Former Controller of the College of New Rochelle Pleads Guilty to Securities fraud and Failing to Pay Over More Than $20 Million in Payroll Taxes

eHezi Finance, Governance, Law, People, Westchester County, NY 1 Comment

Geoffrey S. Berman is the United States Attorney for the Southern District of New York. As U.S. Attorney, Mr. Berman oversees the investigation and litigation of all criminal and civil cases brought on behalf of the United States in the Southern District of New York. He supervises an office of about 220 Assistant U.S. Attorneys, who handle a high volume of important cases, including domestic and international terrorism, white collar crime, securities and commodities fraud, public corruption, cybercrime, narcotics and arms trafficking, gang violence, organized crime, and civil rights violations.

WHITE PLAINS, NY — March 28, 2019 — Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector-in-Charge of the New York Field Division of the United States Postal Inspection Service (“USPIS”), and Jonathan D. Larsen, the Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that KEITH BORGE, the former controller of the College of New Rochelle (“CNR”), pled guilty today before U.S. Magistrate Judge Judith C. McCarthy to one count of failing to pay over federal payroll taxes and one count of securities fraud in White Plains federal court.  The case has been assigned to United States District Judge Vincent L. Briccetti.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “By covering up CNR’s true financial condition, Keith Borge deprived CNR’s leaders of the opportunity to address the college’s financial problems for two years.  Borge defrauded CNR’s bondholders and left CNR with a $20 million tax liability.  He committed federal crimes for which he will now pay the price.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “Investors rely on accurate financial reporting when deciding on where to invest their hard-earned money.  When executives create and distribute inaccurate financial statements, investors are unknowingly steered into making poor investment choices.  The United States Postal Inspection Service is committed to protecting American investors and bringing those who manipulate the financial system to justice.”

IRS-CI Acting Special Agent in Charge Jonathan D. Larsen said:  “As the tax filing deadline looms, it’s important for the American taxpayer to have confidence that when they are paying their taxes, their neighbor and co-workers are doing the same. And for those individuals who are considering evading their tax duty, they should consider the consequences which include potential imprisonment and civil penalties.”

According to the allegations contained in the Information and other publicly filed documents:

From in or about 2011 to in or about August 2014, BORGE was the Vice President for Financial Affairs at CNR, a private college with its main campus in New Rochelle, New York.  From in or about August 2014 to in or about June 2016, BORGE was CNR’s controller.  CNR had approximately 500 to 900 paid employees, depending on the time of year.  CNR withheld both federal income tax and its employees’ contributions to Social Security and Medicare from its employees’ pay.  Federal law required that the college pay over those withheld taxes and contributions within one week of the day it paid its employees.  During that one-week period, CNR held those withheld taxes and contributions in trust for the federal government.

As controller, BORGE managed CNR’s financial affairs and was responsible for paying over withheld payroll taxes and contributions.  From the third quarter of 2014 through the second quarter of 2016, BORGE failed to do so.  By the end of the second quarter of 2016, BORGE had failed to pay over more than $20 million in combined federal and state payroll taxes and contributions.

BORGE also made false entries in CNR’s books and records to conceal the college’s actual financial condition.  As a result, CNR’s financial statements for its fiscal year ending June 30, 2015, reported the college had net assets of $25 million, which was overstated by at least $24 million.  Among other things, BORGE caused the financial statements to understate CNR’s liability for federal and state payroll taxes by approximately $11 million; to overstate accounts receivable by approximately $9.2 million by recognizing pledged donations twice; to understate accounts payable by at least $1.5 million by failing to enter unpaid vendor invoices into CNR’s books and records; and to overstate investment assets by at least $2.2 million by recognizing assets that did not exist and by failing to enter his withdrawals from CNR’s investment accounts into the college’s books and records.

BORGE caused CNR’s inaccurate financial statements for the fiscal year ending June 30, 2015, to be released to the public by, among other things, providing the financial statements to the Municipal Securities Rulemaking Board for publication on the Electronic Municipal Market Access web site, where they could be reviewed by the investing public.  As a result, investors in bonds issued by the college through the City of New Rochelle Industrial Development Agency were defrauded by BORGE’s materially false and misleading statements in CNR’s financial statements.

*                *                *

BORGE, 62, of Valley Cottage, New York, is charged with one count of failing to pay over payroll taxes, which carries a maximum sentence of five years in prison, and one count of securities fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentence will be determined by the court.  BORGE is scheduled to be sentenced July 11, 2019, before Judge Briccetti.

In a related case, the U.S. Securities and Exchange Commission brought a civil action today against BORGE in U.S. District Court in White Plains.”

Mr. Berman praised the outstanding investigative work of the Postal Inspection Service and IRS-CI.  Mr. Berman also thanked the SEC for their investigative work.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys James McMahon and Daniel Loss are in charge of the prosecution.

SOURCE: Office of the United States Attorney for the Southern District of New York

*                *                *

 

eHeziFormer Controller of the College of New Rochelle Pleads Guilty to Securities fraud and Failing to Pay Over More Than $20 Million in Payroll Taxes

Comments 1

Leave a Reply

This comment will be displayed anonymously. Your name and email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.