College Housing Non-Profit to Recover Millions in Funds Stolen by Founder
George Scott, former president of Educational Housing Services, will finally pay the price for sucking millions of dollars out of the very organization he founded more than two decades ago.
The disgraced former president must repay $4.5 million to the organization -- after agreeing to settlement terms with the New York State Office of the Attorney General.
Scott founded EHS in the late 1980's with the mission of providing low-cost housing to students and faculty at institutions of high-learning throughout the city. He embarked on a far less honorable mission in 2002 when he created Student Services Inc., which he used to funnel money from EHS for years.
SSI secured numerous contracts with EHS from 2003-2009 to provide cable, internet and telephone services to residents. The sham organization purchased those services from large telecommunication companies and then proceeded to sell them to EHS at ridiculously inflated rates -- services that EHS could've easily purchased directly from the larger telecommunications companies at much lower rates.
In 2008, EHS and SSI agreed to a multi-million dollar telecommunication services agreement that would've ended in December 2013. SSI will forfeit the remaining $2 million it was expected to earn over the remainder of the contract.
"Siphoning millions of dollars at the expense of college students is deplorable," NYS Attorney General Eric Schneiderman, said in a release. "We have no tolerance for officers and directors who treat a not-for-profit organization as a vehicle for personal enrichment, and we will hold them accountable for breaking the law."
Five members of EHS's board of directors, who served the non-profit while Scott orchestrated his schemes, also agreed to pay back $1 million in restitution for failing to exercise adequate oversight over the organization. Not only did the board fail to oversee Scott's seemingly blatant abuse of power, but they also rewarded him with pricey perks, lavish compensation, and costly travel and housing expenses unrelated to EHS operations.
"Scott's conduct and the role of the EHS board in enabling his abuses represent the complete opposite of what is expected from the leadership of not-for-profit organizations in New York State," Schneiderman said.
Each of the members is required to pay back $25,000 individually and a collective $850,000 to EHS for the board's oversight failures and for authorizing excessive compensation for their own services on the board. Scott and the former board members are prohibited from ever serving as officers, trustees or directors at a not-for-profit organization in New York again.
The money recouped from the settlement will go towards lowering student rental costs and upgrading housing amenities.
Get the ICYMI: Today's Top Stories Newsletter Our daily newsletter delivers quick clicks to keep you in the know
Catch up on the day's news and stay informed with our daily digest of the most popular news, music, food and arts stories in New York, delivered to your inbox.