OREM — After an investigation that took more than six months, two former National School Fitness Foundation executives have been charged with federal felonies in Minnesota for allegedly defrauding dozens of school districts and banks around the country.
Cameron and Ty Lewis headed the American Fork-based charity until this spring, when allegations surfaced that the foundation had stopped making promised reimbursement payments for $77.5 million in fitness equipment it sold to some 600 schools in 20 states.
Cameron Lewis, 34, was fired from his position as president in June after an independent auditor reviewed the foundation's records and found major financial discrepancies. Ty Lewis, 63, who was chairman of the foundation's board, resigned after his son was removed from his job.
On Tuesday, both father and son were each charged with four counts of bank fraud, eight counts of mail fraud, 12 counts of wire fraud and 16 counts of money laundering.
"This is a glorified version of a Ponzi scheme, that victimized a number of banks and at least 20 school districts here in the state of Minnesota," said Minnesota U.S. Attorney Thomas Heffelfinger. "The scheme picked on school districts, which, at least in our state, are suffering from significant cash shortages, and by offering them a way to get essential equipment for free, took advantage of that vulnerability when in fact it wasn't a way to get something free, it was a way to steal."
The indictment alleges that Cameron and Ty Lewis failed to tell school districts about the foundation's lackluster fund-raising, precarious financial condition and that prior school districts had been reimbursed almost exclusively from payments made by other schools. Instead, the schools were told that the foundation would reimburse the cost of the equipment through government and private donations.
These charges do not prevent the Utah U.S. Attorney's Office or Attorney General's Office from filing charges on behalf of the 131 Utah schools that bought in to the foundation's program. Neither office could be reached for comment late Tuesday, but Assistant Attorney General Neal Gunnarson has previously said he may leave the matter in Minnesota's hands, as school districts in Utah have not come forward to demand prosecution.
The Minnesota U.S. Attorney's Office has been in contact with the Utah office, Heffelfinger said.
"I can't speak to what your U.S. Attorney's Office will do, but we have kept them advised as to what we are doing," he said.
The Alpine, Jordan and Granite school districts are taking part as creditors in the foundation's Chapter 11 bankruptcy proceedings. Utah schools were among the first to sign up for the foundation's program and have generally received more reimbursement payments than schools who signed up more recently.
The president of the foundation's fitness equipment supplier, Joseph Mont Beardall, pleaded guilty in July to two counts of bank fraud and one count each of mail and wire fraud. Beardall also agreed to cooperate in the investigation, and, according to Heffelfinger, played some role in providing information that led to these charges.
"Any time we have the opportunity to gain a guilty plea from an individual who's alleged to be a participant in a conspiracy, our case is aided," he said. "The degree to which it's aided in this case I guess will be decided by the jury."
If convicted, both Cameron and Ty Lewis face a maximum of 30 years in prison and/or a $1 million fine on each count of mail fraud, wire fraud and bank fraud, and up to 20 years in prison and/or a $250,000 fine on each count of money laundering.
The charges are a result of the combined investigative efforts of the Minnesota Department of Commerce, FBI, IRS Criminal Investigation Division and U.S. Postal Inspection Service.