Tax Fraud’s Role in the College Admissions Scandal

This week the news was flooded with reports of the college admissions scandal involving cheating and bribery from some very well-known individuals including celebrities and CEOs. Wealthy parents paid thousands of dollars to fake their children’s way into elite schools and will be facing legal repercussions for many months to come. As more information is revealed, those involved are finding themselves entangled in charges including money laundering, obstruction of justice, and ultimately tax fraud.

The “Operation Varsity Blues” scheme, ran by William Rick Singer, involved fixing SAT scores and faking students’ credentials as promising athletic recruits. Parents, with or without the knowledge of their children, struck a deal with Singer who bribed various admin staff members, exam proctors, and coaches. Payments were made in the form of “charitable donations” to Singer’s non-profit, the Key World Foundation (KWF). KWF was an official IRS-recognized organization established in 2014 and received approximately $2-4 million in yearly contributions from 2015-2016.

KWF “donated” to schools across the country, including Chapman University, DePaul University, NYU, University of Miami, University of Texas, USC, UCLA, among others. Over the years KWF would distribute over $7 million in grant “bribes.” Given the non-profit status of the organization, these donations qualified as tax deductions for those who contributed, which many of the accused took advantage of. Because of this, whether intentionally or not, when hiding their crimes through the KWF non-profit, parents were also committing tax fraud. As each case is brought to trial, those involved in the scandal will face the legal repercussions of defrauding the IRS.

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