Money

How an ex basketball coach tried to pull off the biggest college admissions scam ever, allegedly roping in CEOs and celebs

This combination of pictures created on March 12, 2019 shows US actress Felicity Huffman(L) attending the Showtime Emmy Eve Nominees Celebration in Los Angeles on September 16, 2018 and actress Lori Loughlin arriving at the People's Choice Awards 2017 at Microsoft Theater in Los Angeles, California, on January 18, 2017.
Lisa O'Connor | AFP | Getty Images

What do you get when you combine Hollywood stars like Felicity Huffman, sprinkle in some high-powered CEOs, a former high school basketball coach and some of the most elite colleges in the country?

The answer, according to a federal indictment, is what authorities have called "the largest college admissions scam ever prosecuted by the Department of Justice" — one that government prosecutors allege saw dozens of wealthy parents fork over roughly $25 million in total to a college admissions consultant who helped them lie and cheat their kids' way into institutions of higher learning.

In March 2019, federal prosecutors announced a mountain of charges against roughly 50 people — parents, college athletics coaches, and associates of a college admissions consultant named William "Rick" Singer — in a case federal agents code-named "Operation Varsity Blues." It's that case, with Singer's admissions scheme at its center, that was the focus of the season premiere of CNBC's "American Greed " on Monday, August 12.

The scheme — which allegedly included actresses like Loughlin and Huffman as well as executives like Gordon Caplan, the former co-chairman of international law firm Willkie Farr & Gallagher — saw Singer paid millions of dollars to help kids cheat on college admissions tests, bribe college sports coaches and administrators, and even fake photos to make kids look like star athletes to help wealthy parents get their children into top schools including Yale, Stanford, the University of Southern California, and Georgetown, government prosecutors claim.

U.S. Attorney for Massachusetts Andrew Lelling called those accused "a catalog of wealth and privilege" when he announced the charges in March.

Who is Singer?

A former college athlete who coached high school and college basketball teams during the 1980s, Singer, now 59, is the founder of college counseling organization Edge College & Career Network, and CEO of Key Worldwide Foundation, which was billed as a charitable organization helping under-served youths. Federal authorities claim its tax-exempt status helped Singer's college admissions clients list their illegal transactions as tax deductions.

William "Rick" Singer leaves the federal courthouse after facing charges in a nationwide college admissions cheating scheme in Boston, Massachusetts, U.S., March 12, 2019.
Bryan Snyder | Reuters

Singer typically charged as much as $2,500 a year per student he counseled, he told the Sacramento Business Journal in 2005. He said his business had thousands of clients and annual revenue of $1 million, and it is worth noting that none of the charges against Singer date back to this period of his career, suggesting that his business evolved to include allegedly illegal services in more recent years. However, Margie Amott, a Sacramento-based educational consultant, tells CNBC's "American Greed" that she was already suspicious of Singer's operation in the early 2000s, even hearing from some of his former clients that Singer filled out students' college applications for them, cramming them with "blatant, outright lies."

The actions for which the feds indicted Singer began in 2011, according to the document.

Singer moved to Newport Beach, California in 2012, buying a $1.55 million home. From there, Singer's operation continued to grow, as he self-published two books touting his advice on getting into a prestigious college and he posted college admissions advice videos online to promote his personal brand.

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How authorities say it worked

Singer reportedly told parents that there are three "doors" for entry into elite colleges. The "front door" is the traditional method of getting good grades and exceptional test scores, while the "back door" involves donating large sums of money to a school. What Singer offered parents and their children was entry into elite colleges through what he called a "side door." In many cases, that meant, very simply, cheating, feds say.

According to the government's indictment of Singer, starting at least in 2011, he was accepting payments between $15,000 and $75,000 from parents in exchange for helping their children cheat on standardized college admissions tests like the ACT and SAT exams. Specifically, Singer bribed test proctors in Los Angeles and Houston, one of whom was a Harvard alumnus named Mark Riddell.

For $10,000 per test, Riddell allegedly took some clients' SATs for them or simply corrected any of their incorrect answers on the test while he served as the official proctor for the exam.

"If you wanted a perfect score on the SAT, that's what you got," Caroline Connolly, crime reporter for NBC Boston, tells CNBC's "American Greed" of the services Singer allegedly offered to parents and their children.

In the case of Hollywood actress Felicity Huffman, she was charged with bribing the official proctor (through Singer) to correct her daughter, 19-year-old Sofia Grace Macy's, test answers; Sofia Grace's SAT score was 1420, roughly a 40% bump from her PSAT score a year earlier. In May, Huffman pleaded guilty to conspiracy to commit fraud for paying Singer $15,000 to facilitate the cheat. (Neither her husband, actor William H. Macy, nor her daughter were charged; Huffman says their daughter did not know about the scam.)

Another method Singer allegedly touted was to set up his clients with a psychologist who would diagnose the student with a learning disability, allowing them to get more time to take the test.

According to prosecutors, another avenue for Singer's clients was one where parents paid him to get their kids into schools as athletic recruits, even if they had little or no athletic background. Essentially, Singer would bribe coaches of athletic teams at certain prestigious schools who were willing to accept large sums of money in exchange for giving one of their team's recruited athlete spots to a student who would never realistically play the sport.

NBC Boston's Connolly tells "American Greed": "They would doctor up these fake resumes of all these athletic accolades, and say 'My kid plays this sport.' And, as soon as the kid got in, they would come up with something like an injury, or whatever, so they would never actually play the sport. But, they were on the roster and they got in [the school] as an athletic recruit."

While not every parent is willing to go to such illegal lengths to secure admission for their children, Devin Sloane was one willing participant in Singer's scheme. The founder and CEO of Aquatecture, a drinking water and wastewater business, Sloane pleaded guilty to conspiracy to commit fraud in April and admitted to paying Singer a total of $250,000 to help secure his son a spot at USC as an athletic recruit for the school's water polo team despite never having played the sport, according to court filings. Sloane even allegedly went so far as to purchase water polo equipment for his son to wear in staged photographs that Sloane later paid a graphic designer to Photoshop in order to make them look like photos of his son in water polo matches.

Court filings allege that Singer also worked with Loughlin and her fashion designer husband, Mossimo Giannulli, in order to land athletic recruit spots at USC for their two daughters, Olivia Jade (a social media influencer with 1.4 million Instagram followers) and Isabella Rose Giannulli.

Prosecutors allege that the family staged photos of the sisters sitting on rowing machines in order to improve their chances of landing spots on USC's rowing team. Both Olivia Jade and Isabella Rose did gain entry to USC as athletic recruits after their parents allegedly paid Singer a total of $500,000, according to court filings, though both Loughlin and Giannulli pleaded not guilty to federal charges stemming from the scandal, with the couple reportedly claiming they were duped by Singer and thought the money they paid him would be used as a donation to the school. (Their daughters have not been charged.)

The biggest payment Singer allegedly received came from the parents of Yusi Zhao — whose father is Tao Zhao, the chairman and co-founder of a multibillion-dollar pharmaceutical company based in China — who prosecutors claim gave Singer a whopping $6.5 million to get Zhao into Stanford. However, they now claim Singer scammed them into thinking that large sum was simply a donation to the school (in other words, they thought they were taking the so-called "back door" route, which is legal).

Stanford expelled Zhao in April following news of the scandal, and the discovery of falsified information on her college application. The USC students, including the Giannulli sisters, have not been expelled, though the school said in July that any students linked to the scandal will not able to register for classes for the upcoming semester while their cases are under review.

How was the scam exposed?

"Operation Varsity Blues" actually started as an offshoot of an illegal stock sale. In November 2018, the Securities and Exchange Commission charged Los Angeles finance executive Morrie Tobin for his role in an attempt to defraud investors in two public pharmaceutical companies through a so-called "pump and dump" stock scheme. But in the course of that investigation, Tobin had offered federal authorities some dirt in an effort to secure leniency in his own case, telling them that he knew of a women's soccer coach at Yale who was taking bribes.

That coach was presumably Rudy Meredith, who pleaded guilty in March and admitted to accepting bribes totaling nearly $1 million from Singer in order to give athletic recruit spots to Singer's clients seeking entry to the Ivy League institution.

Once federal investigators were turned on to Singer's broader scheme, they brought him in and got him to cooperate by letting the government record his conversations with clients as they discussed with Singer the illegal deals aimed at getting their children into prestigious schools.

On March 12, Singer pleaded guilty to charges of racketeering conspiracy, money laundering conspiracy, conspiracy to defraud the U.S. and obstruction of justice for his leading role in the alleged $25 million scheme. Singer now faces a maximum sentence of up to 65 years in prison — though the government has recommended that Singer serve just three years of supervised release — and a fine of up to $1.25 million.

Watch the new season of CNBC's "American Greed " at 10 p.m. ET/PT on Mondays starting Aug. 12.

Don't Miss:

7 of the most shocking allegations of the $25 million college admissions scandal

Kevin O'Leary on college admissions scandal: 'I'll tell you who you really screwed: Your kid'

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This combination of pictures created on March 12, 2019 shows US actress Felicity Huffman(L) attending the Showtime Emmy Eve Nominees Celebration in Los Angeles on September 16, 2018 and actress Lori Loughlin arriving at the People's Choice Awards 2017 at Microsoft Theater in Los Angeles, California, on January 18, 2017.
Lisa O'Connor | AFP | Getty Images
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