Ex-Hopkins official guilty in tax case

Schuerholz admits not reporting money received in scheme

Kickback system outlined

Payments amounted to nearly $349,000 over four-year period

May 14, 1999|By Eric Siegel | Eric Siegel,SUN STAFF

Former Johns Hopkins University administrator Robert J. Schuerholz admitted yesterday in federal court to failing to report $348,900 in taxable income over a four-year period -- university money he received in what prosecutors described as a "billing fraud and kickback scheme."

The extent of Schuerholz's income tax evasion -- he avoided paying $97,692 in federal income taxes from 1992 to 1995 -- and the details of his scheme were revealed by prosecutors in a statement of facts that accompanied a plea agreement reached with the 63-year-old resident of Manor Glen Road in Baldwin.

Under the agreement, Schuerholz pleaded guilty to a single count of tax evasion for 1995, when he understated his income by $113,470 and failed to pay $31,772 in taxes.

U.S. District Judge Benson E. Legg in Baltimore set sentencing of Schuerholz, Hopkins' former executive director of facilities and management, for Sept. 3.

The U.S. attorney's office will seek a jail sentence of about 15 to 18 months for Schuerholz, who was fired from his position at Hopkins two years ago after allegations of kickbacks first surfaced in a civil lawsuit involving a university contractor. James P. Ulwick, Schuerholz's attorney, said he will offer an "alternative to incarceration" that will involve "charitable, community-based work."

The maximum penalty for the charge is five years in prison and a $250,000 fine.

Besides whatever penalty he receives on the criminal count, Schuerholz is also "liable for back taxes, plus penalties and interest" on the $97,692 he evaded paying from 1992 to 1995, said Domenic J. LaPonzina, spokesman for the Internal Revenue Service in Baltimore, which investigated the case with the Maryland attorney general's office.

Interest on unpaid taxes is 8 percent a year, while the failure to pay a penalty is 6 percent annually. Both assessments are compounded daily, LaPonzina said.

During the time of the scheme, Schuerholz, who began working at Hopkins in 1973, had sole authority to grant contracts up to $500,000.

According to the statement of facts presented by Assistant U.S. Attorney Carmina S. Hughes, Schuerholz set up bank accounts in the early 1990s for Business Services Co. and Power Contracting -- companies that did no work but existed merely as names on bank accounts into which Schuerholz deposited checks and withdrew money for personal expenses and investments.

The statement details a series of transactions involving Elco Electric Inc., an electrical contracting company and longtime university vendor headed by Schuerholz' cousin, Donald Schuerholz.

According to the statement, Robert Schuerholz told Donald Schuerholz that Business Services and Power Contracting were affiliated with Hopkins. Robert Schuerholz instructed his cousin to submit false or inflated invoices to the university, the statement said. After the university paid the money to Elco, Robert Schuerholz told his cousin to write checks to his shell companies, providing bogus invoices to cover the payments.

For example, Elco submitted an estimate of $17,900 in 1992 for electrical work at the university. Robert Schuerholz informed his cousin that the company had gotten the job but said Elco should submit an invoice to the university for $53,840. After Elco had received the payment, Robert Schuerholz told Donald Schuerholz to pay Power Contracting $34,800.

Robert Schuerholz never reported that payment -- and another payment that year of $42,000 -- on his tax return.

Schuerholz also did not report on his tax returns payments from Elco Electric of $100,950 in 1993; $57,680 in 1994; and $113,470 in 1975, the government's statement said.

Many of the false or inflated invoices from Elco Electric highlighted by prosecutors yesterday are also contained in a confidential audit that concludes that Hopkins was improperly or fraudulently charged $1.5 million as part of kickback schemes involving Robert Schuerholz and others.

Ulwick, Robert Schuerholz's attorney, acknowledged his client failed to report money he received from Elco but disagreed with the government's characterization of "kickbacks."

"There's another side to this. I hope it will come out at sentencing," Ulwick said. He declined to elaborate.

"Bob Schuerholz worked for Hopkins for many, many years, and anyone who fairly analyzes or reviews his work for the university would see that he accomplished a great amount of good for the school," Ulwick said.

Donald Schuerholz -- who has not been charged with any crimes -- said neither he nor his company did anything wrong.

"I just paid invoices that were presented to me," he said. "I got nothing out of it."

Dennis O'Shea, a Hopkins spokesman, said Elco has been precluded from doing business with the university. "They're not on our vendor list," he said.

O'Shea said the university would wait until the criminal process is completed before deciding whether to seek to recover money from any parties.

Robert Schuerholz was dismissed from Hopkins on April 11, 1997 -- the same day he was accused in a private civil lawsuit involving partners in a Carroll County heating and ventilation company of receiving kickbacks from the firm. The company, Thermal Services Inc., is no longer in business, and no mention was made of it or its relationship with Schuerholz in court papers filed yesterday.

Pub Date: 5/14/99

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