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December 10, 2012

Housing Nonprofit's Head to Pay $5.5-Million in Fraud Inquiry

The former head of a nonprofit housing agency that provides low-cost apartments to thousands of New York college students has agreed to pay a $5.5-million settlement following a state investigation into its finances, The New York Times reports.

According to the New York Attorney General Eric Schneiderman's office, George Scott siphoned millions of dollars from Educational Housing Services through a shell company that ostensibly provided Internet, cable, and phone services to the organization's dorm rooms in Manhattan and Brooklyn. Investigators allege Mr. Scott used the funds on a luxury Brooklyn penthouse and flights to and from a second home in Colorado.

An attorney for Mr. Scott, who resigned his post last month, denied any wrongdoing. No criminal charges are expected because state officials consider the case a matter of civil fraud and because the service contracts were approved by Educational Housing Services' board, which Mr. Schneiderman faulted for "stunning" negligence. As part of the settlement, the five board members will resign and pay $1-million.