MINNEAPOLIS -- A father and son who bilked school districts into acquiring “free” fitness equipment as part of a pyramid scheme were sentenced Dec. 7 to lengthy prison terms and will have to pay $39 million in restitution.
U.S. District Judge Joan Erickson of Minneapolis sentenced Cameron J. Lewis, 36, to 17 years in prison and his father, J. Tyron Lewis, 65, to 5 years, 8 months. Cameron Lewis was the CEO of the Utah-based nonprofit organization National School Fitness Foundation. Tyron Lewis was its chairman and helped finance the operation.
A jury in Minneapolis convicted the Lewises a year ago on five counts of mail fraud, nine counts of wire fraud, one count of bank fraud and one count of money-laundering conspiracy.
The U.S. Attorney’s Office says that more than 350 school districts and dozens of banks nationwide lost nearly $40 million in the scheme, in which schools purchased the equipment in anticipation of refunds the foundation said would be obtained through government grants and private donations. In reality, the schools that purchased the equipment in the early stages of the scheme were reimbursed with the payments from schools that signed up later.
The Lewises never disclosed to schools that they were personally profiting from the foundation and paid themselves $1.4 million on the eve of the company’s collapse. The foundation went bankrupt in 2004, and the Lewises were convicted in 2006.
In related cases, Shanna L. Black, Cameron Lewis’ sister, pleaded guilty in February 2006 to misdemeanor charges for her work with the foundation. Marion H. Markle, the foundation’s former chief financial officer, pleaded guilty in April 2006 to a felony related to the scheme to defraud.
Joseph Mont Beardall, the president of School Fitness Systems LLC, which supplied the equipment to the foundation, pleaded guilty to fraud charges in 2004. Beardall, as part of his plea agreement, agreed to pay restitution to victims by selling all his personal and real property and having School Fitness Systems surrender its assets valued at about $2.6 million.
Among the 600 schools in 20 states that were victimized were 131 schools in Utah and 21 schools in Minnesota. The Alpine District in Utah owed $1.7 million, and the Granite District in Utah owed $2 million, according to the Deseret (UT) Morning News.
Allen Giles, general counsel for the Minneapolis school district, says the district put in a claim for $1.3 million but got only $74,000, leaving a loss of about $1.2 million, according to the Minneapolis Star Tribune.
“It’s $1.2 million we don’t have to buy pencils and pay teachers salaries,” Giles told the newspaper.
Despite the cost to the schools as a result of the scheme, some physical education teachers are nonetheless happy to have the equipment.
“It’s really sad it was done dishonestly,” Amy Strickland Johnson, a health and physical education teacher in the Minneapolis school district, told the Star Tribune. “We don’t agree with that, but we love the equipment. The kids love it, too.”
Read more about past developments of this story in Club Industry’s Fitness Business Pro articles from September 2004 and November 2004.