Massive Embezzlement Case Leads To Conviction For Mother-Son Pair

By - April 27, 2022
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Nancy New and her son Zachary pleaded guilty this week in a federal embezzlement case in Mississippi that bilked $4 million in public school dollars for their private school.

New, the owner of the shuttered New Summit School, which was once popular in Mississippi for special needs students, pleaded guilty to wire fraud, which could result in a 10-year federal prison sentence.

Zach New, VP for New Learning Resources, Inc., pleaded guilty to conspiracy to commit wire fraud and could get five years in prison. The pair could face fines of up to $250,000 each.

Pair Defrauded The Mississippi Department Of Education

The federal indictment against the mother and son was filed in 2021. It alleged that the News stole $4 million in public education dollars from the Mississippi Department of Education by filing phony reimbursement claims.

Nancy New pleaded guilty to that charge, but prosecutors put Zach’s federal charge into a separate bill of information. This document is filed when the defense agrees to plead guilty without a grand jury indictment.

The federal plea deals come after the Mississippi Today’s ‘Backchannel Investigation’ that showed new information about former Mississippi Governor Phil Bryant’s role in another scandal that involved the state’s Department of Human Services. The News are also facing state charges in that scandal.

The plea deals came less than a month before the News was to stand trial on federal charges.

Nancy New was president of New Learning Resources and Zachary New was VP of operations. The company ran three private schools that provided services for kids with dyslexia or autism. The schools were located in Jackson, Greenwood, and South New Summit, Mississippi.

Mississippi lets some public education funds to be given to private schools for students who have special needs. However, prosecutors say the News submitted phony documents that sought reimbursement for salaries for teachers. Those claims included requests for teachers who didn’t work there and claims that misrepresented that teachers at other schools worked at theirs.

The News were indicted in March 2021 for wire fraud, aggravated ID theft, money laundering, and doing monetary transactions with proceeds of certain unlawful activity with education funds. They pleaded not guilty on all charges at first. If they were convicted on those charges, they could have gotten up to 200 years in prison.

News Also Accused Of Embezzling $4 Million In Welfare Funds

In the state case that involves welfare theft, the state accuses the News of a $4 million embezzlement of federal welfare funds. About $2 million was allegedly used to make investments in the companies PreSolMD and Prevacus.

The Mississippi Today online news magazine uncovered text messages showing that just before the New pair agreed to send welfare money to Prevacus, the firm’s owner – former NFL QB Brett Favre – offered the Bryant stock in exchange for help as governor.

Bryan agreed to this arrangement in a text message after he was no longer governor. Favre also referenced in text messages the public monies the company was getting from the state government and the News.

Bryant claimed to Mississippi Today that he didn’t read the texts carefully so he didn’t understand what they meant. To this point, government officials have not looked at the former governor’s role in the welfare fraud scandal and the Prevacus arrangement.

After the New indictments, Bryant seemed surprised to discover that the pharma company had gotten welfare funds. Then he cut ties with the company. The state charges against Bryant are still pending.

Federal agents continue to investigate the fishy welfare spending, according to media reports.

The New’s federal plea agreements don’t detail how the defendants need to cooperate with federal prosecutors if the News have details that can help the prosecution of higher-profile people. But the plea agreement does discuss a sealed plea supplement, which is where those arrangements may be detailed.

The federal charges are being resolved before the state welfare theft charges. So it is likely the News will be sent to federal prison instead of state prisons in Mississippi, which are known to be brutal.

Sentencing for the pair is set for November 2022.

News Allegedly Faked Names Of Children Who Didn’t Go To School

In the scam involving their private school, federal prosecutors claim the News took public school funds by inventing names of children who didn’t go to the institution. They also listed people who didn’t work for the school or teachers who didn’t have the certifications they claimed.

The funding was taken from a program called ‘504 teacher units’ which was supposed to offer a personal teacher for a child after a medical professional determines the child needs to be in a psychiatric facility or hospital.

It’s estimated that the News’ New Learning Resources school received about $20 million of these funds in the last 15 years. It isn’t known if more than $4 million of those funds were misused, but the investigation continues.

From 2016 to 2020, New Summit School in two locations hired between 10 and 16 teachers through the 504 teacher units program every year. This means about 320 children with serious mental disorders that New Summit said they were helping.

Federal prosecutors have not learned how all this money was spent, but they said Nancy New used some of the money to buy a $250,000 home in Mississippi. Investigators are still looking into how other funds were spent.

Attorney Geoffrey G. Nathan

About Geoffrey Nathan, Esq

Geoffrey Nathan is a licensed attorney in the Commonwealth of Massachusetts since 1988, admitted to practice in both Federal and State courts. He is a Boston criminal defense attorney with over 25 years of experience in felony, federal, and white-collar crimes. Board of Bar Overseers Number #552110