$4.4 Million Seized From Houston Charter School Fraudsters

HOUSTON (CN) – The husband and wife founders of a Houston charter school amassed a fortune preying on their students’ parents. The duo pocketed fees they charged students to go on field trips and to wear street clothes on Fridays instead of school uniforms.

Federal prosecutors announced Tuesday they had recovered over $4.4 million in restitution payments from the couple, who are now behind bars, and $604,000 of that will be distributed to more than 4,000 parents.

Marian Annette Cluff, 70, and Alsie Cluff Jr., 69, founded the Varnett school in 1984, because they wanted to give their son a quality education.

With the Texas State Board of Education’s permission, they turned the private school into a taxpayer-funded charter school in 1998.

The Varnett Public School expanded to four campuses and had an enrollment of more than 1,000, predominantly comprised of economically disadvantaged black and Latino students. Marian was at the helm as superintendent, and Alsie acted as operations manager.

The school’s entanglement with companies owned by the Cluffs caught the attention of the Texas Education Agency (TEA) in 2013.

A TEA audit found the Cluffs’ real estate company leased space to one Varnett campus for $1 million per year, and their bus company charged the school $980,000 a year to transport students.

The TEA also discovered that the school paid the Cluffs more than $400,000 in salary in 2011, but also reimbursed them $1.5 million that year for what appeared to be personal expenses, including $132,000 on cruises and trips and $22,500 on airline tickets, according to an August 2013 report by The Dallas Morning News.

The Cluffs denied any wrongdoing, calling their extravagant spending “innocent mistakes,” but the TEA audit alerted federal prosecutors to the couple’s suspicious activities.

A federal grand jury indicted the Cluffs in July 2015 on mail fraud, tax conspiracy and tax evasion charges. They pleaded guilty and were sentenced in July 2018. Marian received a 10-year federal prison sentence, while Alsie got three years. They were also ordered to pay $4.4 million in restitution.

U.S. Attorney Ryan Patrick said at a news conference Tuesday that the government seized and auctioned the couple’s 7,000-square-foot Houston home and their ranch and farm equipment, and seized their bank and retirement accounts.

“We were able to collect the entire amount of restitution for everyone damaged in this case, which was $4.4 million,” Patrick said.

He said $1.8 million went to the IRS and $1.9 million back to the school itself, which is still in operation but under a new board of directors.

Patrick said the Cluffs ruthlessly defrauded their students’ parents. They only accepted cash or money orders, charging $10 for field trips, $3 for students to wear street clothes on Fridays rather than uniforms, and they funneled the money to off-the-books accounts they hid from the school office manager, its outside accountant and their income tax preparer.

Assistant U.S. Attorney Quincy Ollison led the prosecution. He told Courthouse News that, in addition to fleecing parents, the Cluffs defrauded school employees.

He said Varnett schools sold chocolate bars one year and Marian set a sales goal for a principal and vice principal.

“They did not meet the goal she had set them,” Ollison said. “They were told they were basically $14,000-plus short. So she required each of them to make up the difference from their own personal funds, and if they didn’t do it they were going to lose their jobs.”

Patrick said the chocolate fundraiser was actually for the benefit of the Cluffs themselves. The two employees will each receive restitution payments of $7,394.

The parents will be paid $110.02 in restitution for each year their child attended the Varnett School from 2007 to 2014, the time period covered by the Cluffs’ indictment.

Neil Sanchez, the Education Department’s Office of Inspector General Special Agent in Charge of its southern regional office, said at the news conference that the case is unusual because the government obtained the full $4.4 million in restitution the Cluffs were ordered to pay.

“It is rare when there are actually assets to seize, bank accounts to take, whether it’s cars or homes. Often times, the money is gone. It’s spent on vacations. It’s spent on consumables,” Sanchez said. “So in this case we’re able to keep the school afloat and the school is doing what it’s supposed to, which is educate children.”

“We’re also able in small part to make the families whole, but also protecting the taxpayer and the Treasury because of the $1.8 million in back taxes that were owed in this scheme,” he added.

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