Executive Director and CEO of Sponsor Organization and Owner of Catering Company Guilty of Participating in a Multi-Million Dollar Scheme to Defraud Food Program for Underprivileged South Florida Children

Sandra Ruballo, 47, of Davie, Florida, and Carlos Andres Montoya, 48, of Miramar, Florida, participated in a conspiracy to defraud the federally funded Child Care Food Program, which provides free and reduced meals to underprivileged children at hundreds of South Florida daycare centers.  As part of the scheme, the conspirators falsified paperwork, entered into various kickback arrangements, manipulated the catering contract bid process, and inflated annual budgets, all in order to receive millions of dollars of falsely and fraudulently obtained federal funds for their own personal use and benefit. 

Ariana Fajardo Orshan, U.S. Attorney for the Southern District of Florida, Michael J. De Palma, Special Agent in Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), Brian Swain, Special Agent in Charge, U.S. Secret Service (USSS), Miami Field Office,  Karen Citizen-Wilcox, Special Agent in Charge, U.S. Department of Agriculture (USDA), and Rick Maglione, Chief, Fort Lauderdale Police Department, made the announcement.

On March 29, 2019, following a four-week jury trial, Montoya was convicted of one count of conspiracy to commit wire fraud, in violation of Title 18, United States Code, Section 1349, and one count of federal program bribery, in violation of Title 18, United States Code, Section 666(a)(2) (Case No. 18-CR-20393-Cooke(s)).  

On February 27, 2019, co-defendant Ruballo pleaded guilty, without a plea agreement, to all counts of the superseding indictment, including: one count of conspiracy to commit wire fraud, in violation of Title 18, United States Code, Section 1349; three counts of wire fraud, in violation of Title 18, United States Code, Section 1343; one count of conspiracy to commit money laundering, in violation of Title 18, United States Code, Section 1956(h); and four counts of money laundering, in violation of Title 18, United States Code, Section 1956(a)(1)(B)(i). 

U.S. District Judge Marcia G. Cooke is scheduled to sentence Ruballo on May 8, 2019 at 10:30 a.m. and  Montoya on June 5, 2019 at 10:00 a.m.  As to the conspiracy, as well as substantive wire fraud and money laundering counts, each defendant faces a maximum statutory sentence of 20 years’ imprisonment.  As to the bribery count, Montoya faces an additional maximum statutory sentence of 10 years’ imprisonment.

According to court documents and evidence presented at trial, the purpose of the Child Care Food Program (CCFP) is to provide nutritious meals and snacks for underprivileged, low-income children in daycare centers across Florida, including within the Southern District of Florida.  As such, the CCFP provides children classified at or below a certain family income level with daily meals and snacks, at a free or a reduced rate.  The government pays vastly higher reimbursement rates for children classified as “free,” as opposed to “non-needy,” for example, up to nine times more per meal.  Daycare centers often contract with a sponsoring organization to process and submit their program paperwork.  In those situations, the sponsoring organization enters into an agreement to operate the CCFP, and assumes administrative and financial responsibility on behalf of the center.  For many children in the CCFP, the subsidized food served at daycare centers is their only source of food each day.

Ruballo was the owner and operator of Highland Food Resources, Inc. (HFR), a sponsoring organization of more than two hundred child daycare centers that participated in the CCFP, covering the geographic area from Key West to West Palm Beach and across the State to Florida’s West Coast.  In this role, HFR processed paperwork and electronically submitted monthly reimbursement claims on behalf of such centers.  Reimbursement was calculated on a sliding scale, with the largest amount allocated for children at the daycare centers who were classified as free, then reduced, then non-needy meal recipients.  Once HFR was reimbursed with federal funds, they paid the daycare centers, less HFR’s fee, which is a percentage of the total monthly meal reimbursements.  Thus, the size of HFR’s payment was driven, in part, by the number of meals claimed by daycare centers that are multiplied by a higher reimbursement rate for the free and reduced meals/snacks. 

On behalf of HFR, Ruballo was responsible for soliciting meal catering companies and awarding contracts through a competitive, anonymous bidding process. 

Montoya was the owner and operator of Montoya Holdings, Inc., d/b/a Healthy Children Catering and Pelota Café and Pizzeria.  The evidence at trial showed that Montoya, Ruballo, and others conspired to rig the catering bid process and award contracts to Montoya from 2012 to 2016.  As a result of the bid-rigging scheme, Montoya Holdings received lucrative contracts, and was paid more than $14 million in federal funds, via HFR, which were supposed to be used for providing nutritious meals to children at daycare centers in South Florida. 

Ruballo, Montoya and others conspired to rig the catering bid process through materially false and fraudulent representations to the CCFP.  For a period of five years, Ruballo agreed to accept kickbacks in exchange for awarding catering contracts to Montoya Holdings at participating CCFP centers that used HFR as a sponsoring organization.  During the course of the scheme, the kickbacks added up to hundreds of thousands of dollars.  Montoya and co-conspirators withdrew more than $1.6 million in cash during the conspiracy, and hundreds of thousands of dollars of cash, in turn, were deposited into accounts controlled by Ruballo – including into an account for Ruballo’s husband’s purported mobile car wash business.

Montoya’s bribes bought him protection from regulating agencies, most notably, the Florida Department of Health, and ensured that HFR and Ruballo did not terminate contracts despite repeated complaints about spoiled food.  Indeed, the evidence showed that Ruballo and other employees at HFR, at Ruballo’s direction, created falsified reports about other caterers and submitted them to the Department of Health in an attempt to detract attention from Montoya when investigators became suspicious. 

After Montoya Holdings caused a staph-induced foodborne illness outbreak in November 2016, affecting more than 140 preschool children in Miami-Dade and Broward Counties, the Department of Health and regulators ultimately banned Montoya Holdings from participating in the CCFP.  Despite this prohibition, the bribery continued February 2017, Montoya paid a $160,000 bribe to Ruballo, which the co-conspirators attempted to disguise as a “donation” or “settlement.”

Montoya failed to report more than $27 million in income to the IRS for Montoya Holdings from 2013-2016.  Evidence at trial also showed that he used the proceeds of the crime to fund personal expenditures, including visits to the Seminole Hard Rock Casino, a strip club, homes, cars, and jewelry.

Ruballo and other co-conspirators also falsified paperwork for children enrolled at daycare centers in order to qualify more kids for free and reduced meals under the CCFP.  This fraudulent paperwork was used as the basis for inflated monthly reimbursement claims that Ruballo submitted to the program, for which HFR received reimbursement from the CCFP. 

Ruballo falsely and fraudulently inflated the HFR budget by adding non-existent companies and employees to the budget, thereby deceiving the Department of Health and USDA, to illegally obtain additional program funds.  In total, Ruballo caused a loss to the CCFP of at least $22 million. 

            A co-conspirator, Yudy Miranda, pleaded guilty in connection with the wire fraud conspiracy (Case No. 18-CR-20040) and was sentenced to 84 months in prison by U.S. District Judge Jose E. Martinez.  Assistant U.S. Attorney Anne McNamara was the lead prosecutor in that case. 

U.S. Attorney Fajardo Orshan commended the investigative efforts of IRS-CI, USSS, USDA and the Fort Lauderdale Police Department.  The case is being prosecuted by Assistant U.S. Attorneys Lisa H. Miller and Daniel J. Marcet.

            Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or at http://pacer.flsd.uscourts.gov.