nrodriguez@courier-journal.com • September 8, 2010

http://www.courier-journal.com/article/20100908/NEWS01/309080094/Felner+associate+%E2%80%98stunned++by+guilty+verdict+on+IRS+count

More than two years after University of Louisville officials tipped federal investigators to a possible fraud scheme involving a former education dean, an Illinois man accused of being involved in the deception has been convicted of conspiracy to impede and impair the Internal Revenue Service.

Schroeder, 53, of Port Byron, Ill., was acquitted on two other charges — mail fraud and conspiracy to commit money laundering.

He faces a maximum sentence of five years in prison on the IRS conviction and is scheduled to be sentenced on Dec. 14.

In the courtroom after the jury returned the verdict following a day and a half of deliberation, Schroeder said, “I feel OK. Kind of stunned.” He said he was looking forward to going home.

Schroeder had been accused of participating in a scheme with former University of Louisville education dean Robert Felner that bilked U of L, the University of Rhode Island and the Rock Island County Council on Addictions out of $2.3 million. Schroeder was executive director of the Rock Island agency until this past winter.

Schroeder, who took the stand in his own defense during the four-week trial, maintained he was duped by Felner, who pleaded guilty earlier this year to fraud, money laundering and tax evasion in connection with the scheme. Felner is currently serving a 63-month sentence.

The defendant said he was used by Felner to set up an educational center in Illinois — the National Center on Public Education and Prevention — and that the former dean later used the center to steal money from U of L and the University of Rhode Island. Schroeder served as the center’s executive director.

Schroeder repeatedly said he was innocent of all charges, and that Felner lied to him and forged his signature on documents used to steal the money.

David Mejia, Schroeder’s attorney, said he was disappointed with the guilty verdict on the IRS charge.

“I believe the conviction is flawed. I believe the evidence didn’t support it,” said Mejia. “But we’re very gratified for the acquittal on the other charges.” Mejia said he will likely appeal.

First Assistant U.S. Attorney John Kuhn said the government “is pleased” with the IRS conviction, but did not comment on the fraud or money laundering acquittals.

Schroeder, according to federal officials, failed to accurately report income he received from the Illinois center, and also claimed business expenses on his taxes that he had already been reimbursed from his various employers and the center.

Over four weeks, federal prosecutors tried to convince jurors that Schroeder knew what Felner was doing, and participated in an alleged scheme that involved stealing money from the two universities and the Rock Island agency. The government said in court that the two men then diverted the money to three different bank accounts in Illinois, Rhode Island and Louisville that were set up as corporate accounts for the National Center on Public Education and Prevention.

The majority of the stolen money went to Felner, who pocketed an estimated $2 million, including $450,000 of a $694,000 federal No Child Left Behind grant that U of L secured to help improve student achievement in Kentucky. Schroeder, they alleged, also benefitted, netting almost $300,000.U of L officials said Wednesday the university has moved on in the two years since the federal investigation into Felner’s misdeeds became public — undertaking several audits and strengthening its grant management and business oversight.

“We’re glad the final piece of this criminal case is over,” said U of L spokesman Mark Hebert, following the Schroeder verdict. “Justice has been served.”

At the University of Rhode Island, where $1.7 million was stolen from an educational center set up by Felner in the late 1990s, officials also said they were glad the case was resolved. “It puts some finality to it,” said Bob Weygand, vice president of administration and finance at the University of Rhode Island.

During the trial, prosecutors called almost 40 witnesses from U of L, Rhode Island and Illinois to testify about their dealings with Schroeder, the Illinois center and Felner.

Hundreds of bank and tax records, contracts, invoices and e-mails were also presented by prosecutors, who argued Schroeder and Felner were long-time, “best buddies” who, in addition to stealing the money, created “do-nothing jobs” for each other at the expense of their employers. Prosecutors said they could find no record of any work produced by Schroeder at either university.

Additionally, they said that Schroeder took checks made out to Felner for his alleged work in Rock County, and deposited them in the Illinois center’s bank account. Schroeder later withdrew the money from the account to pay his executive director salary, and travel expenses.

Felner was referred to repeatedly during the trial by both the prosecution and defense, who painted him as an arrogant, high-maintenance, abrasive dean who used his intelligence to deceive and manipulate friends, colleagues and employees, some of whom unwittingly helped him commit his crimes.

In some cases, he rewarded those who assisted him, sending them thousands of dollars in monetary gifts, the attorneys alleged.

Schroeder, whose Illinois house is in foreclosure, remained upbeat throughout his trial, often chatting and laughing with his defense team, and sharing pleasantries about the weather, length of the trial and sports with federal investigators and prosecutors.

During his testimony, Schroeder said he has started a consulting business, and had plans to work with an accountant to review and straighten out any problems with his taxes “once the trial was over.”

The trial in the court of U.S. District Judge Charles Simpson III lasted more than four weeks despite original estimates of half that amount of time. It looked at one point like the trial might wrap up last week until Simpson decided to remove one of the jurors on Friday and replace him with an alternate after a day of deliberations.

That forced the jury to have to re-start its process on Tuesday morning.

It came back with its verdict about 1:30 p.m.