The Real Deal New York

Student rental agency to pay $5.5M to end AG probe

December 10, 2012 11:00AM

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From left: AG Eric Schneiderman and George Scott

A $5.5 million settlement has been struck in an investigation into allegations of self-dealing and excessive executive compensation inside a city student housing non-profit company, Attorney General Eric Schneiderman announced today. The company in question is Educational Housing Services, whose former president, George Scott, was found to use EHS as a means fund his lavish personal lifestyle.

Funds from the settlement will be used to lower student rents and upgrade students’ rooms, Schneiderman said.

The Charities Bureau handled the investigation and discovered that both Scott and his wife had siphoned off millions  of company dollars — the exact amount of money was not specified– from a shell company called Student Services to pay for their extravagant lifestyles. Scott created the company to provide cable, Internet and phone services inside student dorms. The company served as a “middleman” between EHS and cable companies, from which Scott profited, Schneiderman said.

In addition, the investigation revealed that the board of EHS gave Scott high executive compensation and perks, such as an allowance to pay for his penthouse in Brooklyn Heights. The board will now be entirely overturned; its directors are forever banned from working for the organization and will pay a fine of $1 million for their breaches in oversight.

EHS has a collection of six student housing buildings — three in Brooklyn and three in Manhattan. The buildings feature 24-hour security, fitness centers and live-in staff. — Zachary Kussin

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