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Former Obama Education Advisor Seth Andrew in Talks to Resolve Charter School Theft Case

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  • Federal prosecutors and a lawyer for former Obama White House education advisor Seth Andrew are in talks about potentially disposing of the criminal case that accuses him of ripping off a charter school network that he founded of $218,000, a court filing revealed.
  • Andrew, 42, who is free on a $500,000 bond, is founder of Democracy Prep Public Schools, which he left in 2013 to join the administration of then-President Barack Obama.
  • Prosecutors last month accused Andrew of looting a series of escrow accounts belonging to individual schools in the Democracy Prep network in 2019.

Federal prosecutors and a lawyer for former Obama White House education advisor Seth Andrew are in initial talks about potentially disposing of the criminal case that accuses him of ripping off a charter school network that he founded of $218,000, a court filing by a prosecutor says.

Those discussions came to light just a month after Andrew was arrested on a criminal complaint in New York City on charges of wire fraud, money laundering and making false statements to a financial institution.

But a person familiar with those discussions, who requested anonymity because of the nature of the talks, said they do not relate to a possible plea deal, but instead are giving Andrew's new lawyer time to get up to speed in the case.

Andrew, 42, who is free on a $500,000 bond, is founder of Democracy Prep Public Schools, which he left in 2013 to join the administration of then-President Barack Obama.

Prosecutors last month accused Andrew of looting a series of escrow accounts belonging to individual schools in the Democracy Prep network in 2019.

Andrew then allegedly used most of that money to maintain a bank account minimum, which in turn gave him a more favorable interest rate on the $1.776 million mortgage for the Manhattan residence that he shares with his wife, CBS News anchor Lana Zak.

Andrew and Zak obtained a mortgage rate of just 2.5%, or 0.5% less than they would have had to pay, as a result of having more than $1 million on deposit with the lender.

Without the more than $142,000 in allegedly stolen funds that he deposited with the lender, "Andrew would have been eligible for only a 0.375% interest rate deduction," the U.S. Attorney's Office for the Southern District of New York noted last month.

Democracy Prep has said it learned of the unauthorized withdrawals and then contacted authorities.

Zak, who has three children with Andrew, is not accused of wrongdoing.

Thursday was the legal 30-day deadline for Andrew to be charged in the case by either a grand jury indictment or another type of charging document, known as an information, which is typically filed when a defendant has signaled his willingness to plead guilty.

On Thursday, the prosecutor in the case asked Manhattan federal court Magistrate Judge Barbara Moses to extend that deadline.

"Defense counsel and the Government are discussing a potential disposition to this case and other matters," Assistant U.S. Attorney Ryan Finkel wrote in a court filing.

"Therefore, the Government is requesting a 30-day continuance until June 27, 2021, to continue the foregoing discussions. The undersigned personally spoke with defense counsel who specifically consented to this request."

Moses granted the request for a continuance in an order which was made public Friday.

A disposition in a criminal case typically refers to a guilty plea, an acquittal at trial, or, less commonly, the dismissal of charges by prosecutors.

It is common for prosecutors and defense attorneys to discuss a possible plea agreement, but such talks do not always end with a deal.

And the person familiar with the discussions in Andrew's case said the postponement of the indictment deadline stems from the fact that his lawyer, Edward Kim, only recently was retained to represent him in this case, not from a move to resolve the case as of now by a plea.

The U.S. Attorney's Office for the Southern District of New York declined to comment.

Kim declined to comment as well.

Andrew until his arrest had been CEO of Democracy Builders, a group that 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."

Democracy Builders in 2020 bought the former campus of Marlboro College in Marlboro, Vermont, for more than $1.7 million, with the goal of setting up a school there dubbed Degrees of Freedom.

The group removed Andrew as chairman of its board of directors and restricted his access to all financial accounts after learning of his arrest.

Natasha Trivers, current CEO of the charter school network Democracy Prep, last month said in an email to the network's families that 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."

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."

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