Feds charge Pa. cyber school founder with 11 counts of fraud, conspiracy

PITTSBURGH — They used to call Nick Trombetta “coach,” when he led high school wrestling and football teams in Beaver County and East Liverpool, Ohio.

Then they called him a pioneer in education and a miracle-worker in Midland, where he built an empire that included the state's largest cyber school, a charter school, a performing arts center and a nonprofit education management foundation with 400 clients.

This article was written by David Conti, of Channel 11's news exchange partners at TribLIVE.

“He brought employment to a dying steel town and to a region that needed it,” said Midland Council President Paul Anthony. “We can't say thanks enough.”

On Friday, U.S. Attorney David Hickton called Trombetta a cheat, charging the award-winning educator with 11 counts of fraud, filing false tax returns and conspiracy. Trombetta, 58, of East Liverpool was charged Wednesday and the indictment unsealed Friday. Authorities also charged his accountant Neal Prence with assisting Trombetta in the tax fraud scheme.

Trombetta and Prence surrendered to the FBI on Thursday, made initial appearances and were released.

Hickton outlined a complicated scheme that he said Trombetta created to skim about $1 million off for himself.

“He is charged with creating a series of connected for-profit and not-for-profit entities to siphon taxpayer funds out of PA Cyber and to avoid federal income tax liabilities...

“As the founder and CEO of PA Cyber, Trombetta was the custodian of the public trust, receiving public funds,” said Hickton. “These charges reflect our obligation to protect the education of our children, who are our future, and to protect the compact with hardworking taxpayers.”

Said FBI Special Agent in Charge Gary Douglas Perdue, “Charter schools are funded with public money that is intended to help educate children in our communities. When individuals enrich themselves with this money rather than act as stewards of the education funds entrusted to them, our communities and the children we are obligated to educate are the true victims.”

Akeia Conner, Special Agent in Charge of the IRS-Criminal Division-Philadelphia Field Office, added, “During a six-year period that began in 2006, Mr. Trombetta, with the assistance of CPA Prence, concealed his position as the direct beneficiary and recipient of funds generated by PA Cyber. Mr. Trombetta exerted his influence to control the flow of funds and falsify corporate books and records, ultimately shifting more than $8 million in income attributable to him, to the federal income tax returns of other persons so as to conceal his true income from the IRS.”

Trombetta and his lawyer did not immediately return calls seeking comment about the charges.

The charges cap an investigation that became public in July 2012 when federal agents searched Trombetta's office at the Pennsylvania Cyber Charter School that he founded in 2000. They also served warrants at the National Network of Digital Schools Management Foundation (NNDS) in Beaver, which he founded in 2005; a property in Calcutta, Ohio, that housed offices of two foundation contractors led by former PA Cyber and foundation executive Brett Geibel; and the Koppel office of Prence Accountants, the address for which appeared on corporation papers for those contractors and other entities.

Geibel, 43, of Leechburg, was not charged.

The U.S. Attorney's Office on Aug. 2 charged Trombetta's sister, Elaine Neill, of Center, with filing a false tax return for claiming income due to a relative and claiming inappropriate business deductions. Neill is executive director of Prima Early Learning Center in Midland, which Geibel founded in 2010. She is expected to plead guilty Oct. 8.

Tax and property records showed huge sums of money moving among the schools, the foundation, Geibel's companies and Trombetta. Much of it came from taxpayers who fund PA Cyber and Lincoln Park Performing Arts Charter School through payments by the state and the school districts in which the charters' students live.

A dozen people, most with roots in Midland, served on multiple boards and payrolls. Trombetta, who gave them jobs while rehabilitating a rusted-out former steel town with new buildings, stood quietly at the center of the investigation, a contrast to decades of loud public life.

HOMETOWN BOY

Trombetta grew up in Aliquippa and graduated from nearby Quigley Catholic High School in 1973. With a bachelor's degree from Slippery Rock University, he started teaching and coaching wrestling at Quigley before moving to East Liverpool for a decade.

He returned home in 1992 to a very different Aliquippa, where the collapse of the steel industry in the 1980s decimated enrollment at most Beaver County schools. After three years as a principal in Aliquippa, he became superintendent of Midland schools, which in 1986 closed its high school and was busing students to Ohio because surrounding schools wouldn't accept them.

When the state passed laws to allow charter schools, Trombetta persuaded the Midland school board to sponsor one that would allow kids there and across the state to stay home and learn online.

“All we wanted to do was help some of our kids locally,” Trombetta said in 2000 answering instant criticism that his school would take tax money from traditional districts. “We weren't sure how big we wanted to get, but we knew it is very difficult for Midland to reject anybody when we were rejected ourselves.”

That us-against-the-world attitude spread through his empire as Trombetta brought many Midland leaders on board at PA Cyber and its spin-offs while he kept a dual role as head of the cyber school and Midland superintendent until 2007.

When former PA Cyber employee Jay Paisley of Big Beaver questioned the charter schools' funding formula while running against then-Rep. Mike Veon in 2006, Trombetta threw his support behind the incumbent, who won the primary.

“For whatever reason, he thought I was attacking the cyber school and really fought back,” Paisley said recently. “I haven't spoken to Nick since then.”

Other school districts sued over their loss of money and legislators called for changes in the funding formula. Trombetta won every battle.

“This is all about him trying to help children. That's always been his focus,” Anthony said.

MONEY MACHINE

State law requires public schools to pay charters for each student in their district enrolled in the charters, averaging up to about $15,000 per student. Because cyber programs have less overhead, PA Cyber quickly found itself flush with cash.

Trombetta found use for it. He founded NNDS in 2005 and within weeks had PA Cyber paying it millions to manage the school. PA Cyber gave NNDS its copyrighted Lincoln Curriculum, which NNDS licensed back to the charter and hundreds of other schools.

Trombetta used money from the cyber school, Midland schools, Beaver County and the state to build the $23.5 million Lincoln Park Performing Arts Center, where he opened the second charter school in 2007.

The spending and intermingling of board members and staff for all of the entities prompted a state grand jury investigation and warnings from the state Department of Education that ended with no charges or penalties. NNDS and PA Cyber split some board members so they would only work with one group at a time.

The empire kept spreading. Geibel, who served as director of technology at PA Cyber and senior vice president at NNDS, created Avanti Management Group in July 2008 and a subsidiary, Palatine Development LLC, in January 2010, state records show. While NNDS managed PA Cyber, Avanti managed NNDS.

Property passed among the groups. NNDS paid $457,000 in 2007 for two Calcutta, Ohio, properties that would house Avanti offices. Palatine bought the properties in April 2011 for $495,000, and sold them in November 2012 for $400,000, property records show.

Trombetta paid $933,000 for a condo in Bonita Springs, Fla., in April 2011. He sold it eight months later for $10 to Palatine, which, according to paperwork signed by Geibel, fetched $850,000 for the condo in November 2012.

NO MORE MIRACLES

People referred to Trombetta's empire as the “Midland Miracle.” A former steel town that 30 years ago couldn't support a high school had shiny new buildings in its downtown employing nearly a thousand people in high-tech education.

“You look around and everything here is positive now,” Anthony said.

The University of Pittsburgh, from which Trombetta received a doctorate in education, honored him in March 2012 for his achievements in education, Three months later he left PA Cyber, which by then had more than 11,000 students, eight offices and a budget of more than $100 million.

When agents searched PA Cyber, Trombetta's hand-picked successor as CEO, Michael J. Conti — a former Midland school director who also worked with Avanti — said the school was not a target.

Trombetta went to work at Kuhn's Quality Foods as its personnel director. PA Cyber fired several leaders and continues to flourish.

The Associated Press contributed to this report.

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