Long Island Couple Indicted For Charities Scam And Welfare Fraud

New York State Attorney General Spitzer and New York State Welfare Inspector General Paul Balukas today announced the arrests of two people on a 46-count indictment charging that they stole hundreds of thousands of dollars from charities they established, and from local, state, and federal welfare agencies.

Defendants Barbara Abernethy, 42, and Steven Southard, 55, of 104 Round Swamp Road in Old Bethpage, set up three not-for-profit corporations to operate schools purportedly to train guide dogs for blind children. Between 1997 and 2002, they collected over $200,000 in charitable donations from hundreds of contributors, including the Pall Corporation, the Charles B. Wang Foundation, Barry Manilow, the Ron and Sheryl Howard Foundation, the Hicksville Fire Department, and from numerous individuals who reside in the area.

However, according to the indictment, the schools never operated a training program and did not graduate a single seeing-eye dog. Instead, the defendants opened bank accounts in the names of the not-for-profits and used the money as if it were their own, spending more than half of what they collected on personal expenses.

The pair is also charged with defrauding the Nassau County Department of Social Services, the New York State Office of Children and Family Services, and the Social Security Administration. It is alleged that the couple stole more than $100,000 in welfare, disability and social service payments from these government agencies by concealing their income from the charitable foundations.

"These defendants used these charities for their own enrichment," Spitzer said. "We intend to hold them accountable for their actions. My office will continue to work with other state agencies to root out fraud and abuse."

Inspector General Balukas added, "My office has repeatedly called upon government agencies that contract with non-profit organizations in New York to increase the oversight, reporting requirements and accountability of these organizations. The defendants created and operated their non-profit organizations with the real purpose of stealing thousands of dollars intended to benefit blind children."

Among the charges contained in the indictment are one count of Scheme To Defraud in the First Degree, four counts of Grand Larceny in the Second Degree, seven counts of Grand Larceny in the Third Degree, Repeated Failure to File Income Taxes, and Welfare Fraud in the First Degree.

The charges are merely accusations and the defendants are presumed innocent unless and until proven guilty.

Spitzer commended the following state agencies for their assistance in the investigation: The NYS Workers’ Compensation Board, Office of the Fraud Inspector General; the NYS Department of Taxation and Finance; the Inspector General of the Social Security Administration and the NYS Office of Children and Family Services.

The case is being prosecuted by Pat Russo, General Counsel to the Office of the Welfare Inspector General, who has been designated a Special Assistant Attorney General, under the supervision of Assistant Attorney General Vincent O’Reilly, Deputy Bureau Chief of the AG’s Criminal Prosecutions Bureau. Also providing assistance with the investigation were Assistant Attorney General Charles Smith of the Charities Bureau and Supervising Investigator John Serrapica. From the Welfare Inspector General’s office, Chief Investigator Robert L. Waters and Investigators Gabriel Camacho and Ismael Zayas also assisted in the investigation.