Admissions scandal parents charged with money laundering

Hollywood actress Lori Loughlin, 54, and her husband, the designer Mossimo Giannulli, were among 16 parents involved in the nationwide college admissions scandal in the United States who were additionally charged on Tuesday in Boston with conspiring to commit money laundering in connection with the scheme to facilitate their children’s admission to selective colleges via bribery and cheating.

Loughlin is accused of plotting to pay US$500,000 to William ‘Rick’ Singer, an admissions consultant, to ensure that her daughters were given a place at the University of Southern California (USC) as purported rowing crew recruits.

The older daughter was presented for admission allegedly based on falsified athletic credentials and was admitted to USC as a rowing crew recruit. The second daughter was admitted allegedly on the basis of a profile that included a staged action photograph and falsely presented her as a crew coxswain for the LA Marina Club team.

The evidence includes a call made by Singer on 29 November 2018 to Loughlin in which the former mentions that payments made to the Key Worldwide Foundation, the foundation through which two payments of US$200,000 had been made by the Giannullis, was being audited by the Internal Revenue Service, and that, “I just wanted to make sure you know that, one, you’re probably going to get a call and that I have not told them anything about the girls going through the side door, through crew, ever [sic] though they didn’t do crew to get into USC.

“So I – that is – all I told them was that you made a donation to our foundation to help underserved kids.”

Arrests in multiple states

The additional charging of the 16 parents follows on from the arrest last month by federal agents in multiple states of dozens of individuals allegedly involved in a nationwide conspiracy that facilitated cheating on college entrance exams and the admission of students to elite universities as purported athletic recruits.

Athletic coaches from Yale University, Stanford University, USC, Wake Forest University and Georgetown University, among others, were implicated, as well as parents and exam administrators.

In total US$25 million is alleged to have been paid to Singer by wealthy parents. The scandal has raised widespread concern about the fairness of the admissions process in elite universities.

Association of American Universities President Mary Sue Coleman said last month: “The actions of the accused not only unfairly tarnish leading educational institutions but stand in stark contrast to the values of openness, scholarship, achievement, inclusion and merit that are at the core of these very same institutions.”

The 16 defendants have been charged with conspiring with William ‘Rick’ Singer, 58, of Newport Beach, California, and others, to bribe SAT and ACT exam administrators to allow a test taker to secretly take college entrance exams in place of students, or to correct the students’ answers after they had taken the exam, and with bribing university athletic coaches and administrators to facilitate the admission of students to elite universities as purported athletic recruits.

The second superseding indictment also charges the defendants with conspiring to launder the bribes and other payments to hide the fraud by funnelling them through Singer’s purported charity and his for-profit corporation, as well as by transferring money into the United States, from outside the United States, for the purpose of promoting the fraud scheme.

The charge of conspiracy to commit fraud provides for a maximum sentence of 20 years in prison, three years of supervised release and a fine of US$250,000 or twice the gross gain or loss, whichever is greater.

The charge of conspiracy to commit money laundering provides for a maximum sentence of 20 years in prison, three years of supervised release and a fine of US$500,000 or twice the value of the property involved in the money laundering.

United States Attorney Andrew E Lelling; Joseph R Bonavolonta, special agent in charge of the Federal Bureau of Investigation Boston Field Division; and Kristina O’Connell, special agent in charge of the Internal Revenue Service’s Criminal Investigations in Boston, made the announcement on 9 April.

Loughlin and her husband have yet to enter a plea.

Parents plead guilty

Meanwhile, more than a dozen other parents, including actress Felicity Huffman, one of the stars in the popular TV series Desperate Housewives, pleaded guilty this week. Huffman agreed to plead guilty to one count of conspiracy to commit mail fraud and honest services mail fraud, with a plea hearing set for 21 May.

Huffman was accused of paying US$15,000 disguised as a charitable donation to have a proctor correct the answers on her daughter’s SAT.

Huffman publicly said she accepted responsibility for her actions.

“My daughter knew absolutely nothing about my actions, and in my misguided and profoundly wrong way, I have betrayed her,” she said.

“This transgression towards her and the public I will carry for the rest of my life. My desire to help my daughter is no excuse to break the law or engage in dishonesty.”

As part of the deal Huffman struck to agree to plead guilty, the sentence recommendation includes a short prison term – expected to be between four and 10 months – a fine or penalty of US$20,000, and 12 months’ supervised release.

Most selective colleges and universities in the US require prospective students to submit standardised test scores – usually either the ACT or the SAT – as part of their application packages. These scores are a material part of the admissions process.

Many selective colleges and universities in the US, including all the universities, recruit students with athletic abilities and typically apply different criteria when evaluating their application with the expectation that the students will be contributing members of the university’s athletic teams once enrolled.

Typically, the admissions offices at the universities allot a set number of admission slots to each head coach of a sport for that coach’s recruited athletes. Thus at each of the universities the admissions prospects of recruited athletes are higher – sometimes substantially higher – than those of non-recruited athletes with similar grades and standardised test scores.

But university athletic coaches and administrators owe a duty of honest services to the universities where they are employed.

According to the superseding indictment document provided by the US District Court for the District of Massachusetts, from 2011 to February 2019 the defendants conspired to use bribery and other forms of fraud to facilitate their children’s admission to selective colleges and universities in Massachusetts and elsewhere.

The conspiracy included:

• • Cheating on college exams, including by bribing administrators to permit such cheating.
  
  
• • Bribing university athletic coaches and administrators to designate applicants as purported athletic recruits, regardless of their athletic abilities, and, in some cases, even though they did not play the sport they were purportedly recruited to play.
  
  
• • Having a third party take classes in place of the actual students, with the understanding that grades earned in those classes would be submitted as part of the students’ college applications.
  
  
• • Submitting falsified applications for admissions to universities that included the fraudulently obtained exam scores and class grades, and often listed fake awards and athletic services.

In some cases parents falsely secured extended time by having their children purport to have learning disabilities in order to obtain the necessary medical documentation required to be granted extra time in exams.

Others bribed entrance exam administrators to permit cheating. Others paid a third party to pose as an ACT or SAT exam proctor, or even as a student taking the exam, to secretly provide students with the correct answers during the exam, replace the student’s exam responses or take the exam in place of students.

Others fabricated athletic ‘profiles’, including by staging photographs of students purportedly engaged in the athletic activity.