Former College Of New Rochelle Controller Pleads Guilty To Fraud

NEW ROCHELLE, NY — The former controller of the College of New Rochelle pleaded guilty to securities fraud and failing to pay more than $20 million in payroll taxes. Geoffrey S. Berman, the U.S. Attorney for the Southern District of New York, said Thursday that Keith Borge, 62, of Valley Cottage, was 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.

Berman said Borge defrauded the college's bondholders and left it with a $20 million tax liability.

"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," he said. "He committed federal crimes for which he will now pay the price."

According to the allegations in publicly filed documents, from 2011 to about August 2014, Borge was the vice president for financial affairs at the College of New Rochelle. He was the controller from August 2014 to around June 2016.

The college had about 500 to 900 paid employees, depending on the time of year.

The college withheld both federal income tax and Social Security and Medicare contributions from its employees' pay, and was required by law to pay over those withheld funds within one week of the day it paid the employees.

Borge, as controller, was responsible for making those payments, but, from the third quarter of 2014 through the second quarter of 2016, he did not do so.

By the end of the second quarter, he had failed to pay more than $20 million in combined federal and state payroll taxes and contributions.

Authorities said Borge also made false entries in CNR's books and records to conceal the college's actual financial condition.

As a result, the college's financial statements for its fiscal year ending June 30, 2015, reported assets of $25 million — which was overstated by at least $24 million.

He had caused the financial statements to understate the college's liability for federal and state payroll taxes by about $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 is scheduled to be sentenced July 11.

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

The College of New Rochelle announced in early March that it would be shutting its doors after the summer 2019 semester and reached an agreement with Mercy College to give its students a transition to continue their education.

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