Red Apple Swindle in Brooklyn

April 16, 2012 Brooklyn Eagle Staff

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$2.7M Embezzled Through Schools

CADMAN PLAZA EAST — Joanna Fan and her husband Ziming Shen pled guilty last week in Brooklyn to program fraud arising from their theft of $2.7 million of federal funds designated for meals for students at the Red Apple child centers.

The defendants entered their pleas before the U.S. District Judge Dora L. Irizarry at the United States Courthouse in Downtown Brooklyn. Each defendant faces a maximum sentence of 10 years’ imprisonment.

The guilty pleas were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York in Downtown Brooklyn, along with federal agents from the IRS and U.S. Department of Agriculture.

“IRS-Criminal Investigation is committed to investigating people who abuse their positions of authority and trust for their own financial benefit,” stated IRS Acting Special Agent-in-Charge Victor Lessoff, of the New York Field Office for Criminal Investigations. “It is especially troubling when personal gain comes at the expense of not just the law-abiding taxpaying public, but the direct beneficiaries of government programs, like children.”

Fan, 50, was the executive director and a trustee of Red Apple Child Development Centers, which provided day care and schooling for children from birth to age 5 at facilities located in Manhattan, Queens and Brooklyn.

From March 2002 through December 2010, Red Apple received over $13.5 million in federal funds pursuant to the Child and Adult Care Food Program (CACFP) and was required to use those funds to provide food to the toddlers in its schools and daycare facilities.

In fact, as admitted during their guilty plea allocutions, the defendants illegally diverted CACFP funds to pay unauthorized personal and business expenses, including purchasing real property in Manhattan, expenses for one of 53-year-old Shen’s businesses unrelated to daycare and schooling, and physical improvements at the defendants’ schools.

Fan also admitted that she had falsely inflated the dollar amounts of the claims Red Apple submitted to CACFP to fraudulently obtain more student meal money. As set forth in the information to which the defendants pled guilty, Fan and Shen embezzled approximately $2.7 million of CACFP funds over a five-year period.

“By siphoning funds from a federal school-lunch program, the defendants literally took food from the mouths of babies and toddlers in a brazen exhibition of sheer greed,” stated United States Attorney Lynch.