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Prosecutors place blame for College of New Rochelle demise on convicted controller Keith Borge


Federal prosecutors contend that convicted controller Keith Borge could have prevented the closure of The College of New Rochelle and that he should be imprisoned.

Borge is scheduled for sentencing on Aug. 28 for failure to pay $20.4 million in payroll taxes and filing financial statements that inflated the college’s net assets by $33.8 million, causing losses of $612,398 to bond investors.

Borge has asked U.S. District Judge Vincent Briccetti for no jail time, and he claims that he was a scapegoat for the failures of other college administrators and the board of directors.

Federal prosecutors painted a starkly different picture.

“The defendant was literally the only person who knew the truth about CNR’s financial condition,” James McMahon and Daniel Loss, assistant prosecutors, stated in a sentencing memorandum. “He was the only person who could have initiated a successful effort to save the college, just by telling CNR’s board and management the full truth, instead of repeatedly deceiving them.”

CNR, a 115-year-old Catholic college that has educated more than 50,000 students, held its final graduation ceremony Aug. 20. Mercy College has agreed to accept transfer students and to lease the college’s 15.5-acre main campus in New Rochelle.

Borge claimed in his sentencing memo and in a letter to judge Briccetti that CNR closed because declining enrollments caused a severe cashflow shortage. Former college president Judith Huntington and the board of trustees were aware of unpaid payroll taxes and unpaid bills, he claims, but failed to see the urgency of the situation.

Borge’s position, the prosecutors argue, is utterly inconsistent with the fact.

Borge, 63, of Valley Cottage, began his career as a senior accountant in 1979, rose to controller and to vice president of finance, and was demoted back to controller when tax issues were first discovered. He retired in 2016.

From 2014 to 2016, he failed to pay federal and state taxes and Social Security and Medicare payments that had been withheld from employee paychecks.

He hid the growing tax liability by inflating assets and understating liabilities on the college books. He then made the fictitious financial statements available to potential investors in the college’s bonds.

Prosecutors claim he maintained tight control over finances during the key years, and could easily manipulate records. For instance, he had $2.5 million in checks printed, reducing accounts payable on the accounting software, but did not mail the checks, enabling him to use the cash elsewhere. When an employee discovered the discrepancy, prosecutors state, Borge fired him.

A payroll coordinator repeatedly confronted Borge about late and missing tax deposits in 2013, and eventually told Huntington. Borge told the president that he had forgotten to pay the taxes.

She told him to pay the taxes immediately. He claimed he had done so, but didn’t until the IRS filed a $2 million levy.

The controller who replaced him when he retired repeatedly asked for tax information. Borge, according to prosecutors, insisted he had paid everything and said the files were on his desk.

CNR hired an outside attorney in 2016 who discovered more than $20 million in unpaid payroll taxes. Borge still claimed he had paid the taxes, and at Huntington’s request he returned to his former workplace to find the proof. For at least four hours, prosecutors say, he shuffled papers. After seven hours, he turned over copies of tax returns he had signed but not filed.

Borge eventually admitted that he had lied to Huntington and others, that he alone was responsible for the unpaid taxes and that he had failed to tell the board about the college’s liability.

But in 2017, testifying before the Securities and Exchange Commission about the distorted financial statements, he attempted to deflect attention from himself. He said a senior accountant was recording the liabilities “and I wasn’t directly involved in that.”

Borge also drew down an extra $5.1 million from two government grants, according to prosecutors, for expenditures not authorized by the grants. He told Huntington that it was a mistake and promised to return the funds. He did not live up to the agreement, prosecutors say.

He also failed to make $2.7 million in contributions to an employee benefit plan from 2009 to 2012.

In 2015, New York State determined that CNR had failed to return $861,490 in unclaimed student loans. The college agreed to pay the obligation in six installments. Borge, prosecutors say, issued the checks but stopped payments on three checks totaling $430,740.

“To hear the defendant tell it,” the prosecution’s sentencing memo states, “almost everyone else in this case bears responsibility for his offenses.”

According to him, he is a hero. He did not personally benefit from the financial manipulations and his actions permitted more than 5,600 students to obtain degrees.

“But what is most surprising is the defendant’s argument that he pleaded guilty for the sins of others,” prosecutors say. “The defendant is hardly a scapegoat and the only tragedy here is what has happened to CNR .… His efforts to minimize his guilt, to shift blame to others and to portray himself as a hero who sacrificed his life for others bear no resemblance to reality.”

His deception, prosecutors argue, was breathtaking in scope, persistent and long lasting.

When he signed a criminal plea agreement in March, the nonbinding sentencing guidelines called for imprisonment of eight to ten years. A pre-sentence investigation report recommended four years.

Prosecutors argue that a sentence of incarceration is reasonable but the guideline range of eight to 10 years would be more than necessary.

CNR “could have created a sustainable future had it had a true and timely picture of its financial state,” the college’s last president, William W. Latimer, said in a letter to the court.

But “the additional debt created by the actions of Mr. Borge ultimately had a series of effects on the college from which it could not and has not recovered.”

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