS, and depositing the stolen money into an account under ANDREW’s complete control.  The next day, ANDREW sent a wire for $225,000, apparently comprised primarily of funds from the Escrow Accounts, for a down payment on a significant purchase of property for Democracy Builders.

In total, DPPS lost $218,005 as a result of Andrew’s actions.

ANDREW, 43, previously pled guilty to one count of wire fraud on January 14, 2022, before Judge Cronan.  In addition to this prison sentence, ANDREW was sentenced to 3 years of supervised release.  Prior to today’s sentencing Andrew paid $218,005 in restitution to DPPS, and $22,537 in forfeiture.

Mr. Williams praised the outstanding investigative work of the FBI.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Ryan B. Finkel is in charge of the prosecution.