TRENTON, New Jersey — A Pennsylvania man who supervised construction work for the Hillsborough Township School District has pleaded guilty in federal court to embezzling more than $156,000 from the district through a fraudulent overtime scheme — and to paying about $70,000 of it back out as cash kickbacks to the district's former business administrator, US Attorney Robert Frazer announced in a statement from the US Attorney's Office for the District of New Jersey.
Source: US Attorney's Office, District of New Jersey (justice.gov)
Kenneth Gratto, 55, of Dingman's Ferry, Pennsylvania, pleaded guilty before US District Judge Robert Kirsch to embezzling, stealing and obtaining by fraud funds belonging to and under the care, custody and control of the Hillsborough Township School District (HTSD), in violation of Title 18, United States Code, Section 666(a)(1)(A), the Justice Department said. New Jersey coverage of the plea confirmed the same figures: more than $156,000 embezzled and approximately $70,000 in kickbacks.
Source: PostGoo (New Jersey coverage)
A 2019 referendum project, a $150-an-hour timesheet
The money sat inside a multi-million-dollar project to upgrade existing Hillsborough school facilities and build a new school, a project voters approved in a 2019 referendum. 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 the site supervisor and owner's representative, overseeing aspects of the work including safety monitoring and assisting two companies implementing the referendum's goals, according to court documents cited by the Justice Department.
Gratto admitted that shortly after he was hired, he agreed to provide substantial cash kickbacks to Mahmoud, and in exchange Mahmoud approved timesheets that substantially exaggerated the overtime hours Gratto worked, billed at $150 per hour. Specifically, Gratto admitted he regularly submitted timesheets claiming he had worked more than 12 hours of overtime on both Saturdays and Sundays throughout the latter half of 2021 — even though he had not performed any work on those weekend days, the Justice Department said.
Cash in an envelope, left in an unlocked school vehicle
The mechanics of the scheme were simple, according to Gratto's admissions in court. The companies involved paid him for the billed hours and were in turn reimbursed by the school district. Gratto would deposit the cheques, withdraw cash in the amount of the intended kickback, and deliver that cash in an envelope at a location of Mahmoud's choosing — typically inside Mahmoud's unlocked school vehicle. In total, he admitted paying Mahmoud approximately $70,000 generated from the fraudulently billed overtime, and to embezzling approximately $156,150 from the district together with Mahmoud through the scheme.
As part of his plea agreement with the government, Gratto agreed to forfeit the full $156,150. The embezzlement charge carries a maximum potential penalty of 10 years in prison and a maximum fine of $250,000. His sentencing is scheduled for March 4, 2027, before Judge Kirsch.
Source: US Attorney's Office, District of New Jersey (justice.gov)
Who investigated — and where Mahmoud's case stands
US Attorney Frazer credited the FBI, under Special Agent in Charge Stefanie Roddy in Newark; Homeland Security Investigations, under Special Agent in Charge Michael McCarthy; and the Somerset County Prosecutor's Office, under Prosecutor John P. McDonald, with the investigation. The government is represented by Assistant US Attorney Mark J. McCarren of the office's Special Prosecutions Division in Newark. Gratto's defence counsel is Timothy Donahue, an assistant federal public defender in Newark.
What is solid
- Gratto has pleaded guilty and admitted the overtime scheme, the ~$70,000 in kickbacks and the $156,150 total in court, according to the Justice Department.
- Sentencing is scheduled for March 4, 2027; the charge carries up to 10 years in prison and a $250,000 fine.
What is only claimed
- The charges and allegations in the indictment remain pending against Aiman Mahmoud. They are accusations only, and Mahmoud is presumed innocent unless and until proven guilty — the Justice Department states this explicitly.
Why Hillsborough families are watching
Hillsborough Township sits in Somerset County, in the heart of New Jersey's Indian and Punjabi diaspora belt, and the money at issue was not an abstract budget line: it was referendum money local taxpayers approved in 2019 to upgrade existing schools and build a new one. Every dollar billed for weekend work that was never done was a dollar taken from that construction programme. Cases like this are also why school boards across New Jersey have tightened timesheet approvals since 2021 — a single approving official and a single contractor, prosecutors say, were enough to run this scheme for months.
What happens next
Gratto returns to federal court in New Jersey on March 4, 2027, for sentencing, where Judge Kirsch will decide how much of the 10-year maximum he serves; the $156,150 forfeiture is already agreed. Mahmoud's case proceeds separately on the pending indictment, and nothing in Gratto's plea decides Mahmoud's guilt or innocence. The Hillsborough district, meanwhile, has a new administration in place since Mahmoud's tenure ended in 2021, and the referendum construction programme he helped oversee has continued under it.