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Minneapolis
- Two executives of a Utah-based charity that promised "free"
fitness equipment to hundreds of school districts across the nation
were convicted today by a federal jury. Cameron J. Lewis, age 36,
of Highland, Utah, and his father, J. Tyron Lewis, age 65, of Monticello,
Utah, both were convicted on five counts of mail fraud, nine counts
of wire fraud, one count of bank fraud, one count of conspiracy
to launder funds, and thirteen counts of money laundering. Cameron
Lewis was also convicted on one additional count of money laundering.
Following seventeen days of trial before United States District
Judge Joan E. Ericksen, the jury deliberated one and one-half days
before finding the defendants guilty of those crimes.
According
to court documents and trial evidence, from 1999 to May of 2004,
Cameron Lewis and Tyron Lewis operated National School Fitness Foundation
(NSFF), a company that marketed and sold fitness programs and equipment
to school districts across the nation. Throughout the fraud scheme,
Cameron Lewis was the chief executive officer and Tyron Lewis was
the chairman of the board of trustees for that company. Through
NSFF, the defendants promised school districts that they could obtain
the fitness equipment "free" based on NSFF repayments
to schools with funds raised through government grants and private
donations. Cameron Lewis and Tyron Lewis also misrepresented to
schools that NSFF was operating as a non-profit charity. Based on
these false representations, school districts obtained financing
from banks to purchase the fitness equipment. What Cameron Lewis
and Tyron Lewis failed to disclose to schools, however, was that
they personally profited from NSFF through excessive and hidden
compensation, including lucrative contracts and kickbacks from vendors.
They also failed to disclose to schools the almost complete lack
of fund raising and the company's precarious financial condition.
Instead, Cameron Lewis and Tyron Lewis operated a Ponzi-type scheme
in which prior school districts were almost exclusively repaid using
funds obtained from subsequent school districts. Evidence at trial
showed that Cameron Lewis and Tyron Lewis defrauded over 600 schools
and dozens of banks across the nation of more than $60 million.
Trial
evidence also showed that Cameron and Tyron Lewis improperly enriched
themselves by accepting funds directly from NSFF and indirectly
through other sources, including profiting from hidden ownership
interests in several NSFF vendors and contractors. Furthermore,
the defendants furthered their fraud scheme by paying themselves
before the victims of their scheme or NSFF's other creditors. For
example, in March of 2004, when NSFF's financial circumstances were
especially precarious because of outstanding obligations owed to
school districts, Cameron Lewis and Tyron Lewis paid themselves
approximately $1.4 million under the guise of a repayment of a loan.
Evidence
at trial also showed that Cameron Lewis and Tyron Lewis conspired
to launder hundreds of thousands of dollars in proceeds from their
fraud by making lulling payments to school districts and using funds
to remodel their homes.
Both
Cameron Lewis and J. Tyron Lewis face a maximum potential penalty
of thirty years in prison and a $1 million fine on each count of
mail fraud, wire fraud, bank fraud, and conspiracy, and up to twenty
years in prison and a $250,000 fine on each count of money laundering.
The actual sentences will be determined by Judge Ericksen. Sentencing
dates have not been set.
Two
co-defendants pled guilty earlier this year in connection with the
fraud. Cameron Lewis' sister, Shanna L. Black, age 28, of Lehi,
Utah, pled guilty in February of 2006, to a misdemeanor charge in
connection to the operation of National School Fitness Foundation.
NSFF's former chief financial officer, Marion H. Markle, age 45,
of Highland, Utah, pled guilty in April of 2006, to misprision of
a felony related to the Lewises' scheme to defraud.
Guilty
pleas were also obtained in a related case. Joseph Mont Beardall,
the owner and president of School Fitness Systems, LLC, and the
company, School Fitness Systems (SFS), pled guilty in July of 2004
to defrauding financial institutions and Minnesota school districts
of more than $1 million. SFS managed the delivery and installation
of fitness equipment, as well as received payments from schools
which were divided between NSFF and SFS. As part of his plea agreement,
Beardall agreed to pay restitution to victims by selling his $1
million Highland, Utah, residence and various collectibles and bronzes;
and by liquidating his interests in the Beardall Family Foundation
Trust and his IRA account. School Fitness Systems agreed to surrender
its assets, including inventory and bank accounts valued at approximately
$2.6 million to be paid towards restitution.
This
case is the result of a multi-agency investigation by the Federal
Bureau of Investigation; the Internal Revenue Service, Criminal
Investigation Division; the United States Postal Inspection Service;
the Minnesota Department of Commerce, Division of Enforcement; the
Minnesota Office of State Auditor; and the Minnesota Attorney General's
Office. The Illinois, California, and Pennsylvania Attorneys General
also assisted in the investigation of this case. Assistant United
States Attorneys Robert M. Lewis and W. Anders Folk prosecuted the
case.
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