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Date: 08-28-2020

Case Style:

United States of America v. Michael Malone

Case Number: 4:20-cr-00430-AGF

Judge: Audrey G. Fleissig

Court: United States District Court for the Eastern District of Missouri (St. Louis County)

Plaintiff's Attorney: United States District Attorney’s Office

Defendant's Attorney:


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Description:





St. Louis, MO - The United States of America charged Michael Malone, age 44, with wire fraud connected to a scheme to defraud and obtain education funds from the State of Missouri relative to the operation of the St. Louis College Prep Charter School from 2011 through 2018.

According to the plea agreement and statements made in Court, The St. Louis College Prep Charter School (“SLCP”) was a Missouri Charter School located in St. Louis, Missouri. From April, 2011 through June, 2015 it operated out of leased premises at 2900 South Grand Avenue, at which time it purchased a building at 1224 Grattan Street, where it operated until the school’s closing in May, 2019. During its final school year of 2018-2019, SLCP served students in grades six through twelve. As a Missouri Charter School, SLCP was tuition free and funded by Missouri and federal education funds. SLCP received its state funding through Missouri’s Department of Elementary and Secondary Education (“DESE”) based upon SLCP’s reported student attendance. Per-student funding is based on average daily attendance, or how often students are reported to be in the school, rather than enrollment. Malone founded SLCP and served as the Executive Director of SLCP from the school’s inception during 2011 until his resignation on November 1, 2018. Malone was actively involved in the day-to-day management and administration of SLCP, maintained his office in the primary school building and was responsible for reporting the SLCP student attendance numbers to DESE in order for DESE to calculate SLCP’s state funding.

As part of his scheme, Malone falsely inflated SLCP students’ average daily attendance in his reports to DESE. For four of the seven school years between 2011-2012 and 2017-2018, Malone reported students’ average daily attendance in excess of SLCP’s actual enrollment. For example, during the 2013-2014 school year, Malone reported average daily attendance of 220, when actual enrollment at SLCP was only 191 students. During the 2016-2017 school year, Malone reported average daily attendance of 326, when actual enrollment at SLCP was only 290 students. These falsely inflated average daily attendance numbers reported by Malone to DESE resulted in increased state funding to SLCP.

SCLP operated on a year-long school schedule and an extended school day with no summer school and no remedial classes. However, as part of his scheme, Malone inflated student attendance numbers by falsely claiming regular school days and hours as summer school or remedial hours, increasing the state funding received from DESE. Malone also falsely inflated actual student daily attendance. For example, during the 2016-2017 school year, Malone inflated the daily attendance records of 81 out of 333 students, or 24% of the actual SLCP student body. During the 2017-2018 school year, Malone inflated the daily attendance records of 188 out of 319 students, or 59% of the actual SLCP student body. Inflated hours totaled approximately 10,044 hours for the 2016-2017 school year and approximately 13,255 hours for the 2017-2018 school year.

Malone used the fraudulently obtained increase in state funding, approximately $2,400,000, to maintain SLCP’s ongoing operations during a period when costs to operate the school were increasing significantly. Malone also used the increased state funding to give SLCP a competitive advantage over St. Louis Public Schools and other St. Louis Charter Schools when recruiting students. As Missouri state funding follows the student, each St. Louis resident student successfully recruited to SLCP meant an increase in funding for SLCP and a decrease in funding for St. Louis Public Schools. The additional funds provided to SLCP were used to pay for resources which were not equally accessible to St. Louis Public Schools and other St. Louis Charter Schools.

United States Attorney Jeff Jensen stated, “What the former headmaster did through his deception, repeatedly over many years, was take advantage of the Missouri taxpayers, while obtaining an unfair advantage over the St. Louis Public Schools and other area charter schools. This was not a mistake. Evidence proved Michael Malone’s actions were intentional and, unfortunately he got away with it for years.”

"Michael Malone failed more than just students and staff at St. Louis College Prep Charter School," said Special Agent in Charge Richard Quinn of the FBI St. Louis Division. "By siphoning $2,400,000 from a finite pool of education dollars, he robbed students at other public and charter schools of additional resources they should have received."

Each charge of wire fraud carries a maximum possible penalty of twenty years imprisonment, a fine of $250,000 or both imprisonment and a fine. In determining the actual sentence, a Judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges.

This case was investigated by the Federal Bureau of Investigation, with the cooperation and assistance of the Missouri Department of Elementary and Secondary Education and the Missouri State Auditor’s Office. Assistant United States Attorney Hal Goldsmith is handling the case for the United States Attorney’s Office.

Wire Fraud

Outcome: 08/26/2020 1 INFORMATION as to Michael Malone (1) count(s) 1-3. (Attachments: # 1 Criminal Cover Sheet) FORFEITURE ALLEGATION(DLB) (Entered: 08/26/2020)
08/26/2020 2 WAIVER OF INDICTMENT by Michael Malone (DLB) (Entered: 08/26/2020)
08/26/2020 Warrant Issued as to Information in case as to Michael Malone. (DLB) (Entered: 08/26/2020)
08/26/2020 Attorney update in case as to Michael Malone. Attorney Gregory Nat Wittner for Michael Malone added. (AFC) (Entered: 08/26/2020)
08/26/2020 Arrest of defendant Michael Malone: date of arrest: 8/26/2020. (AFC) (Entered: 08/26/2020)
08/26/2020 3 ELECTRONIC MINUTE ENTRY (no pdf attached) for proceedings held before District Judge Audrey G. Fleissig: Waiver of Indictment and Change of Plea hearing as to Michael Malone held on 8/26/2020. Under Section 15002(b)(2)(A) of the CARES act, in response to the COVID-19 crisis this Court authorizes the use of video and telephone conferencing for criminal hearings. The defendant has been advised and consents on the record to proceed by video conference. Counsel for the government and for the defendant also participates by video conference. The Court goes over the rights of the defendant regarding charge by Indictment. Defendant wishes to proceed with charge by Information and waives Indictment. Waiver is executed. Defendant sworn. Age of Defendant: 44; Level of Education: Masters Degree. Arraignment as to defendant Michael Malone held. Defendant waives reading of the Information and will plead guilty. The Court finds the defendant competent to enter a plea of guilty. By leave of Court, defendant withdraws former plea of not guilty and enters a Plea of Guilty as to Counts 1, 2 and 3 of the Information. The Court adopts and approves Guilty Plea Agreement. Guilty Plea Agreement filed. (Objections to Presentence Report due by 11/9/2020. Sentencing set for 11/30/2020 09:30 AM in Courtroom 12S - St. Louis before District Judge Audrey G. Fleissig.)(Probation/Pretrial Officer: present via videoconference)(Court Reporter:Carla Klaustermeier, Carla_Klaustermeier@moed.uscourts.gov, 314-244-7984) (proceedings started: 9:33 AM) (proceedings ended: 10:30 AM)(Deputy Clerk: A. Cordray) (Defendant Location: Bond)(Attorney Appearance for USA: Hal Goldsmith.)(Attorney Appearance for Defense: Gregory Wittner.) (AFC) (Entered: 08/26/2020)
08/26/2020 4 GUILTY PLEA AGREEMENT by USA, Michael Malone as to Michael Malone (AFC) (Entered: 08/26/2020)
08/26/2020 5 GUILTY PLEA AGREEMENT SUPPLEMENT as to Michael Malone (AFC) (Entered: 08/26/2020)
08/26/2020 6 ELECTRONIC MINUTE ENTRY (no pdf attached) for proceedings held before Magistrate Judge Patricia L. Cohen: Under Section 15002(b)(2)(A) of the CARES act, in response to the COVID19 crisis this Court authorizes the use of video and telephone conferencing for criminal hearings. The defendant has been advised and consents on the record to proceed by video conference. Counsel for the government and for the defendant also participates by video conference. Initial Appearance/Rule 5 as to Michael Malone held on 8/26/2020. Defendant advised of rights and indicated an understanding of those rights. Defendant to retain: Counsel- Greg Wittner., Bond Execution Hearing as to Michael Malone held on 8/26/2020. Bond set in the amount of: O/R. Bond papers executed. (proceedings started: 11:32 am) (proceedings ended: 11:51 am)(FTR Gold Operator initials: COlliges) (Defendant Location: BOND)(Attorney Appearance for USA: Hal Goldsmith.)(Attorney Appearance for Defense: Greg Wittner.) (CLO) (Entered: 08/26/2020)
08/26/2020 7 ORDER as to Michael Malone: IT IS HEREBY ORDERED that the sentencing as to defendant Michael Malone is set for Monday, November 30, 2020 at 9:30 a.m. IT IS FURTHER ORDERED that the deadline for filing objections, if any, to the Presentence Report as to defendant Michael Malone is November 9, 2020. IT IS FURTHER ORDERED that no objections shall be filed after the deadline without leave of the Court. A request for leave to file objections out of time must be in writing and supported by reasons for the request. IT IS FURTHER ORDERED that the parties shall inform the Court, in writing, and not less than ten (10) days prior to the sentencing date, whether testimony is to be presented at sentencing and, if so, the anticipated number of witnesses and the estimated length of such testimony. IT IS FINALLY ORDERED that the parties must file any memoranda no later than seven (7) days before sentencing date except that a response to a sentencing memorandum may be filed no later than five (5) days before the sentencing date. (Objections to Presentence Report due by 11/9/2020. Sentencing set for 11/30/2020 09:30 AM in Courtroom 12S - St. Louis before District Judge Audrey G. Fleissig.) Signed by District Judge Audrey G. Fleissig on 8/26/2020. (AFC) (Entered: 08/26/2020)

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