Two former executives of the Easton-area business admitted to the scam Tuesday in federal court.
Federal agents raided Circle System Group's two main buildings, a facility on Bushkill Street in Easton and offices on McFadden Drive in the Palmer Industrial Park in Palmer Township, in May 2007.
Two former executives of an Easton-area sports gear company admitted Tuesday in federal court that they routinely over-billed schools in a dozen states -- including one in Warren County -- in a decade-long fraud scheme.
Circle System Group forged fake price quotes from competitors and even cooked up inflated invoices to recoup money it had donated to schools’ fundraising and charity efforts, Mitchell Kurlander admitted.
“So, you gave with one hand and took back with the other?” U.S. District Judge William Walls asked Kurlander, Circle System’s former chief financial officer.
“Yes, your honor,” Kurlander replied.
The 54-year-old Kurlander, of Allentown, and his father-in-law, Alan Abeshaus, of Highland Beach, Fla., each pleaded guilty in federal court in Newark to one count of conspiracy to commit wire fraud and mail fraud.
The count carries a maximum prison sentence of 20 years, but federal prosecutors said they will not oppose a motion that could keep the 81-year-old Abeshaus, formerly of Palmer Township, out of prison. Kurlander faces between 41 and 51 months in prison under terms of his plea agreement.
Abeshaus said in court he would pay restitution of $1 million; the amount of Kurlander’s restitution is to be determined, the office of New Jersey District U.S. Attorney Paul J. Fishman said.
The two were arrested in 2011 and charged in a 22-count indictment. Their trial was to have begun Tuesday.
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Football helmets wait to be reconditioned in April 2009 at the Palmer Township facility of Schutt Sports Inc., which bought Circle System Group in 2005.
Circle System refurbished football helmets, shoulder pads and other sports equipment at facilities on Bushkill Street in Easton and McFadden Drive in the Palmer Industrial Park in Palmer Township. The company was bought in 2005 by Schutt Sports
Inc., which still reconditions sports equipment at the Palmer Township facility.
Schutt did not return a phone message seeking comment on Tuesday's pleas.
Schools ensnared
In New Jersey alone, 22 high schools and the school districts of Newark and Jersey City were affected along with Rutgers and Monmouth universities, according to the indictment.
Locally, only Belvidere High School was ensnared in the scheme. The school's business manager in December 2005 refused to pay a Circle Group invoice of $435 because there was no purchase order for softball reconditioning work, the indictment states.
Circle Group agreed to void the invoice but then a sales representative, with Kurlander's approval, fraudulently inflated the cost of reconditioning work that the company had done to recoup the $435, the indictment stated. Circle Group faxed a quote that included the inflated reconditioning work to the school's athletic director Dec. 16, 2005.
The indictment also charged that the company showered gifts such as video games, cameras, clothing, computers and NFL tickets on school officials and then recouped the expense by submitting fraudulent invoices.
Former Circle Group President David Drill and two New Jersey high school officials who previously pleaded guilty in connection to the scheme are awaiting sentencing.
According to the indictment, schools also were swindled in Pennsylvania, Delaware, New York, Maryland, Virginia, Tennessee, North Carolina, South Carolina, Georgia, Florida and Michigan.
'Appropriate resolution'
Neither Kurlander nor Abeshaus commented after the plea hearing. William DeStefano, an attorney representing Kurlander, said the case involved extenuating circumstances that would be brought out when the men are sentenced in July, but he declined to give details.
"Mr. Abeshaus believes this is a fair and appropriate resolution to the case and he looks forward to putting the matter behind them," said Kevin Marino, Abeshaus' attorney, when reached by telephone Tuesday afternoon.
According to statements made in court by both men, Circle Group took advantage of schools’ confusion over invoices and account statements to get paid twice for the same services. That scam reaped the company more than $800,000 between 1997 and 2003, Kurlander and Abeshaus admitted.
Kurlander admitted the company sent bogus price quotes on other companies’ letterhead to schools so that Circle could emerge as the low bidder and schools could satisfy a requirement to seek competitive bids. Circle made up the difference on some of its low-ball price quotes by overcharging for other services, Kurlander said.
Express-Times reporter Sara K. Satullo and The Associated Press contributed to this report.