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Feds charge Pa. cyber school founder with 11 counts of fraud, conspiracy

Statement from PA Cyber CEO Michael J. Conti:

“Although PA Cyber's former CEO has been indicted and his case awaits trial, our school, as well as our management foundation, has been vindicated. Even though the Department of Justice said from the outset that PA Cyber itself was not a target of the investigation, we conducted an internal evaluation and restructuring of our senior administrators to assure our school was performing in a manner that maintains its strong reputation among state education officials, the general public and our students and their families.

“Since the investigation began, PA Cyber completely severed its ties to its former administrator. The school itself and no one currently employed by the school is implicated and at no time did the alleged criminal activity affect the high-quality, day-to-day instruction PA Cyber students received then or are now provided.”

Statement from National Network of Digital Schools CEO Mark Elder:

“We are pleased that we can finally close this chapter, focus on our mission without encumbrances, and redouble our commitment to the clients and students who rely on our services.

“If the events of the last year have taught us anything, it's that we are a hardworking and dedicated team committed to excellence. We took the opportunity to re-evaluate and restructure our organization so that we could become more efficient and effective, as well as more open and transparent.”

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Friday, Aug. 23, 2013, 8:15 a.m.
 

They called Nick Trombetta “coach” when he led high school wrestling and football teams in Beaver County and East Liverpool, Ohio.

They called him a pioneer in education and miracle worker in Midland, where his empire included the state's largest cyber school, a charter school, a performing arts center and a nonprofit education management foundation with 400 clients.

“He brought employment to a dying steel town and to a region that needed it,” said Midland Council President Paul Anthony. “We can't say thanks enough.”

On Friday, U.S. Attorney David Hickton called Trombetta a thief, charging the award-winning educator with 11 counts of mail fraud, filing false tax returns and conspiracy. A grand jury indicted Trombetta, 58, of East Liverpool under seal Wednesday, and he was arraigned Thursday. Authorities charged his accountant, Neal Prence of Koppel, with preparing Trombetta's false tax returns.

Trombetta declined to comment and referred questions to his attorney, who did not return calls. Hickton's office would not say why it allowed Trombetta and Prence to appear in court while keeping the indictment sealed.

Prence's attorney, Stan Levenson, said he and his client knew the indictment was coming.

“We're anxious to see the government's evidence,” he said.

Released on bond, the men have a hearing on Wednesday in U.S. District Court, Downtown.

Hickton outlined a complicated scheme that he said Trombetta designed to skim nearly $1 million for himself, often from work done by employees at Pennsylvania Cyber Charter School and the related National Network of Digital Schools Management Foundation, or NNDS. He said the scheme attempted to hide $8 million in cash and property from the Internal Revenue Service.

“He is charged with creating a series of connected for-profit and not-for-profit entities to siphon taxpayer funds out of PA Cyber and to avoid federal income tax liabilities,” Hickton said. “As the founder and CEO of PA Cyber, Trombetta was the custodian of the public trust, receiving public funds.”

He said Trombetta conceived Avanti Management Group in 2008 and installed straw owners to use the company as a retirement account while it made money from NNDS. As PA Cyber and NNDS did work for online school programs in Ohio and New Mexico, money flowed to a shell company, one2one, which “operated as Trombetta's checking account for his day-to-day expenses,” Hickton said.

Through Avanti, Trombetta collected a $50-per-computer kickback on 11,000 laptops that PA Cyber bought from an unnamed company, the grand jury said.

The grand jury said PA Cyber and NNDS employees doing work for Buckeye Online School for Success, or BOSS, in Ohio and Wingspan New Mexico did not know Trombetta diverted the money to himself through one2one, which he operated with his sister, Elaine Neill.

Authorities charged Neill, 56, of Center on Aug. 2 with filing a false tax return. She's expected to plead guilty Oct. 8.

“When individuals enrich themselves with (public) money rather than act as stewards of the education funds entrusted to them, our communities and the children we are obligated to educate are the true victims,” said FBI Special Agent in Charge Gary Douglas Perdue.

Names and initials

The charges cap an investigation that became public in July 2012 when agents searched Trombetta's office at the Pennsylvania Cyber Charter School he founded in 2000. They served warrants at NNDS in Beaver, which he founded in 2005; a property in Calcutta, Ohio, that housed offices of two foundation contractors led by former PA Cyber and foundation executive Brett Geibel; and the Koppel office of Prence Accountants, whose address appeared on corporation papers for the contractors and other entities.

Geibel, 43, of Leechburg was not charged. His attorney, Efrem Grail, declined to comment.

The 41-page indictment mentions Geibel and three fellow owners of Avanti by initials only.

“The investigation is continuing,” Hickton said when asked about Geibel's role. “I'm not prepared to talk about anyone else.”

Trombetta's sister is executive director of Prima Early Learning Center in Midland, which Geibel founded in 2010. She claimed income due to a relative and inappropriate business deductions for one2one, prosecutors allege.

The indictment said Trombetta used someone with the initials “MD” to divert money meant for PA Cyber and NNDS to one2one through Butler County-based Martlin Management. Martin Dorsch, a high school friend of Trombetta's, is listed as president of Martlin in state records. He did not return calls for comment.

Tax and property records show huge sums of money moved among the schools, the foundation, Geibel's companies and Trombetta. Much of it came from taxpayers who fund PA Cyber and Lincoln Park Performing Arts Charter School through payments by the state and the school districts in which charter students live.

“To keep the spigot flowing with public money, (Trombetta) had to remain the CEO of PA Cyber,” Hickton said.

Michael J. Conti, CEO of PA Cyber, said the indictment vindicated the school and NNDS.

Hometown boy

Trombetta grew up in Aliquippa and graduated from Quigley Catholic High School in 1973. With a bachelor's degree from Slippery Rock University, he taught and coached wrestling at Quigley before moving to East Liverpool for a decade.

He returned home in 1992 to a different Aliquippa, where the steel industry collapse in the 1980s decimated enrollment at Beaver County schools. After three years as a principal in Aliquippa, he became superintendent of Midland schools, which in 1986 closed its high school and bused students to Ohio because surrounding schools wouldn't accept them.

When the state passed laws to allow charter schools, Trombetta persuaded the Midland school board to sponsor one that would allow kids there and across the state to stay home and learn online.

“All we wanted to do was help some of our kids locally,” Trombetta said in 2000, answering instant criticism that his school would take tax money from traditional districts.

Trombetta brought Midland leaders on board at PA Cyber and its spin-offs while he kept a dual role as head of the cyber school and Midland superintendent until 2007.

State law requires public schools to pay for each student enrolled in charters, up to about $15,000 per student. Because cyber programs have less overhead, PA Cyber quickly found itself flush with cash.

Trombetta found use for it. He founded NNDS and within weeks had PA Cyber paying it millions to manage the school. PA Cyber gave NNDS its copyrighted Lincoln Curriculum, which NNDS licensed back to the charter and hundreds of other schools.

Trombetta used money from the cyber school, Midland schools, Beaver County and the state to build the $23.5 million Lincoln Park Performing Arts Center, where he opened the second charter school in 2007.

The spending and intermingling of board members and staff prompted a state grand jury investigation and warnings from the Department of Education that ended with no charges or penalties.

The empire spread when Geibel, the technology director at PA Cyber and senior vice president at NNDS, created Avanti and a subsidiary, Palatine Development LLC, records show. While NNDS managed PA Cyber, Avanti managed NNDS.

Property passed among the groups.

No more miracles

People referred to Trombetta's empire as the “Midland Miracle.” It brought new buildings and jobs for nearly a thousand people.

“You look around and everything here is positive now,” Anthony said.

Sheryl Monaco, who owns Midland Auto Sales repair shop with husband Anthony, depends on cyber school and Lincoln Park employees for business.

“They say when a door closes, a window opens,” Monaco said. “My business wouldn't be here if Dr. Trombetta didn't bring this to town.”

Retired county Commissioner Dan Donatella, 76, formerly of Industry, said the indictment “stunned and saddened” him. Donatella worked with Trombetta and former Gov. Ed Rendell to establish Lincoln Park Performing Arts Charter School.

“When something like this happens you have to wonder why,” Donatella said. “He had a brilliant career, a brilliant mind, a Ph.D., celebrity. What more could an individual want?”

The University of Pittsburgh, from which Trombetta received a doctorate in education, honored him in March 2012 for his achievements. Three months later he left PA Cyber, which by then had more than 11,000 students, eight offices and a budget of more than $100 million.

When agents searched PA Cyber, Trombetta's hand-picked successor Conti, a former Midland school director who worked with Avanti, said the school was not a target. Hickton reiterated that.

Trombetta went to work at Kuhn's Quality Foods as its personnel director. PA Cyber fired several leaders and continues to flourish.

David Conti is a Trib Total Media staff writer. Reach him at 412-388-5802 or dconti@tribweb.com. Staff writers Bill Vidonic, Bob Bauder and Brian Bowling contributed to this report.

 

 

 
 


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