OIG: Office of Inspector General
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Investigative Reports

United States Attorney Lawrence J. Laurenzi
Western District of Tennessee

PHONE: (901) 544-4231
FAX: (901) 544-4230


April 21, 2010


Charges Include Conspiracy, Wire Fraud, Embezzlement, and Obstruction of Justice

Memphis, TN- Penny Burns, 43 of Memphis, and Ruby Klyce, 56 of Sardis, Mississippi have been charged in a 14 count federal indictment, announced Lawrence J. Laurenzi, United States Attorney for the Western District of Tennessee. They are charged with one count of Conspiracy to Defraud, 10 counts of Wire Fraud, one count of Embezzlement of Title IV Educational Funds, one count of Theft of Government Funds and one count of Obstruction of Justice.

Burns and Klyce were the CEO and Executive Director, respectively, for HD Adcock and Associate, Inc. (HDAA), a corporation of cosmetology schools operating at nine locations between Memphis, Jackson, and Nashville, Tennessee and Charlotte, Greenville, Winston-Salem, and Durham, North Carolina. As a proprietary cosmetology school, HDAA was funded mainly through grants and loans provided, administered, or reinsured by the United States Department of Education.

According to the Indictment, between June 2006 and January 2009, Burns and Klyce devised a scheme and defrauded the Department of Education approximately $464,957. Burns and Klyce allegedly were responsible for certifying hours for student attendance when students, in fact, were not in attendance and, therefore, HDAA received reimbursement funds which were not due to them. The indictment further alleges that by falsely certifying student attendance, the defendants failed to return funds to the Department of Education for students who had withdrawn or dropped out, and HDAA retained funds from Pell Grants and Title IV financial aid to which it was not entitled. In addition to falsifying attendance records, the defendants allegedly falsified GED certificates for a number of students so that those students would appear eligible for financial aid when, in fact, they were not.

Count One carries a penalty of up to five years in federal prison. Counts 2-11 carry penalties of up to 20 years; Count 12 carries a penalty of up to 10 years in prison; Counts 13 and 14 carry penalties of up to five years in prison.

This case was investigated by the U. S. Department of Education-Office of Inspector General, Federal Bureau of Investigation, and Internal Revenue Service Criminal Investigation. Assistant United States Attorney Justin Bailey is handling the prosecution for the government.

Note: Charges brought against a person through a Complaint or an Indictment are accusations only. That person is presumed innocent until and unless proven guilty.

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Last Modified: 04/26/2010