March 20th, 2014

Former Hallmark Institute Owner Pleads Guilty of Fraud, Tax Evasion

George J. Rosa III, the former owner of the Hallmark Institute of Photography, the photography school in Turners Falls, Massachusetts, pled guilty March 11 to charges of bank fraud and tax evasion, according to a report by Springfield, Massachusetts, TV station WWLP.

Rosa stood accused of diverting $2.6 million in school funds for his own personal use, and then covering up the theft by recording the outlays as business expenses on the school’s books. Tax fraud charges arose from tax returns that Rosa filed on the basis of the false financial records.

Federal prosecutors said Rosa used the stolen money to build a house for himself, gamble, and buy “clothing, footwear and accessories,” according to the WWLP report.

Sentencing is scheduled for May 29. Rosa could be sentenced to up to 30 years in prison for bank fraud, and five years for tax fraud. He also faces restitution fines.

Last month, former Hallmark Institute vice president Gregory Olchowski was sentenced to 6 months in federal prison for tax evasion, according to news site MassLive.com. Olchowski was charged with hiding from the IRS $200,000 in money transfers from the “former president” of Hallmark Institute to cover Olchowski’s personal expenses. Although that former president isn’t named in court papers, Olchowski worked at Hallmark when Rosa was president of the school.

Rosa’s financial and legal troubles began several years ago when he borrowed money to fund projects at Hallmark Institute from People’s United Bank  (PUB) in Springfield, Massachusetts. The bank, which was Hallmark’s largest creditor, ended up taking control of the school in 2009 when Rosa began defaulting on the loans. PUB then sold Hallmark Institute to Premier Education Group in Philadelphia.

Premier Education Group kept Rosa on as president of the school until 2012. According to a report from Daily Hampshire Gazette, Ed Martin, the school’s current president, said in a statement on March 12 that Rosa “separated from the company in August of 2012 in light of personal and business issues” that occurred before Premier took over the school.

Rosa filed for personal bankruptcy protection, also in 2009. In early 2010, PUB sued Rosa to prevent the bankruptcy court from discharging Rosa’s $2.2 million debt to the bank. In its lawsuit, the bank alleged that Rosa kept two sets of books at Hallmark Institute to hide assets from the bank and divert money for his personal use.

The bankruptcy court eventually declared Rosa in default of the loans for failure to respond to the bank’s fraud claims against him. The bank’s claims also attracted the attention of federal prosecutors, who ended up filing the criminal charges.

Related:
$3.6 Million in Debt, Photo School President Faces Fraud Charges

Photo School President Fails to Answer Fraud Charges

Bankruptcy Won’t Protect School President from $2.4 Million Debt

The Art Institutes: Legitimate Photo Schools or Accessories to Fraud?