Kenneth Gratto, a 55-year-old contractor from Dingmans Ferry, Pennsylvania, pleaded guilty this week to embezzling, stealing and obtaining by fraud more than $156,000 from the Hillsborough Township School District, admitting he padded his own overtime pay and funneled tens of thousands of dollars in cash kickbacks to a former district official. Gratto appeared before U.S. District Judge Robert Kirsch to enter the plea, closing out one chapter of a scheme prosecutors say unfolded over roughly a year inside a multimillion-dollar school construction project.
According to mycentraljersey.com, Gratto pleaded guilty Thursday to embezzling, stealing and obtaining by fraud more than $156,000 from the district. The case centers on a scheme that ran between January 2021 and January 2022 involving fraudulent overtime payments and kickbacks, as reported by Patch. The money came from funds tied to a multimillion-dollar project to upgrade school facilities and construct a new building, approved through a 2019 referendum, according to the same mycentraljersey.com report.
Inflated Weekend Timesheets
Gratto billed the district $150 an hour for his overtime work, per mycentraljersey.com's reporting. During the latter half of 2021, he regularly submitted timesheets claiming he worked more than 12 hours of overtime on both Saturdays and Sundays, even though he performed no work on those days, the outlet reported.
Those inflated hours weren't just a personal scam — they were the mechanism for a kickback arrangement with former district Business Administrator Aiman Mahmoud, who served in that role from 2008 through the end of 2021, according to mycentraljersey.com's account. The dossier of facts assembled in court describes Gratto agreeing to pay Mahmoud cash in exchange for approval of the padded timesheets, with Mahmoud having appointed Gratto as site supervisor overseeing safety monitoring and construction aspects of the project.
Cash Handoffs in an Unlocked School Vehicle
After receiving payment for his inflated hours from companies involved in the project, which the district reimbursed, Gratto would withdraw the kickback amounts in cash. He then delivered envelopes containing the cash at locations selected by Mahmoud, typically inside Mahmoud's unlocked school vehicle, mycentraljersey.com reported. In total, Gratto admitted paying approximately $70,000 in cash kickbacks to Mahmoud, the outlet's report states.
As part of his plea agreement, Gratto agreed to forfeit approximately $156,150 and pay that same amount in restitution to the school district, according to mycentraljersey.com. The restitution is intended to compensate the community for financial losses tied to the scheme, Patch noted in its coverage.
Potential Penalties and What Comes Next
The embezzlement charge Gratto pleaded guilty to carries a maximum penalty of 10 years in prison and a $250,000 fine, per mycentraljersey.com. His sentencing is scheduled for March 4, 2027, the outlet reported.
Mahmoud, for his part, was previously indicted by a federal grand jury on charges including conspiracy to commit extortion and embezzlement, according to Patch's reporting. Those charges remain pending, and per the United States Department of Justice, he is presumed innocent unless and until proven guilty.
Not Hillsborough's First Overtime Scandal
This isn't an isolated case for the district. Patch's reporting notes that former Director of Buildings and Grounds Anthony DeLuca previously pleaded guilty in federal court for his role in an illegal overtime scheme after receiving more than $137,000 in unauthorized overtime pay and paying cash kickbacks of his own — a strikingly similar pattern of inflated hours and envelope payoffs tied to the same district's construction spending.
