Seth Andrew during a TEDx Talks
Source: TEDx Talks | YouTube
Seth Andrew, who served as an education advisor in the Obama White House, has been arrested Tuesday morning on charges of scheming to steal $218,005 from a public charter school network that he founded, federal authorities said.
The 42-year–old Andrew was arrested in New York City, and is due to appear in court later in the day in Manhattan federal court in the case.
Andrew, who founded Democracy Prep Public Schools in 2005, is accused of using more than half of the allegedly stolen money from that network to maintain a bank account minimum that gave him a more favorable interest rate for his home mortgage.
Andrew, who is married to CBS News anchor Lana Zak, is charged with wire fraud, money laundering, and making false statements to a financial institution, according to the U.S. Attorney’s Office for the Southern District of New York, which is prosecuting the case.
Zak, who has three children with Andrew, did not immediately respond to a request for comment.
Andrew’s criminal defense attorney Michael Yaeger told CNBC that Andrew “will be entering a plea of not guilty today.”
Natasha Trivers, the current CEO of Democracy Prep, in an email to the network’s families, alumni and scholars said a “series of financial safeguards” that were instituted after she took over her post in 2019 “led directly to the discovery of Seth’s unauthorized withdrawals.”
Democracy Prep then notified authorities, and has been cooperating with the criminal investigation, she said.
“Seth left our network in 2013,” Trivers wrote. “His 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. To be clear, at no time did the alleged crimes pose any risk to our students, staff or operations in any way.”
Trivers added: “The network’s finances remain strong, and at no time did any of the activity by Seth Andrew have any adverse effect on our scholars or the functioning of our schools.”
Democracy Prep operates schools in The Bronx and Harlem in New York City, as well as in Camden, New Jersey, Las Vegas, San Antonio and Baton Rouge. Last week, Andrew retweeted a Twitter post by Democracy Prep that said the network was “looking for an amazing team of teachers, leaders and staff who want to educate responsible citizen-scholars!”
Andrew currently is CEO of Democracy Builders, which bills itself as a “social sector studio that has launched more than $1b in enterprises that are changing the face of education, democracy, and technology around the world.” That organization 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.
Andrew’s co-founder at Democracy Builders did not immediately respond to a request for comment.
U.S. Attorney Audrey Strauss in a statement said, “Seth Andrew abused his position as a founder of a charter school network to steal from the very same schools he helped create.”
“Andrew is not only alleged to have stolen the schools’ money but also to have used the stolen funds to obtain a savings on a mortgage for a multimillion-dollar Manhattan apartment,” Strauss said.
Andrew helped create Democracy Prep in 2005.
He accepted a job in the U.S. Department of Education in 2013, shortly after then-President Barack Obama began his second term, and then became a senior advisor in the Office of Educational Technology at the White House.
Andrew is accused in a complaint of ripping off the charter schools network in 2019 — two years after severing ties from the network — by drawing funds from escrow accounts he had set up for individual schools in the network years before, and depositing much of the money into a bank that he was looking to obtain a mortgage from.
He allegedly benefited from a lower interest rate on his $1.776 million mortgage as a result of having used stolen funds from the schools to maintain a large deposit in the bank that was loaning him the money to buy a $2.37 million home in New York.
Andrew and his wife, who is not charged in the scheme, obtained a mortgage rate of just 2.5%, or .5% less than they would have had to pay, as a result of having more than $1 million on deposit with the lender.
“Without the $142,524 deposited stolen funds, Andrew would have been eligible for only a 0.375% interest rate deduction,” the U.S. Attorney’s office noted.
FBI Assistant Director William F. Sweeney Jr. said in a statement, “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.”
“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,” he added. “Today Andrew himself is learning one of life’s most basic lessons – what doesn’t belong to you is not yours for the taking.”
A CBS News spokeswoman did not immediately return messages seeking comment on Zak.