MARLBORO — The co-founder of Democracy Builders, which bought the old Marlboro College campus last summer, has been arrested and charged with wire fraud and money laundering.
According to a news release from the United States Attorney’s Office for the District of Southern New York, Seth Andrew allegedly stole $218,005 from Democracy Prep, the charter school network that he founded in 2005. Andrew left Democracy Prep in 2013 to take a job with the United States Department of Education and also served as a senior adviser in the Office of Educational Technology at the White House.
In addition to wire fraud and money laundering, Andrew has also been charged with making false statements to a financial institution.
In June 2020, Andrew co-founded a new venture, Democracy Builders, on the campus of Marlboro College. Democracy Builders bought the campus for $225,000 in cash and the assumption of $1.5 million debt the college owed to the Marlboro Music Festival. Following the sale of the campus, Marlboro College closed and merged with Emerson College in Boston. Democracy Builders established Degrees of Freedom on the campus, launching “a new model of higher education, where high school students can earn college credit, and high school/GED graduates can get the boost they need to access, competitive colleges and well-paid careers.”
Degrees of Freedom is aimed at students in Democracy Prep programs, and many of the people setting up the program in Marlboro were at one time affiliated with Democracy Prep, but there is no official connection between the two organizations.
“Upon learning of the allegations against Mr. Andrew, the [Democracy Builders] board of directors held an emergency meeting to remove Mr. Andrew from his position as board chair and restrict his access to all financial accounts and resources effective immediately,” stated Marcellina Blow-Cummings on behalf of the Democracy Builders’ board in an email to the Reformer. “The board of directors takes its fiduciary role and responsibilities seriously and will ensure that contributions made to Democracy Builders Fund are used for the mission and intended purposes of Democracy Builders and its various projects and programs.”
“The alleged actions precede Degrees of Freedom’s inception and our program is beyond the scope of this matter,” said Chandell Stone, CEO and co-founder of the program. “Degrees of Freedom remains focused on a successful launch in September, which will expand college access for low-income and first-generation college students. Degrees of Freedom is currently in the process of establishing itself as a separate 501c entity from Democracy Builders, and will conduct an internal review to ensure all proceeds designated for the DoF project have been appropriately managed.”
Christopher Serkin, chairman of the Marlboro Music Festival board of trustees, told the Reformer he and the rest of the board are monitoring the situation closely in advance of the Marlboro Music Festival’s summer program, its 70th year on the campus on Potash Hill.
“We will welcome our musical community back this summer as planned,” he said. “We remain completely committed to our home on the campus. We are invested in the land and the community and look forward to being back in our home this summer.”
Democracy Prep operates several charter schools throughout United States including several in New York City.
As part of its authorization to operate charter schools in New York, Democracy Prep set up three escrow accounts to be accessed only if the schools dissolved, states information from the U.S. Attorney’s Office.
On March 28, 2019, Andrew withdrew more than $142,000 from the escrow accounts, according to the news release. That same day, it states, Andrew opened a “fraud account” into which he deposited about half the funds, stating he was “a key executive” with Democracy Prep, though he had left the organization in 2013.
Five days later he deposited the rest of the funds into the account. At the time he deposited the money, states the notice, Andrew was hoping to obtain a favorable mortgage with reduced interest rates available to people with more than $250,000 in a bank account. To take advantage of those favorable rates, banks require the funds be owned by the customer or a business owned by the customer. Because of the deposits, Andrew became eligible for a .5 percent rate deduction, states the notice. Andrew then purchased a residential property in New York City for $2.368 million dollars.
On Oct. 17, 2019, Andrew allegedly closed out a third escrow account, receiving more than $75,000. He then moved all the money into another bank, setting up a certificate of deposit.
“Andrew then transferred the funds from the certificate of deposit — including the funds stolen from the Escrow Accounts — into a bank account held 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,” states the news release. “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.”
Andrew could be sentenced to up to 20 years each for wire fraud and money laundering and 30 years for making a false statement to a bank.
Natasha Trivers, chief executive officer of Democracy Prep, wrote in a notice to Democracy Prep families that she took over Democracy Prep in 2019 and since then, has instituted a series of financial safeguards that led directly to the discovery of Andrew’s unauthorized withdrawals.
“Upon learning of the unauthorized withdrawals, Democracy Prep alerted the appropriate authorities,” she wrote. “As the victim of this crime Democracy Prep has continued to assist the authorities as they investigate and prosecute this crime to the full extent of the law.”
Trivers wrote in her notice that Democracy Prep’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. ... 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.”
According to information from the U.S. Attorney’s Office, Andrew was arrested in New York City on Tuesday morning.
Earlier this year, Andrew, who moved to Marlboro with his family, announced during a community meeting that Degrees of Freedom was selling the campus to Adrian Stein and his Type 1 Civilization Academy Marlboro Campus LLC. The plan was for Degrees of Freedom to then lease the campus back for its programs while Stein was to host “civilizational” forums on campus. However, in March, that agreement fell through.
“I am really quite shocked, flabbergasted to be honest,” wrote Stein in an email to the Reformer. “I can however say without too much hesitancy that the re-conveyance of the property back to Democracy Builders Fund from Type 1 Civilization Academy was done under highly suspect and false pretenses that could amount to fraud. Our ownership claims to the property are very strong and we are in the process of commencing our legal suit.”
Andrew did not respond to a request for comment.