Thomas Schroeder, the president of the Riverdale School Board and the executive director of the Rock Island County Council on Addictions, was indicted Wednesday in Louisville, Ky., on charges of conspiracy and mail fraud.
The federal indictment alleges that Mr. Schroeder, of Rapids City, and Robert Felner, formerly a dean at the University of Louisville, used federal grant money intended to pay for student assessments at various school systems for their own purposes.
The U.S. Attorney's Office alleges that the pair received fraudulent payments totaling more than $2 million.
The government seeks the forfeiture of property and other assets derived from the alleged scheme.
Herb Schultz, Mr. Schroeder's attorney, said his client is innocent.
“We will fight this vigorously. We maintain our innocence,” he said. He said his client would not be made available for comment...
U.S. Attorney David Huber in Louisville said the University of Rhode Island, where Mr. Felner was director of the School of Education from 1996 to 2003, was the biggest victim in the scheme.
"People who are in a trusted position, who have credibility, are able to get away with things to a point," Mr. Huber said. "Eventually, things come crashing down."
University of Rhode Island spokesman Dave Lavallee declined immediate comment.
In a previous interview, Mr. Schroeder said he formed the National Center on Education and Prevention Inc. (NCEP), a non-profit corporation, in 2001 at Mr. Felner's request. It was to that organization, the indictment says, payments intended for the Rhode Island center were instead sent.
Some of the funds came from federal grants, including a $450,000 federal earmark awarded to the University of Louisville.
Other funds came from consulting work done for school districts in Atlanta; Buffalo, N.Y.; and Santa Monica, Calif., Mr. Huber said. Mr. Huber said the men appear to have done the work requested by the school districts, but diverted the money to their own accounts. The money was supposed to be paid to the education center in Rhode Island.
"There is no dissatisfaction as far as we know," Mr. Huber said of the school districts. "They are not the victims of the fraud."
Although Thomas Schroeder wouldn't speak to the media after he was indicted Wednesday ... he was willing to speak in July.
According to the indictment, Mr. Schroeder and Mr. Felner created a corporation called the National Center on Public Education and Prevention to obtain funds fraudulently for work performed by the Rhode Island-based National Center on Public Education.
This allowed Mr. Schroeder and Mr. Felner to appear as if they were operating as the Rhode Island center, causing other entities to believe they were dealing with the National Center on Public Education, according to the indictment.
After it was reported this summer that he had been interviewed by federal agents, Mr. Schroeder, of Rapids City, discussed the investigation and his role with the organization with The Dispatch and The Rock Island Argus.
During that interview, he said he was cooperating with investigators, and that he was upset and felt betrayed by his longtime friend, Mr. Felner.
"It is real strange," he said. "We were close friends and professional colleagues, then this happens."
In that interview he denied any knowledge of wrongdoing.
He said he formed the non-profit corporation in 2001 at Mr. Felner's request, and it was to serve as the fiscal agent for educational assessment projects directed by Mr. Felner. Mr. Felner served, at different times during their association, in posts at the
University of Rhode Island and the University of Louisville.
His organization, he said, handled payments for two projects -- one in Atlanta
public schools and another for the Santa Monica, Calif., school district. He placed the value of those contracts at $525,000.
The indictment, however, alleges the work for those projects was conducted by the Rhode Island organization, and that Mr. Schroeder and Mr. Felner diverted payments of $1,005,972 from the Atlanta project, and $375,000 from the Santa Monica project to the accounts of Mr. Schroeder's non-profit for their own use.
The indictment also alleges they concealed payments of $326,000 from a project in
Buffalo, N.Y. Mr. Schroeder made no mention of that project in the interview.
Mr. Schroeder said in 2007 his organization received a contract from the University of Louisville to provide and administer education surveys, funded by a federal grant, in connection with No Child Left Behind.
Mr. Schroeder said he received two payments for work that was to be done as part of that project, one for $200,000 and another for $50,000. Both checks were returned, uncashed, to Mr. Felner at his direction, Mr. Schroeder had said.
The indictment, however, alleges the university received invoices totalling several
hundred thousand dollars for work not performed.
At the time, Mr. Schroeder said, he was receiving $3,000 a month for his work with the organization and was being paid $2,400 a month by the University of Louisville
to serve as Mr. Felner's research assistant.