Martin Handler Sentenced To 58 Months For Fraud On Federal Head Start Program And Tax Evasion

Damian Williams, the United States Attorney for the Southern District of New York, announced that MARTIN HANDLER was sentenced today to 58 months in prison for defrauding the federal Head Start program, misappropriating over $1 million from his federally-funded childcare company, and tax evasion. HANDLER pled guilty before U.S. District Judge Jennifer H. Rearden on March 15, 2024. Judge Rearden imposed today's sentence.

U.S. Attorney Damian Williams said: "Martin Handler and his co-conspirators defrauded a vital federal childcare program that aims to serve one of society's most vulnerable populations. By secretly exploiting a non-profit entity for his own financial gain, Handler exploited the system and undermined the public's trust in the Head Start program. My Office is committed to pursuing justice against those who place greed above their responsibility to be stewards of federal funds, and I commend our law enforcement partners and the dedicated team of career prosecutors for their outstanding work."

According to the Indictment, public court filings, and statements made in court proceedings:

Handler participated in two related schemes involving the federal Head Start program and a third scheme to commit tax evasion.

First, between 2017 and August 2021, Handler secretly "owned" and exercised control over a non-profit entity, Project Social Care Head Start Inc. ("PSCHS"), that until recently operated in the New York City area. The U.S. Department of Health and Human Services ("HHS"), which administers the Head Start program, annually granted to PSCHS millions of dollars that were to be used exclusively on the Head Start program and from which earning a profit is prohibited by law. Through this control over PSCHS, Handler conspired to submit multiple fictitious documents to HHS that fraudulently asserted PSCHS had an independent board and had in place controls to guard against fraud, waste, and abuse. In truth, PSCHS had neither an independent board nor sufficient controls in place, and Handler used his control over PSCHS to impermissibly direct PSCHS's Head Start funding to his own for-profit companies through rampant undisclosed self-dealing. Indeed, through Handler's "ownership," he was able to secretly "sell" control over the proceeds of PSCHS's federal funding streams for $4.7 million to a co-conspirator.

Second, between April 2019 and January 2023, as majority owner of New York City Early Learning Co. ("NYCELC"), a for-profit entity that also received Head Start grants, Handler misapplied and misappropriated NYCELC's corporate treasury funds to, among other things, repay personal loans and finance the leasing of luxury vehicles for the benefit of two members of NYCELC's statutorily-required Head Start board. Under the Head Start Act, members of that board owed a fiduciary duty to the Head Start program and were prohibited from having a financial conflict of interest with NYCELC. Handler corrupted NYCLEC's Head Start program through his actions.

Third, in 2021 and 2022, Handler falsely reported to the Internal Revenue Service ("IRS") $2,000,000 in charitable contributions, thereby evading taxes of at least $740,000 for tax year 2021.

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In addition to today's prison sentence, HANDLER, 50, of Brooklyn, New York, was sentenced to three years of supervised release, ordered to pay a fine of $200,000, to forfeit $1,156,068.10, and to pay restitution of $1,156,068.10 to HHS, and to pay restitution of $740,000 to the IRS.

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation, IRS-Criminal Investigation, and HHS, Office of the Inspector General. Mr. Williams also thanked U.S. Department of Agriculture, Office of the Inspector General, and the New York City Department of Investigation for their assistance with this investigation.

The prosecution of this case is being handled by the Office's Public Corruption Unit. Assistant U.S. Attorneys Daniel H. Wolf, Catherine Ghosh, Jacob R. Fiddelman, and Stephanie Simon are in charge of the prosecution, with the assistance of Paralegal Specialist Jayda Foote.

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