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Millions of federal dollars meant to help disadvantaged and struggling students have flowed into the Davis School District, but authorities say greedy employees diverted some of the money for their own use.
An indictment unsealed Wednesday accuses the district's former director of federal programs and her husband, a grant specialist, of stealing millions of dollars in grant money during the past two decades.
The money allegedly was used to finance a lavish lifestyle that included a big home, fancy vacations and nice cars, officials said.
Susan G. Ross and John D. Ross adamantly deny the allegations. They also say they have not lived a wealthy lifestyle.
"In 34 years of giving, we did nothing but protect those kids," Susan Ross said. "I did not steal a dime, and neither did my husband."
Susan Ross, 62, and John Ross, 64, are charged with mail fraud, money laundering, theft from a state agency receiving federal funds and copyright infringement.
She was employed by the district beginning in the 1970s. John is the former Title I specialist for the Utah Office of Education and worked as a grant specialist for the Davis district from March 2000 to February 2005.
In another indictment, Susan Ross' secretary, Stella V. Smith, is charged with running a separate scam that netted more than $300,000.
Smith could not be reached. Her attorney, Paul Grant, said he was reviewing the indictment Wednesday and had no comment.
"This case represents an egregious abuse of the public trust by these three employees of the Davis School District," said Timothy Fuhrman, special agent in charge of the FBI's Salt Lake City office.
Fuhrman said the trio had lined their pockets with ill-gotten gains - the indictments accuse Susan and John Ross of stealing approximately $4.3 million in the past five years alone and Smith of taking $338,189 in roughly the same period - and called their alleged conduct "staggering."
The money in both cases came from the U.S. Department of Education's Title I program, which helps financially disadvantaged students. The program nationwide provided $12.7 billion in grants this year, with $50 million going to Utah. The Davis School District received more than $2 million a year in benefits between 1998 and 2005, according to the Department of Education.
Brett Tolman, the U.S. attorney for Utah, said the motive is greed. Susan and John Ross used the trust given them in their positions to defraud the government and students out of valuable funds, he said.
"They used that trust to pad their bank accounts and lead lavish lifestyles," he said.
Tolman said there is no evidence that the couple and Smith knew about each other's alleged scam, but added, ''There are similarities too striking to ignore.''
The 47-count indictment accuses the Rosses of stealing the $4.3 million between Jan. 1, 2000, and May 6, 2005, by selling photocopies of books at vastly inflated prices through an intermediary company.
The alleged scheme was uncovered by a school district audit that led to an investigation by the U.S. Attorney's Office, the FBI, the U.S. Department of Education Office of Inspector General, the IRS and the Farmington Police Department.
The indictment, issued Tuesday, says the scheme began as early as 1985. Authorities said they limited their case to the five-year period because of the statute of limitations and the age of some of the evidence.
According to the indictment, Susan and John Ross routed orders for Title I program books through a company called Research and Development (R&D), which was run by two of their associates, identified as T.A. and K.E.
The Rosses allegedly had the school district send payment checks to the operators of R&D, which kept 8 percent as its cut and gave the remaining 92 percent to Notable Education Writing Services (NEWS), a company owned by the Rosses, the indictment says.
The educational materials provided were unauthorized copies of copyrighted books printed by third-party vendors, the indictment alleges. The books were spiral-bound color copies allegedly sold for as much as seven times the price of the hardcover copies sold by the publishers.
In one case, R&D allegedly charged $93 for each copy of Away We Go, a book that had a list price of $13.22. One Potato Two allegedly was sold for $79 apiece, instead of the list price of $17.
Prosecutors have filed a notice that if the Rosses are convicted, they will seek forfeiture of ill-gotten gains, which they allege includes at least $4,295,787, a 2001 Jeep Grand Cherokee and a 2006 Acura MDX, a luxury SUV that retails for about $40,000.
Susan Ross said she was authorized by the district to work through R&D as an independent contractor to provide Title I products. She said the cost of the book included a whole tutorial program of learning materials, such as reading comprehension lessons and other books.
"We're not talking about a book. We're talking about a kit," Ross said.
Her Salt Lake City attorney, Paul Gotay, said the Rosses have provided all their tax documents to investigators to show that their earnings were legitimate.
''Who in the hell steals money, then does a perfect tax return?'' Gotay asked.
Susan Ross, who was hired by the district in 1973, retired in January 2005 as director of federal programs. At the time, she was making $80,000 in annual salary. John Ross, who retired in June 2005 as a grant writer, had been making $73,000 a year.
Smith, who left the district in 2005, was making $32,000 annually.
The 54-year-old Layton woman is charged with 37 counts of mail fraud for allegedly submitting phony bills for textbooks that were never ordered and never delivered. The indictment against her says she collected $338,189 through fake invoices from 1999 to 2005.
Under district procedure, Smith had the authority to submit requests for payments of less than $1,000 without management approval. Checks for the nonexistent purchases allegedly went through a business she called E.B. Smith Co.
District officials said they conducted an internal audit of Title I spending for a number of reasons, in part after questions were raised by some principals and teachers about the poor-quality books. The audit revealed a large sum being spent on the books, which were coming exclusively from one company, Superintendent Bryan Bowles said.
He said the situation had escaped notice because Susan Ross bought books in sums below her purchasing limit. She denied making any profit from the transactions when questioned by the district and soon announced her retirement, Bowles said. The district then alerted authorities to its concerns.
Bowles said Wednesday he felt betrayed by the Ross' alleged actions.
"We do not stand for people who steal from children," the superintendent said.
The Rosses have been ordered to appear in U.S. District Court on Monday. Smith also will be issued a summons, authorities said.
The maximum penalty for mail fraud and money laundering is 20 years in prison; for theft, 10 years; and for copyright violations, five years.
Carol Lear, the Utah Office of Education director of school law and legislation, said she did not think these cases should hurt the state's chances of getting future federal grants.
To prevent future abuses, she said, the state might consider examining district reports to the state "to see if there's a reasonable way to have a second check on these kinds of things."
* Two former Davis School District employees allegedly funneled more than $4 million in federal grants into their own pockets during the past five years.
* The case helped prompt the FBI to establish a new tip line to combat public corruption in Utah, Idaho and Montana.
* Anyone who believes the public trust has been betrayed by a public officeholder or someone in a position of public trust can call 1-866-50-BRIBE, or 1-866-502-7423.