A former Obama administration adviser was arrested in Manhattan Tuesday and accused of embezzling more than $218,000 from a Harlem charter school network he helped found.
Seth Andrew, 42, allegedly transferred funds from the Democracy Prep Public Schools reserve bank accounts in order to inflate his account balance and to qualify for a special mortgage deduction on his $2.4 million apartment, authorities said.
Andrew was filmed wearing a distinctive yellow Democracy Prep baseball cap at the bank when he went to withdraw the funds, investigators noted.
“Locking into the lowest interest rate when applying for a loan is certainly the objective of every home buyer, but when you don’t have the necessary funds to put down, and you steal the money from your former employer to make up the difference, saving money in interest is likely to be the least of your concerns,” said FBI Assistant Director William F. Sweeney Jr. in a release Tuesday. “We allege today that Andrew did just that, and since the employer he stole from was a charter school organization, the money he took belonged to an institution serving school-aged children. Today Andrew himself is learning one of life’s most basic lessons – what doesn’t belong to you is not yours for the taking.”
CNBC reported that Andrew’s lawyer Michael Yaeger said his client “will be entering a plea of not guilty today” in Manhattan federal court.
In 2005, Andrew helped found the charter school network – while the FBI did not release the name of the school network, his LinkedIn page said he was a “founder, teacher, principal, and superintendent of Democracy Prep.” He left the school in 2013 to work in the White House as a senior advisor to former President Barack Obama as well as the Secretary of Education, where he helped launch the Vote.gov initiative, his profile said.
Before leaving Democracy Prep, Andrew had established escrow accounts for the school as required by state law, and remained a signatory on the accounts, the FBI said.
In March 2019, Andrew allegedly closed two of those escrow accounts without authorization from the school and withdrew more than $142,524 from those accounts. He allegedly eventually deposited those checks into a third account he opened by telling a bank employee that he was a “Key Executive with Control of” the Democracy Prep school network though he hadn’t been part of the organization for two years.
Andrew allegedly used the funds to present an inflated bank account on his mortgage application in order to snag a 2.5% mortgage interest rate from his bank under a promotional deal in April 2019—because the bank was offering 0.125% off the rate for every $250,000 customers maintained in their accounts, and Andrew had over $1,000,000 in his account, the FBI said.
Andrew and his wife Lana Zak, the CBS News anchor, bought a Manhattan home for $2,368,000—with a mortgage of $1,776,000 at the 2.5% interest rate—in August 2019.
In October 2019, Andrew allegedly targeted a third escrow account in Democracy Prep’s name and transferred $75,481.10 into a new bank account. He then, prosecutors say, combined all the transferred Democracy Prep funds into a bank account he opened “in the name of a particular civic organization that Andrew currently controls, thereby concealing the money’s association with (Democracy Prep) and depositing the stolen money into an account under Andrew’s complete control.”
CNBC reported that Andrew is the current chief executive officer of Democracy Builders, a new education-technology-society venture, which "last year purchased for $1.725 million the former campus of Marlboro College in Marlboro, Vermont, with the goal of setting up a school there dubbed Degrees of Freedom.”
In a note to the school communities Tuesday, Democracy Prep’s Chief Executive Officer Natasha Trivers said Andrew’s “alleged actions are a profound betrayal of all that we stand for and to you and your children, the scholars and families that we serve.” She said the school’s finances “remain strong” and that the school discovered the "unauthorized withdrawals" after financial safeguards were instituted.
Andrew is charged with wire fraud, money laundering, and the top charge of making a false statement to a bank, which carries a maximum of 30 years in prison if convicted.