Thursday July 25, 2013

NEAL P. GOSWAMI

Senior Staff Writer

BENNINGTON -- Two former employees of the Bennington School pleaded guilty in federal court this week to fraudulent actions that took place at the school during their tenure.

Matthew Merritt III, of Lenox, Mass., the former plant manager at the Bennington School, and Raymond Crowley, of Great Barrington, Mass., the former chief financial officer, entered guilty pleas for tax fraud Monday in Vermont District Court in Burlington. Judge William K. Sessions accepted the guilty pleas, which are part of a plea agreement involving two other school employees. Sessions set sentencing hearings for both men for Dec. 23.

Merritt III and Crowley were released with conditions until the sentencing hearings.

Both men worked under Matthew Merritt Jr., 81, of West Stockbridge, Mass., the school’s former president and the father of Merritt III and father-in-law of Crowley. Merritt Jr. pleaded guilty earlier this month to a single count of health care fraud and one count of filing a false tax return.

A fourth defendant, Jeffrey LaBonte, 59, the school’s former executive director, entered a guilty plea to a single tax fraud charge on May 9.

The school is a private, residential institution offering therapeutic and educational services for socially and emotionally challenged boys and girls. The for-profit school accepts state-placed students through the Vermont Medicaid program which is funded 60 percent by the federal government and 40 percent by the state.

Prosecutors have said Merritt Jr. and LaBonte, with help from Crowley Merritt III, compensated some employees of Bennington School in addition to their salary by providing benefits like cars, gasoline, heating oil for personal residences, payments of personal expenses on credit card accounts, salaries for family members who did not work at the school and reimbursements for other personal expenses. That extra compensation were never reported on tax returns.

The investigation in the fraud was launched in 2011 after the school requested a rate hike from the state because of a declining enrollment.

The four defendants must pay $4.3 million in restitution. Out of the $4.3 million, the state of Vermont will receive $2,113,708 and the United States will receive $2,186,292, officials said. The plea agreement is will to settle both criminal and civil cases involving all four men.