The founder and former CEO of Pennsylvania's largest cyber-charter school has been charged with siphoning more than $8 million from the school through a network of companies, then scheming with his accountant to avoid income taxes.
Nicholas Trombetta surrendered to the FBI on Thursday on charges announced Friday in Pittsburgh. They stem from his tenure at The Pennsylvania Cyber Charter School, which he founded in Midland in 2000, and from which he drew an annual salary between $127,000 and $141,000 during the years covered by the indictment, 2006 to 2012.
“As the founder and CEO of PA Cyber, Trombetta was a custodian of the public trust, receiving public funds,” from local school taxes, state and federal subsidies, U.S. Attorney David Hickton said.
Trombetta's attorney didn't return calls and emails for comment.
Trombetta manipulated companies that he created and controlled to draw additional money from the school, which he spent on himself, real estate and a $300,000 plane, Hickton said.
Trombetta allegedly bought a Bonita Springs, Fla., condominium for $933,000, paid $180,000 for houses for his mother and girlfriend in Ohio, and spent $990,000 more for groceries and personal expenses, Hickton said.
The rest of the money was funneled through Avanti Management Group, which Hickton likened to Trombetta's “savings account, or rather, his retirement account.”
Avanti was a for-profit company that did contract work for the National Network of Digital Schools, a nonprofit that managed the cyber-charter school and developed its curriculum.
Avanti had four “straw” owners who pretended to hold 25 percent of the company, but instead were each paid $500,000 each to relinquish all but a 5-percent stake each. That gave Trombetta 80 percent ownership and de facto control of the firm, the indictment said.
Trombetta, 58, of East Liverpool, Ohio, is also accused of creating another company, Presidio Education Network, last July as federal agents were poring over his financial records, allegedly so he could move more than $3 million out of Avanti's bank accounts.
Despite his alleged misuse of PA Cyber and the National Network of Digital Schools - which continue to operate with new management since Trombetta resigned last June-Hickton said, “We are not indicting PA Cyber or cyber-education.”
In Pennsylvania, nearly 35,100 of the 1.7 million youngsters attending public schools are enrolled in cyber-charter schools. With more than 11,000 students, PA Cyber is by far the largest of the state's 16 such schools.
Hickton refused to be drawn into the debate over whether cyber-schools - which receive money from public school districts - harm bricks-and-mortar public schools, as some critics claim. Whatever their merits, the purpose of charter schools “was never to be to line the pockets of the people that run them,” Hickton said.
A spokeswoman for PA Cyber and NNDS issued statements saying the charges vindicated their claims to be victims, not participants, in the scheme.
Trombetta's accountant, Neal Prence, also is charged, but Hickton wouldn't comment on the extent of his alleged involvement in the overall scheme. Prence, 58, of Koppel, is charged with conspiring with to help Trombetta avoid income taxes, including by filing false tax returns.
Defense attorney Stanton Levenson said Prence maintains he did nothing wrong and plans to plead not guilty when both men are arraigned Wednesday.
Also mentioned in the indictment, but not identified, is a technology company that paid Trombetta $550,000 in kickbacks for buying 11,000 laptop computers for use by the school's students.
Hickton said the investigation is continuing, and therefore he wouldn't comment on what might happen to officials who allegedly paid the computer kickbacks or to Avanti's unidentified straw owners.