Former New York University finance director charged with orchestrating fraud

A former New York University director of finance was charged Monday with orchestrating a six-year fraud.

Cindy Tappe, 57, allegedly diverted $3.5 million intended for women- and minority-owned businesses and for other programs into bank accounts held by two shell companies she created and then used the money to pay personal and luxury expenses, including renovations to her Westport, Connecticut, home, according to the Manhattan District Attorney's Office.

Tappe is charged with money laundering, grand larceny, offering a false instrument and falsifying business records.

"Our multilingual learners and students with disabilities deserve top-notch services, and these funds should have gone directly to their schools," said Manhattan District Attorney Alvin Bragg. "Instead, we allege, the funds meant for student programs were used purely for personal gain by an NYU Director of Finance, who renovated a home in Connecticut and bought a swimming pool with the money."

The New York State Education Department awarded NYU $23 million to administer a bilingual education program and a program meant to help special education. Some of that money was supposed to be used for grants to minority- and women-owned businesses.

Instead, according to the indictment, Tappe arranged for three certified minority- and women-owned business subcontractors to receive the overwhelming majority of the grants. NYU paid the three companies approximately $3.527 million to provide services related to the grants. To justify the payments, the companies submitted fictitious invoices drafted by Tappe and pasted on their letterhead, the indictment said.

None of the companies performed work on the contracts, according to court documents. Instead, they allegedly functioned as pass-throughs, taking between 3% and 6% of the invoice amounts as "overhead," and sending the remainder of $3.352 million to two fictitious shell companies created by Tappe: High Galaxy, Inc. and PCM Group, Inc.

A portion of the funds was then used to pay legitimate grant-related expenses, and to reimburse NYU employees for expenses incurred or services rendered without any NYU oversight, the indictment said.

Moreover, Tappe used the High Galaxy and PCM accounts to steal at least $660,000, by using that money to pay her personal expenses, according to the indictment. She used the accounts to pay for home renovations -- including a new $80,000 swimming pool -- and her ordinary living expenses, the indictment said.

"Cindy Tappe used her high-ranking position at NYU to divert more than $660,000 in state funds to companies she controlled to fund a lavish lifestyle," New York State Comptroller Tom DiNapoli said.

Her attorney, Deborah Colson, declined to comment when reached by ABC News.