Morristown Schools: No Foul Play Here in Billing Scam

Morristown High School is among 26 New Jersey schools mentioned in an indictment that accuses two people in an alleged athletics equipment billing scam.

But school district representatives say the district has only had a very small connection to the investigation, and there's no indication of wrongdoing at Morristown schools.

Two former executives of a Pennsylvania company that reconditioned football equipment for many New Jersey school districts and youth sports leagues were indicted by a federal grand jury on fraud charges, federal officials said Wednesday. U.S. Attorney Paul J. Fishman announced the former chief executive officer of Circle Systems, Alan Abeshaus, 79, of Highland Beach, Fla., and former chief financial officer Mitchell Kurlander, 52, of Allentown, Pa., directed "a long-running fraud against schools in New Jersey and elsewhere."

The indictment against Kurlander and Abeshaus alleges they, along with former Circle Systems President David Drill and others, conducted fraudulent business practices including keeping duplicated payments, submitting fake price quotes, buying school officials gifts and then charging back the costs of gifts and donations in their billing.

“The indictment alleges that these corporate executives and the educators that may have participated in this scheme willingly abused their positions of trust by defrauding school districts, students, and taxpayers for personal financial gain. Such egregious conduct is unacceptable,” Steven D. Anderson, special agent in charge of the U.S. Department of Education Office of Inspector General’s  Mid-Atlantic Region, who led the OIG effort together with Special Agent in Charge Brian M. Hickey of the OIG’s Northeastern Region, said in a prepared statement. “I’m proud of the work of our OIG special agents and our partners in law enforcement in holding these individuals accountable for their actions.”

Drill pleaded guilty to fraud charges in December 2008, admitting that his company participated in fraudulent business practices, including overcharging schools for services and not conducting safety tests on reconditioned helmets, and misreporting testing data to raise the company's profits. Drill testified that many school officials were aware of the "scam" and to date more than a dozen school districts around the state have been served with subpoenas related to the investigation. The in his dealings with Circle System, Clark-Garwood Patch reported at the time.

Kurlander and his father-in-law, Abeshaus, were each indicted with one count of mail and wire fraud conspiracy. Kurlander is also charged with nine counts of mail fraud and 12 counts of wire fraud.

Chris Kelly, business administrator for the Morris School District, said the district was first approached by the U.S. District Court in December 2010 because Morristown High School had been a name that had come up when evaluating Circle Systems' records between January 1998 and June 2008. The district was informed at that time that it would be subpoenaed for any records of their dealings with Circle Systems, "and we forwarded all documentation to them related to Circle Systems" in January, she said.

However, Kelly said, "there was no indication whatsoever there was any foul play anywhere in the district" according to Special Agent Geoffrey Wood, with the Department of Education Office of Inspector General at the time of their meeting. "They were very clear that we were an outlier. They came across our name and wanted to reach out to us. They were doing that with a handful of other schools."

Kelly said the district had worked with Circle Systems for several years before Circle had shut down and was absorbed by Schutt, an Illinois-based sports equipment company, which the Morris School District currently works with. Investigators have told the Morris School District that there currently is no investigation against Schutt.

The business administrator said they had not had any issues with Circle Systems except for when, in 2007, the district received the same bill twice.

"We thought they made an honest mistake and double-billed us," she said. "Our internal control with the district caught it. So, we sent them a letter saying they had double billed us and we would deduct the amount from our next bill."

Kurlander, a part owner of the company, was responsible for "overseeing and managing accounts payable, accounts receivable, billing and the submission of bids and quotes to Circle's customers," according to the indictment.

Abeshaus was "the largest single shareholder" of the company, according to the indictment, prior to the sale of Circle System to Schutt Holdings, Inc. in September 2005.

Kurlander and Abeshaus surrendered Wednesday morning to FBI agents and the U.S. Department of Education Office of Inspector General.

Updated with comments from Chris Kelly, business administrator to the Morris School District.