Affidavit shows longtime associates went to feds with info on PA Cyber founder Trombetta
By Brian Bowling and David Conti
Published: Thursday, Sept. 19, 2013, 11:15 a.m.
Two longtime associates of cyber-school pioneer Nick Trombetta went to federal authorities nearly two years ago to discuss bags of money passed in a Pizza Hut parking lot and board members controlled by a leader known in text messages as “The Man,” according to unsealed federal documents.
An affidavit the FBI and IRS used to obtain search warrants in July 2012 describes Trombetta's scheme to skim taxpayer money from the Pennsylvania Cyber Charter School and related entities, partly through the eyes of two of the four people he installed as shell owners of a management company.
“Trombetta is able to have this control, in part, because individuals in Midland, including family members and friends of other (PA Cyber) board members, rely on the jobs Trombetta has created in the Midland area,” agents wrote in the affidavit, which a magistrate unsealed Thursday at the government's request.
In addition to allegations leveled last month by a federal grand jury that indicted Trombetta and his accountant, the affidavit describes land and computer deals authorities say Trombetta orchestrated to extract kickbacks. It implicates Midland schools Superintendent Sean D. Tanner in an income tax scheme. Tanner has not been charged.
When Trombetta, accountant Neal Prence, the shell owners and Tanner gathered at an office in February 2012, Tanner called it the “annual tax evasion meeting,” according to the affidavit, which said shell owners Brett Geibel and Jane Price were wearing wires.
Tanner did not return messages left at Midland schools or his home. Midland school board members did not return calls.
Trombetta, 58, of East Liverpool, Ohio, pleaded not guilty on Aug. 28 to an 11-count indictment that claims he used PA Cyber and related entities to grab at least $1 million in tax dollars paid to the school.
Prence, 58, of Koppel pleaded not guilty to helping Trombetta with the tax conspiracy at the heart of the case. His attorney, Stanton Levenson, said federal prosecutors offered his client a plea deal.
“He said he hasn't done anything wrong, so he turned them down,” Levenson said. “So we're getting ready to go to trial.”
The affidavit shows Prence taking an active role in the conspiracy. At one point, he ordered Geibel to stop filing “stupid paperwork” after Geibel made a promissory note for the $50,000 Trombetta took from Avanti to pay for his daughter's graduation party.
Prence texted Geibel about backdating a $90,000 check “The Man” wanted to send to his sister's business so that it would look like Avanti wrote the check the previous year. Geibel told investigators that whenever Prence referred to “The Man,” he was talking about Trombetta.
Records identify the associates who went to authorities in December 2011 as Geibel and Price, former PA Cyber employees. Their attorneys declined comment, citing an ongoing investigation.
Prosecutors gave Geibel and Price immunity from prosecution in return for their cooperation in the investigation.
Eight months later, agents raided the PA Cyber offices of Trombetta and then-administrative assistant Brenda Smith, Prence's office, homes of Trombetta's sister and mother, and the Ohio office of Avanti Management Group, which authorities say Trombetta created to funnel money to himself.
‘Cash in bags'
U.S. Attorney David Hickton last month said Trombetta conceived Avanti and installed straw owners in 2008 to use it as a retirement account while it made money from PA Cyber's management company, the National Network of Digital Schools (NNDS). State corporation paperwork shows Geibel, 43, of Leechburg founded Avanti.
Trombetta had an agreement with the Avanti owners that he would assume control of the firm and they would get $500,000 each in return for reduced shares. The affidavit said he canceled that agreement in June 2012 and said he'd bring Tanner into the company.
The indictment and affidavit said the Avanti owners made political contributions for Trombetta, who would reimburse them. Avanti paid the four owners and Tanner while Trombetta used a company American Express card to buy gas, food and memberships to Weight Watchers and Netflix, the affidavit states.
Money moved from PA Cyber to NNDS and then to Avanti through millions in management fees. The affidavit says Trombetta took chunks in checks and cash, including $25,000 for a graduation party for his daughter.
At one point Geibel said Trombetta told him, “I can no longer accept cash in bags in a Pizza Hut parking lot,” the affidavit states.
He formed one2one, which authorities called another shell company, with his sister, Elaine Neill, 56, of Center, who is scheduled to plead guilty next month to tax charges.
Prence helped Trombetta funnel at least $8 million through the shell companies and wrote false tax returns for Trombetta, Tanner and the Avanti executives that hid the fact Trombetta pocketed some of the money, prosecutors say.
The government has to prove both that the tax returns that Trombetta and others filed were false and that his client knew it, Levenson said. The affidavit describes meetings at which the returns were discussed.
Trombetta left PA Cyber — the largest cyber school in the state — in June 2012. In the months after the raids, PA Cyber fired several leaders. NNDS spokeswoman Christina Zarek said several board members left and were replaced.
“If you go back and look at the original indictment, it alleges activity that happened without the boards being aware,” she said.
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