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Western District of Tennessee


Former Cosmetology Schools CEO Pleads Guilty in Federal Court Charges Include Failure to Return Department of Education Funds and Tax Fraud


Memphis, TN -- Penny Burns, 45 of Memphis, has pled guilty to a two count Information charging her with failing to return funds to the Department of Education and filing a false tax return, announced Edward L. Stanton III, United States Attorney for the Western District of Tennessee.

Burns was CEO of HD Adcock and Associates, Inc. (HDAA), a corporation of cosmetology schools operating at nine locations in 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 criminal Information and statements made by the government, Burns and employees of the school devised a scheme in which funds that were received by the schools unlawfully were not refunded to the Department of Education, per Department policy. As CEO, Burns was responsible for certifying hours for student attendance and, in fact, knowingly certified attendance for a particular student even though that student was not in attendance and had withdrawn from the school. HDAA received and failed to refund unearned federal Pell Grant disbursements that it had received for the former student.

Also, according to the Information, Burns failed to report $179,446.66 in income on her 2006 federal tax return. This unreported income was from gross receipts from Burns' business T & P Cosmetics and from additional compensation as CEO of HDAA. Burns faces a maximum penalty of four years in prison and fines of up to $255,000 when she is sentenced on January 25, 2013.

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.

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Last Modified: 02/28/2013