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For Immediate Release:  
For Further Information:
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October 3, 2008  

Peter Aseltine
609-292-4791

Office of The Attorney General
- Anne Milgram, Attorney General
Division of Criminal Justice
- Deborah L. Gramiccioni, Director

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Head of Private Education Services Corporation Sentenced to Prison for Fraudulently Overbilling Districts $1.3 Million

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TRENTON – Attorney General Anne Milgram announced that the former chief executive officer of High Road Schools of NJ, now known as New Road Schools of NJ, was sentenced to state prison today for using the corporation to fraudulently overbill New Jersey school districts in excess of $1.3 million in connection with four private schools it operated in the state for special education students.

Ellyn Lerner, 56, of Long Branch, was sentenced to three years in state prison by Superior Court Judge Bradley J. Ferencz in Middlesex County. She also was ordered to pay a fine of $50,000. Lerner pleaded guilty on June 2 to an accusation charging her with second-degree misconduct by a corporate official. The charge resulted from an investigation by the Division of Criminal Justice Corruption Bureau.

As president and CEO of High Road Schools of NJ, Inc., and a related corporation, Kids 1, Inc., Lerner had responsibility for all aspects of the administration of the corporations. Kids 1 is now known as Specialized Education Services, Inc. and no longer does business in New Jersey.

In pleading guilty, Lerner admitted that High Road, which has its principal offices in Sayreville, and Kids 1 fraudulently overbilled New Jersey school districts $1,332,247 between July 1, 2001 and Oct. 19, 2004 for sending students to their four special education schools.

Deputy Attorney General Robert J. Brass prosecuted the case. It was investigated by Detectives Benjamin Kukis and Scott Donlan of the Division of Criminal Justice Corruption Bureau.

School districts contract for special education services through the state Department of Education. The private schools are paid according to department regulations based on their reimbursable costs plus a 2.5 percent profit. Lerner admitted that High Road and Kids 1 violated the regulations in order to increase their reimbursable costs and profits.

Schools are required to bill the costs of supplies and equipment in whole units, and depreciate amounts over $2,000 over a period of years, billing only a portion each year. The Corruption Bureau investigation revealed that Lerner’s corporations broke down whole units into multiple, arbitrary amounts under $2,000 to get around the regulations and increase their reimbursements.

In addition, the corporations billed districts in New Jersey for equipment such as computers and books that were sent to schools owned and operated by Kids 1 in other states. Those bills included $250,000 for computers and textbooks sent out of state during the fiscal year ending June 30, 2002. In other instances, the corporations violated the regulations by billing districts for expenditures in one year, when the items were not put into service or received until a later year.

High Road and Kids 1 previously paid restitution to the affected school districts totaling $914,233. As part of the plea agreement, New Road Schools was required to pay the remaining balance of $418,024 in restitution to the school districts, and pay $125,000 to the Division of Criminal Justice to cover the costs of its investigation and prosecution.

In addition, New Road Schools entered into an agreement with the Division of Criminal Justice requiring, among other things, that the corporation retain an independent monitor, approved by DCJ, to review and recommend changes to New Road’s business policies, practices and procedures. DCJ can insist on implementation of any changes and related training recommended by the monitor. DCJ will receive reports from the monitor and an independent auditor. The monitor will be in place until the final acceptance by the Department of Education of the New Road Schools Annual Report for the fiscal year running from July 1, 2008 through June 30, 2009.

Lerner was required to divest herself of all interests, employment and affiliation with New Road for the duration of her criminal sentence, including any period of parole or probation. She also must divest herself with respect to Specialized Education Services if it does any business in or with the State of New Jersey or any of its subdivisions.

High Road previously operated four schools: (1) High Road Lower School, which was relocated from East Brunswick to the corporate headquarters in the Parlin section of Sayreville; (2) High Road Upper School, formerly located in Somerset but moved to Franklin Township; (3) High Road School of Ocean County in Toms River; and (4) High Road School of Bergen County in Lodi, which has ceased operation. The private for-profit schools serve numerous school districts throughout the state, not only those located in their home counties. Beginning in the 2007-2008 school year, the three remaining schools were re-named New Road School of Parlin, New Road School of Somerset, and New Road School of Ocean County.

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