UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202
In the Matter of Docket No. 97-88-DA-S
KALMEN STERN, Suspension Proceeding
On June 30, 1997, Mr. Kalmen Stern was issued a Notice of Governmentwide Suspension from Federal Procurement and Nonprocurement Transactions (Notice of Suspension), pursuant to 34 C.F.R. § 85.411. The Notice of Suspension informed Mr. Stern that the suspension was based upon a 21-count indictment brought against him on May 28, 1997, in the United States District Court for the Southern District of New York. I have jurisdiction to decide this matter by virtue of a Delegation of Authority from the Director, Office of Hearings and Appeals, U.S. Department of Education.
On July 29, 1997, Mr. Stern exercised his right to oppose this suspension proceeding,
pursuant to 34 C.F.R. § 85.412, by filing a letter written by his attorney, Mr. John T. Hecht. In
that letter, Mr. Hecht explained that while Mr. Stern is vigorously defending himself against the
charges contained in the indictment, he will be unable to present any information in his defense
to the Deciding Debarment and Suspension Official until the resolution of the criminal case. For
this reason, Mr. Stern, through counsel, requests that this proceeding be stayed until the
resolution of the pending criminal case.
Mr. Stern's request for a stay is denied. The June 30, 1997, Notice of Suspension
references Mr. Stern's May 28, 1997, indictment, along with five other co-defendants. In said
indictment, Mr. Stern is charged with allegedly conspiring to defraud various agencies of the
United States by participating in various fraudulent schemes to obtain tens of millions of dollars
through federal and state grant, loan, and subsidy programs for the benefit of themselves and
other residents of their community. The indictment charges that to effectuate these schemes, Mr.
Stern and the other co-conspirators created legal entities through which federal and state funds
could be obtained, submitted false documentation to establish the eligibility to participate in
these government programs, used the funds obtained from these programs for impermissible
purposes, and concealed their fraud by various methods. The programs allegedly defrauded by
Mr. Stern and the other co-conspirators include the Pell Grant program (U.S. Department of
Education), the Tuition Assistance Program (New York State Department of Education), a Small
Business Administration program designed to provide venture capital to small businesses, and
the Section 8 rental subsidy program (U.S. Department of Housing and Urban Development).
The indictment states that this alleged misconduct violates 18 U.S.C. §§ 2, 371, 666, 1001, 1341,
To protect the public interest, debarments and suspensions are discretionary actions
which are initiated to implement the Government policy that it conduct business only with
responsible persons. 34 C.F.R. § 85.115(a). The regulations authorizing these proceedings
apply to all persons who have participated, are currently participating or may reasonably be
expected to participate in transactions under Federal nonprocurement programs. 34 C.F.R.
§ 85.110(a). I have considered the record in this matter and I find that the Respondent falls
within this category.
The governing regulation further provides that a suspension may be imposed if an
individual is suspected of committing an offense which is listed as a cause for debarment in 34
C.F.R. § 85.305(a). An indictment on one or more of those offenses constitutes sufficient
evidence for the purposes of suspension actions. 34 C.F.R. § 85.405(b). After reviewing the
indictment, I find that the offenses charged therein, following a conviction, would provide
adequate evidence to support a debarment. Accordingly, I find that a suspension of Mr. Stern is
appropriate and the Notice of Suspension was properly issued.
Judge Richard I. Slippen
Deciding Debarment and Suspension Official
Dated: August 6, 1997
A copy of the attached initial decision was sent by certified mail, return receipt requested to the
John T. Hecht, Esq.
Morvillo, Abramowitz, Grand, Iason & Silberberg, P.C.
565 Fifth Avenue
New York, NY 10017
David L. Morgan
Administrative Actions and Appeals Division
U.S. Department of Education
Room 3923, ROB-3
Washington, D.C. 20202-5341