COLUMBUS, OH — States are beginning to take action against an alleged scheme to defraud their schools. The state of Ohio filed a lawsuit against School Fitness Systems LLC (SFS), the for-profit group that National School Fitness Foundation (NSFF) created, and Ohio-based All-Starr Sports. The 10-count complaint includes claims on fraud, conspiracy and neglect of charitable duties.
In the complaint, Ohio Attorney General Jim Petro said that the NSFF/SFS created a scheme offering schools free fitness equipment and fitness programs in exchange for the schools' agreement to collect monthly data on school children using the equipment. Approximately 100 schools in Ohio and 600 school districts nationwide agreed to participate in the program.
“The scheme alleged in the complaint was designed to fail, and Ohio schools and taxpayers have been left with millions of dollars worth of debt,” Petro said in a release.
NSFF/SFS purchased an estimated $67,000 in fitness equipment. All-Starr Sports and All-Starr Sports fitness program, under the name L.I.F.T. American Fitness System, then made presentations to schools for the purchase of that equipment. In Ohio, this package sold from $150,00 to $318,000. Petro said the equipment was actually valued at approximately $55,000.
The agreement had schools secure a three-year loan from a financial institution to cover the price of the program. The bank would then pay the NSFF/SFS directly. Schools were promised that as long as they supplied a monthly report for each program participant to the NSFF/SFS, the program would be paid for because each monthly payment would be kicked back to the school in the form of a charitable donation from NSFF.
All-Starr Sports told schools the NSFF/SFS had secured millions of dollars in donations and corporate backing for such reimbursements but the financial base never materialized, Petro said. The reimbursed money actually came from money generated in sales to new schools, making it less likely that NSFF/SFS could live up to its promises as more schools signed up, Petro contended.
Petro asked that Ohio schools be reimbursed and that the court prevent the groups from engaging in future fraudulent business practices.
This summer, SFS owner Joseph Mont Beardall pled guilty to two counts of bank fraud, one count of mail fraud and one count of wire fraud for mismanagement of money from fitness equipment to schools across Minnesota. The foundation is in bankruptcy proceedings in Utah.
In October, East High School in Duluth, Minn., had 38 fitness machines repossessed due to the same scheme after the school district exercised its right to opt out of its lease-purchase agreement. As of press time two other Duluth high schools were expected to have their equipment repossessed as well.