Bus company, former exec pleads guilty in $1.4 million school district fraud

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HARRISBURG, PA (WPMT)- A Millersburg bus company and one of its former officers pleaded guilty in federal court today to charges they defrauded two area school districts out of more than $1.4 million.

The Harris Transportation Corp. (HTC), and its former Vice President Todd M. Harris, age 49, of Dalmatia, entered guilty pleas to an Information charging them with one count of Mail Fraud. The Information filed on November 5, 2014, charges the defendants with defrauding the Halifax Area and the Upper Dauphin Area School Districts out of approximately $1.4 million between 2008 and 2011.

The Pennsylvania Department of Education is also alleged to have been a victim of the scam. The school districts and  state education department cooperated with the federal investigators. The Department of the Auditor General is also working closely with federal prosecutors.

HTC, a small, family owned business, provided student bus and van transportation services for the Halifax and Upper Dauphin school districts for many years.

The compensation HTC received for its services was based upon a formula set up by PDE, including mileage incurred with and without students, the age and size of the bus or van, and the number of students transported. Based on the formula, PDE reimburses school districts for a major portion of their annual student transportation expenses.

HTC received approximately $1.3 million from Halifax and approximately $3.6 million from Upper Dauphin during the school years 2008 to 2011. The criminal Information alleges that between September 2008 and June 2011, Todd Harris routinely submitted false and grossly inflated mileage claims to the two school districts, resulting in substantial overpayments to HTC by Halifax ($566,556) and by Upper Dauphin ($898,057). PDE also was a victim of the scheme because it reimbursed Halifax for approximately 82 percent, and Upper Dauphin approximately 84 percent, of their approved 2008-2011 student transportation expenses.
The fraud was first discovered in the summer of 2011 following an audit conducted by Upper Dauphin School District. Subsequent audits by the Halifax School District and the State Auditor General’s Office revealed the mileage statements submitted by Todd Harris were typically inflated by 10 to 30 percent. The State Auditors spent hundreds of hours reviewing billing issues and reported that Harris Transportation had over-billed the school districts by falsely reporting school bus mileage over several school years.

“We need every dollar possible going toward classroom education for our students, but I realize that student transportation costs can be a big expense for any school district,” Auditor General Eugene DePasquale said. “I urge all school districts to review transportation contracts and records to make sure they are not paying more than appropriate. Our school auditors will continue to closely examine transportation expenses. I am proud of our continued work with the U.S. Department of Education’s Office of Inspector General and U.S. Attorney to identify and stop corruption when we find it.”

The Auditor General’s audit reported that Harris Transportation Corp. greatly over-billed the districts by falsely reporting school bus mileage over several school years. Auditors spent hundreds of hours reviewing the transportation billing issues, ultimately referring the case to federal officials.

Interviews of former HTC drivers confirmed Todd Harris’ monthly mileage submissions were inflated and that Harris occasionally instructed them to take much longer routes on their runs than necessary. The investigation confirmed the combined losses sustained by both school districts for school years 2008 to 2011 totaled $1,464,613. Upper Dauphin and Halifax terminated their contracts with HTC in early 2012. The company ceased doing business shortly thereafter.

Todd Harris and HTC entered their guilty pleas pursuant to plea agreements with the government. The agreements require the defendants to cooperate with the government, to forfeit their interests in the $1,464,613 proceeds of the fraud, and to make restitution to the two school districts as directed by the court.
HTC’s plea agreement also required it to make a $425,000 lump sum restitution payment at the time it entered its guilty plea. Counsel for the corporation tendered a $188,000 check to the court as partial payment during the guilty plea hearing and agreed to pay the remaining $237,000 by Friday November 22, 2014. The HTC plea agreement also acknowledges that HTC refunded an additional amount, $337,715, to Upper Dauphin in 2011, bringing the total restitution paid by the corporation to date to $762,715.

The Mail Fraud charge has a maximum sentence of up to 20 years in prison and a $250,000 fine. Sentencing has been deferred pending preparation of Presentence Reports.

The case was investigated by the U.S. Department of Education, Office of Inspector General, in conjunction with the Dauphin County Criminal Investigation Division and Office of General Counsel of the Pennsylvania Department of the Auditor General. The case is being prosecuted by Assistant United States Attorney Kim Douglas Daniel.