Former St. Joseph School Superintendent Sentenced for $662,000 Fraud Scheme

KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that the former superintendent of the St. Joseph School District and former president of the Board of Education was sentenced in federal court today for a fraud scheme in which he received more than $662,000 in pension payments to which he was not entitled.

Danny L. Colgan, 70, of St. Joseph, Mo., was sentenced by U.S. District Judge Dean Whipple to one year and one day in federal prison without parole. Colgan also made a final payment of $608,257 today to complete his court-ordered restitution.

Colgan, who pleaded guilty to one count of wire fraud on June 13, 2016, was the superintendent of the St. Joseph School District from July 1, 1992, until his retirement on Dec. 31, 2005. Colgan was entitled to retirement benefits from the Public School and Education Employee Retirement Systems of Missouri (PSRS) with the amount of the retirement benefits based upon his highest consecutive three years of reported salary.

Colgan admitted that he caused others to falsely report his salary to the PSRS in order to increase his retirement benefits. Colgan knew that the salary figures he caused the school district to submit to PSRS on his behalf included fringe benefits and other payments to Colgan that were not eligible to be counted as salary under state statutes.

This fraud scheme began during the 1997-98 school year and lasted for eight years, until Colgan’s retirement. Colgan’s retirement benefits were calculated by using the amounts reported by the school district over the final three-year period before he retired.

During that final three-year period, the school district falsely reported that Colgan’s salary totaled $586,030. In reality, his salary totaled $343,286 – a difference of $242,744. As a result of the false statements to the PSRS, the school district made excess payments in the amount of $14,652 to the PSRS from 2003 through 2005, and Colgan was paid excess benefits that totaled $677,313 over a 10-year period.

Colgan’s salary reported for his final three years as school superintendent improperly included the following:

• Car Allowance/Travel Stipend: The $9,600 car allowance/travel stipend was a fringe benefit that was ineligible for retirement salary calculation purposes;
• Family Insurance Premiums: The family insurance benefits/premiums paid by the district of $5,225, $5,603, and $6,258 were fringe benefits that were ineligible for retirement salary calculation purposes;
• District Contribution to Taxable Annuity: The district payment for the school year 2004-2005 of $25,000 to purchase a taxable annuity for the superintendent was ineligible for retirement salary calculation purposes;
• “District Vehicle” Payments: In the final three years, the school district reported “District Vehicle” payments of $11,300, $11,300, and $28,975. The “District Vehicle” payments were separate from the $800 per month car allowance payments (described above). The “District Vehicle” payments were fringe benefits that were ineligible for retirement salary calculation purposes; and
• Unused Vacation Payment: An unused vacation payment in June 2005 of $10,820 was a fringe benefit that was ineligible for retirement salary calculation purposes.

   

This case was prosecuted by Assistant U.S. Attorney Paul S. Becker. It was investigated by the FBI.