A former top university official faces a maximum of five years in prison on a tax evasion charge stemming from kickbacks on phony bills he approved for payment by the university.
Robert J. Schuerholz, executive director of facilities and real estate until he was fired two years ago, pleaded guilty in U.S. District Court in Baltimore last week to one count of income tax evasion. He admitted withholding $31,000 in federal tax payments on unreported 1995 income of $113,000.
As a condition of his plea agreement, Schuerholz also agreed to a statement read by federal prosecutors alleging that he failed to pay a total of $97,000 in tax on $348,000 in unreported income from 1992 through 1995, derived from what amounted to a billing fraud and kickback scheme.
The money represented Schuerholz's share of university payments on false or padded bills allegedly submitted by his cousin, Donald Schuerholz, who owned Elco Electric Inc. Robert Schuerholz, who had sole oversight of certain university maintenance contracts, admitted he arranged for and authorized payment of the inflated bills. Donald Schuerholz, in an interview with The Sun, denied any wrongdoing.
Robert Schuerholz is scheduled to be sentenced Sept. 3. The maximum penalty for tax evasion is five years in prison and a $250,000 fine, and federal prosecutors said in court they do intend to seek a prison term. Unless U.S. District Judge Benson Legg determines there are grounds to deviate from standard federal guidelines, however, any prison term imposed is likely to be less than the maximum. Schuerholz could also be found liable by the Internal Revenue Service for back taxes, interest and penalties.
The guilty plea culminates an investigation triggered by a 1997 lawsuit between partners in Thermal Services Inc., an area heating and air conditioning contractor, that alleged an improper relationship between Schuerholz and TSI, which also did work for Hopkins under Schuerholz's supervision. The university called in its outside auditors, KPMG Peat Marwick, to undertake a detailed audit of the Office of Facilities and Real Estate. It determined that the total money lost by the university, primarily in schemes engineered by Schuerholz, may have exceeded $1.5 million.
TSI was not mentioned in Schuerholz's guilty plea. University spokesman Dennis O'Shea said Hopkins had not filed suit during the criminal investigation but is evaluating its options for seeking recovery of its losses.
"The university is grateful to the government investigators who prepared this case and brought it to court," O'Shea said. He said the university believes it was important to pursue the case aggressively, to assure students, parents and donors that Hopkins does its best to ensure that their money is not wasted. He said it is also important to demonstrate to contractors and other vendors that Hopkins is committed to fair and honest business practices.
As a result of the Schuerholz case, the university two years ago tightened its procedures for the award and oversight of maintenance and other contracts, ensuring that no one person could have total control.