Former Hillsborough school district worker admits to $156K overtime fraud, $70K in kickbacks
HILLSBOROUGH TOWNSHIP, N.J. (Somerset County) — A former Hillsborough Township School District worker has pleaded guilty to embezzling more than $156,000 through a fraudulent overtime scheme that involved paying approximately $70,000 in cash kickbacks to the district’s former business administrator, federal prosecutors announced Tuesday.
Kenneth Gratto, 55, of Dingmans Ferry, Pennsylvania, pleaded guilty Monday, Oct. 26, before U.S. District Judge Robert Kirsch to embezzling, stealing and obtaining by fraud funds belonging to the Hillsborough Township School District in Somerset County, according to U.S. Attorney Robert Frazer.
The scheme involved a multimillion-dollar school construction and renovation project approved by voters in a 2019 referendum, which included upgrades to existing school facilities and construction of a new school building. According to federal prosecutors, Aiman Mahmoud, who served as the district’s business administrator from 2008 through the end of 2021, helped oversee the project and arranged for Gratto to be appointed as a site supervisor and owner’s representative.
In that position, Gratto was responsible for overseeing aspects of the construction project, including safety monitoring, and assisting two companies involved in carrying out the improvements. Prosecutors said Gratto admitted that shortly after being hired, he agreed to pay Mahmoud substantial cash kickbacks in exchange for approving timesheets that significantly exaggerated the number of overtime hours he worked.
Gratto billed overtime at a rate of $150 per hour, according to court documents. During the second half of 2021, he regularly submitted timesheets claiming he had worked more than 12 hours of overtime on both Saturdays and Sundays, despite performing no work on those days.
Prosecutors said Mahmoud approved the fraudulent timesheets, allowing Gratto to receive payments from the companies involved in the project, which were subsequently reimbursed by the school district. After receiving his paychecks, Gratto deposited them into his bank account, withdrew cash intended for the kickbacks and delivered the money to locations selected by Mahmoud.
According to prosecutors, the cash was typically placed in envelopes and left inside Mahmoud’s unlocked school vehicle. Gratto admitted to paying Mahmoud approximately $70,000 in cash kickbacks generated through the fraudulent overtime billing.
In total, Gratto admitted to embezzling approximately $156,150 from the school district through the scheme and agreed to forfeit that amount as part of his plea agreement. The federal embezzlement charge carries a maximum potential penalty of 10 years in prison and a fine of up to $250,000.
Gratto is scheduled to be sentenced March 4, 2027. The investigation was conducted by the FBI, Homeland Security Investigations and the Somerset County Prosecutor’s Office, with Assistant U.S. Attorney Mark J. McCarren of the U.S. Attorney’s Office Special Prosecutions Division in Newark representing the government.
Federal prosecutors emphasized that the charges against Mahmoud remain pending. The allegations against him are accusations, and he is presumed innocent unless and until proven guilty.
