Defendant Allegedly Used His Official Position to Award Contracts To Close Associates and Accepted Kickbacks
A federal grand jury yesterday indicted Andre J. Hornsby, age 52, formerly of Mitchellville, Maryland, for honest services mail and wire fraud, witness and evidence tampering and obstruction of justice arising from a scheme to cause the Prince George’s County Public Schools to award lucrative contracts to benefit close associates and himself.
United States Attorney Rod J. Rosenstein said, “Citizens deserve to know that government officials in Maryland will be prosecuted if they abuse their power for private financial gain. Criminals who tamper with witnesses and obstruct federal investigations must be held accountable."
Special Agent in Charge of the Baltimore FBI Field Office, William D. Chase, stated "Mr. Hornsby exploited his position, as Chief Executive Officer of the Prince George’s County Public Schools, for his own personal financial gain which came at the expense of the children he was entrusted to serve. We in the FBI are committed to addressing public corruption at every level, and are pleased to have been instrumental in this case."
"Crimes committed by public officials violate the public trust. Part of IRS-CI's mission is to assure honest taxpayers that EVERYONE pays their fair share" said Francis L. Turner, Special Agent In Charge, Internal Revenue Service, Criminal Investigation.
According to the 16-count indictment, the Prince George’s County Public Schools (PGCPS) employed Hornsby as Chief Executive Officer and Secretary and Treasurer of the Board of Education for Prince George’s County (Board) beginning in June 2003. One of the 20 largest school districts in the nation in 2004, PGCPS operated with a budget of more than $1 billion.
Kickback from E-Rate Contracts
Quality Schools Consulting, Inc. (QSCi) was a corporation owned and operated by Hornsby, and provided consulting services to school systems, including assistance in preparing applications to secure funds under the federal E-Rate program. The E-Rate program provides schools and libraries with substantial discounts on telecommunications services, Internet access and internal connections. In providing these services, Hornsby was assisted by an individual who had worked for him in other school districts (Former Employee). Erate Managers, LLC purported to be a company located in Texas that was operated by the Former Employee.
The indictment alleges that in the fall of 2003, PGCPS sought assistance with its E-Rate applications. Hornsby directed PGCPS employees to seek proposals from outside E-Rate consulting companies by issuing a request for proposal (RFP). An RFP is a formal document published to solicit proposals from outside companies to contract with the school system. The Former Employee provided Hornsby with a draft RFP which Hornsby provided to PGCPS personnel. Using that draft RFP, PGCPS published an RFP for two weeks starting in October of 2003 to solicit bids. The mandatory deadline for the return of bids was November 3, 2003.
After evaluating the proposals submitted within the deadline, PGCPS recommended awarding the contract to “Company A,”which submitted a bid for $59,675. Hornsby, however, directed PGCPS personnel not to award the contract to Company A and instead steered the contract to a company operated by the Former Employee. After the deadline for submitting proposals had expired, on December 8, 2003, the Former Employee transmitted a proposal that was blind-copied to Hornsby. In the name of a non-existent company, “Erate Managers D.B. Inc.,” the initial proposal quoted a flat fee of $48,550. But after Hornsby privately complained about the price to the Former Employee, on December 14, the Former Employee submitted another proposal to PGCPS that substantially increased the fee. In the name of “Erate Managers, LLC,” this proposal added a fee of 1% of the E-Rate funds awarded (with a minimum fee of $25,000) in addition to the flat fee of $48,550.
The indictment alleges that as a result of Hornsby’s intervention, on December 19, 2003, PGCPS issued a purchase order to Erate requiring the school system to pay $48,550 plus 1% of the value of the E-Rate funds awarded in excess of $2 million. Pursuant to the contract for 2004, PGCPS paid Erate more than $80,000.
For the 2005 year, PGCPS again awarded Erate a contract for E-Rate consulting services requiring the school to pay $60,500 plus a fee of 1% of the value of the funds awarded up to $10 million and 1.5% of the value of the funding award in excess of $10 million, not to exceed $300,000. Under the 2005 contract, PGCPS paid Erate $40,900 before the contract was terminated by the Board.
Hornsby and the Former Employee agreed that Hornsby would receive half the proceeds from the E-Rate contracts. The indictment alleges that Hornsby met with the Former Employee at a hotel in Bowie, Maryland, where they discussed their agreement. Hornsby agreed to receive from the Former Employee more than $100,000 which represented about half of the percentage fees to be paid by PGCPS. Hornsby accepted $1,000 in cash from the Former Employee as a down payment. Hornsby proposed to the Former Employee various methods to evade detection of the payments, including arranging for the Former Employee to purchase valuable items for him such as property, a truck, art and a yacht.
Kickback from LeapFrog Contract
LeapFrog Enterprises, Inc. (LeapFrog) developed and marketed technology-based educational products designed to assist students from pre-kindergarten through high school. Each LeapFrog sales representative was responsible for an exclusive territory, and was compensated with salary, sales commissions and an annual bonus. Sales commissions were generally paid to the representative assigned to the territory in which the sale was made. The sales representative for sales to customers in Virginia was Sienna Rochelle Owens. According to the indictment, during his tenure as CEO, Hornsby and Owens were engaged in a long-term romantic relationship, and shared the same residence in Mitchellville, Maryland. Another sales representative was responsible for sales to customers in Maryland.
In May 2004, Hornsby directed that PGCPS establish a summer program for kindergarten students who were being held back, and suggested that the system use LeapFrog products in the summer program. After receiving proposals from the Maryland sales representative for LeapFrog, PGCPS personnel recommended using a LeapFrog package for the summer program in approximately 33 classrooms.
In the meantime, Hornsby advised Owens that he wanted to purchase LeapFrog products for 216 classrooms. To consummate the sale, between June 4 and June10, 2004, Owens dealt directly and exclusively with Hornsby by providing him with draft proposals, soliciting his input, and making recommendations about the deal. Hornsby finalized the LeapFrog contract on June 10, 2004. At Owens’ request, Hornsby called Owens’ supervisor and agreed that PGCPS would purchase LeapFrog products for 216 classrooms at a cost of $956,280. This transaction was one of the largest sales ever made by LeapFrog’s SchoolHouse Division to public schools. At Hornsby’s direction, PGCPS mailed a check dated July 30, 2004 to LeapFrog to pay for the $956,280 deal.
On June 4, 2004 Owens demanded 70-75% of the projected sales commission of $40,689, or a flat fee of $25,000. Owens later agreed to half of the gross commission. On June 11, 2004 she executed a commission share agreement with the Maryland sales representative using a Compaq Presario computer and software registered to Hornsby. Owens demanded payment of over $20,000 in commissions. On August 4 Owens received $20,000 by money order from the Maryland sales representative. Owens then paid Hornsby $10,000 in cash in exchange for his assistance in securing the LeapFrog contract. Hornsby instructed Owens to eliminate emails and other records that would reveal her involvement in the LeapFrog contract.
Concealment of the Kickbacks
In October 2004, following newspaper reports of the LeapFrog contract and the relationship between Hornsby and Owens, the FBI opened an investigation into PGCPS contracts with Erate and LeapFrog, leading to a federal grand jury investigation. Hornsby was aware in late 2004 of the federal investigations. He was also aware that the Board hired a forensic accounting firm, Huron Consulting Group (Huron), to investigate the contracts.
The indictment alleges that Hornsby misrepresented and concealed material information involving the E-Rate and LeapFrog contracts. Hornsby failed to disclose to the Board Owens’ involvement in the contract, his business relationship with the Former Employee through QSCi, and his financial interest in the LeapFrog and E-Rate contracts.
The indictment also alleges that Hornsby made several false statements to Huron during its investigation that was commissioned by the Board. Specifically, during a May 2005 interview with Huron auditors and in his written response to Huron’s June 3, 2005 written report, Hornsby falsely stated that: the Former Employee did not work for, or provide services to any clients of, QSCi; he did not know who developed the RFP; PGCPS personnel did not select any of the five bidders for the initial E-Rate because their proposals did not respond to the RFP; after he assumed leadership of PGCPS he did not accept any new E-Rate business and that he had secured two E-Rate contracts with a Houston, Texas school district before his tenure with PGCPS; he was not aware that Owens played any role in the LeapFrog contract; he did not have any role in negotiations to finalize the LeapFrog contract; and he did not personally benefit from the E-Rate and LeapFrog contract.
Obstruction of Justice
On the heels of the news of the federal investigation, Hornsby instructed PGCPS personnel to destroy back-up computer tapes containing his and other employee email. Additionally, the indictment alleges that on February 7, 2005, the Former Employee, who was cooperating with the FBI, advised Hornsby that an Erate representative received a subpoena to produce the computer files from the Compaq computer used by Owens to create the commission-share agreement, which computer Owens had subsequently sent to the Former Employee. Hornsby corruptly attempted to persuade the Former Employee not to produce the Compaq files.
Hornsby faces a maximum sentence of 20 years in prison followed by three years of supervised release for each mail and wire fraud count; and 10 years in prison followed by three years of supervised release for witness tampering and obstruction of justice. Hornsby is expected to have his initial appearance in U.S. District Court in early September.
An information was also filed today against Owens charging her with corruptly endeavoring to impede the internal revenue laws for failing to report the commission income from the LeapFrog contract. She faces a maximum penalty of 3 years in prison followed by a year of supervised release and a $250,000 fine. No court appearance has been scheduled.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.