About That College Admissions Scandal: Use of a Fake Nonprofit Was Critical

On March 12, 2019, I happened to be discussing with a few of my students the extent to which some individuals will go in order to benefit from academic fraud because college admission is a high-stakes issue.

Little did we know, that very day, the story broke about numerous individuals– among them the famous and moneyed– who have been implicated in a massive self-serving, deceptive, fraudulent network of college admission scamming known to date, as CNN reports:

Fifty people — from Hollywood stars and top industry CEOs to college coaches and standardized test administrators — stand accused of participating in a scheme to cheat on admissions tests and admit students to leading institutions as athletes regardless of their abilities, prosecutors revealed Tuesday in a federal indictment. The scandal is being called the largest college admissions scam ever prosecuted.

As the alleged culprits, including actresses Felicity Huffman and Lori Loughlin and fashion designer Mossimo Giannulli, position their defenses, the fallout continues for players across this wide-ranging case, which spans six states and raises seminal questions about how level the postsecondary playing field really is. …

Loughlin, who played Aunt Becky on “Full House,” faces felony conspiracy to commit mail fraud and honest services mail fraud. Her husband, Giannulli has been charged with the same offense.

At the center of the scheme is a fake nonprofit, California-based The Key Worldwide Foundation, operated by William Rick Singer, as CNN continues:

Huffman, who is best known for her role on TV’s “Desperate Housewives,” is accused of paying $15,000 to Singer’s fake charity, the Key Worldwide Foundation, to facilitate cheating for her daughter on the SATs, the complaint says. …

Much of the indictment revolves around William Rick Singer, the founder of a for-profit college counseling and preparation business known as The Key. …

Singer was paid roughly $25 million by parents to help their children get in to schools, the US attorney said.

Singer pleaded guilty on Tuesday to racketeering conspiracy, money laundering conspiracy, conspiracy to defraud the United States and obstruction of justice, prosecutors said.

William Rick Singer

In laundering their dirty money through a nonprofit, Huffman and others were also able to receive a tax write-off for payments related to their scams. Let that sink in.

Below are three tax forms for Singer’s The Key Worldwide:

• The Key Worldwide 2014 990
• The Key Worldwide 2015 990
• The Key Worldwide 2016 990

According to those tax forms, the mission of The Key Worldwide is to (wait for it) *help the underprivileged*:

The Key Worldwide Foundation endeavors to provide education that would normally be unattainable to underprivileged students, not only attainable but realistic. With programs that are designed to assist young people in everyday situations, and educational situations, we hope to open new avenues of educational access to students that would normally have no access to these programs. Our contributions to major athletic university programs, may help to provide placement to students that may not have access under normal channels.

Ahh, the irony!

“…we hope to open new avenues of educational access to students that would normally have no access to these programs…”

Which Singer et al. did.

Our contributions to major athletic university programs, may help to provide placement to students that may not have access under normal channels.

Which Singer et al. also did.

However, in order to set up that fake charity, Singer had to toss in the term, “underprivileged.”

More Key Worldwide background:

The Key Worldwide was registered in California in 2012:

•  The Key Worldwide CA Articles of Incorporation

From that incorporation document, another whopper:

This corporation is a nonprofit Public Benefit Corporation and is not organized for the private gain of any person.

On its incorporation document, Steve Masera is named as The Key’s initial agent.

When I googled, “Steve Masera Key Worldwide,” I found the 23-page The Key Worldwide indictment, filed on March 05, 2019, US District Court, District of Massachusetts. Twelve individuals are listed as defendants; Masura is one. (Singer is not named as a defendant in this indictment, but he is mentioned. Stay tuned.)

The positions of ten of the twelve defendants in this suit hold the following positions:

• Head coach, men’s and women’s tennis, Georgetown University
• Associate athletic director, University of Southern California
• Head coach, women’s soccer, University of Southern California
• Assistant coach, women’s soccer, University of Southern California
• Water polo coach, University of Southern California
• Head coach, men’s soccer, University of California at Los Angeles
• Women’s volleyball coach, Wake Forest University
• Compensated standardized test administrator, College Board and ACT (Houston)
• President of a private tennis academy and camp in Houston
• Compensated standardized test administrator, College Board and ACT (Los Angeles)

Then, there’s Masera and another Key Worldwide associate:

• Defendant STEVEN MASERA (“MASERA”) was a resident of Folsom, California. Until December 2017, MASERA was employed as an accountant and financial officer for the Edge College and Career Network, LLC and the Key Worldwide Foundation in Newport Beach, California.
• Defendant MIKAELA SANFORD (“SANFORD”) was a resident of Sacramento, California. SANFORD was employed in various capacities for the Edge College and Career Network, LLC and the Key Worldwide Foundation in Newport Beach, California.

As the March 05, 2019, indictment details, the Edge, “a for-profit college counseling and preparation business” established in 2007, was also called “The Key” (see this Edge 2011 state filing— Edge “dba The Key” and Masera’s name appears); according to the indictment, for-profit The Edge became nonprofit The Key in 2012.

This Key 2014 state filing lists Masera as chief financial officer; by 2016, Masera is gone and Singer is seemingly running the whole Key Worldwide show.

Though not named as a defendant in the March 05, 2019, indictment, Singer’s role is detailed. From the indictment:

Singer agreed with clients whose children were scheduled to take the SAT or ACT exams as part of the college admissions process to have [Mark] Riddell [a resident of Palmetto, Florida] either take the tests in their children’s place or correct the children’s answers after they had completed the tests.

Parents generally paid Singer between $15,000 and $75,000 per test, typically structuring the payments as purported donations to KWF (Key Worldwide Foundation) that they wired or deposited into one of the KWF charitable accounts.

To facilitate the cheating, Singer counseled parents to seek extended time on the exams, including by having their children purport to have learning disabilities in order to obtain medical documentation that ACT, Inc. and the College Board typically required before granting students extended time.

Singer used the purported charitable donations from parents, at least in part, to bribe [one defendant], who administered the SAT and ACT exams at the private school in Los Angeles, California where he worked, and [another defendant], who administered the exams at the public high school in Houston, Texas, where she worked.

At Singer’s direction, MASERA sent the bribe payments to [one defendant]– typically $10,000 per student– from one of the KWF charitable accounts.

There’s much more to the above indictment. Though this particular indictment does not name Singer, Loughlin, or Huffman as defendants, the document’s 23 pages clearly detail how they and others perpetrated this fraud and benefited from it.

(Note: Here is a list of all individuals charged as of March 12, 2019, including case status as well as links to all charging documents.)

Exploiting a nonprofit as a front to conceal the fraud was an indispensable component of the scam. Singer’s nonprofit allows for donor anonymity, payments to anyone associated with college acceptance could smoothly be explained as assisting the underprivileged.

There is also the twisted privilege of claiming as a “donation” money spent to exploit.

Of course, as the fraud grows, the difficulty in concealing it increases.

Then come the indictments.

Good.

______________________________________________________________________________

Interested in scheduling Mercedes Schneider for a speaking engagement? Click here.

.

Want to read about the history of charter schools and vouchers?

School Choice: The End of Public Education? 

  (Click image to enlarge)

Schneider is a southern Louisiana native, career teacher, trained researcher, and author of two other books: A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education and Common Core Dilemma: Who Owns Our Schools?. You should buy these books. They’re great. No, really.

Don’t care to buy from Amazon? Purchase my books from Powell’s City of Books instead.