Mother and Daughter Sentenced in Federal Procurement Fraud Scheme Targeting CNMI Public School System

SAIPAN, CNMI — A mother and daughter have been sentenced to federal prison after prosecutors uncovered a procurement fraud and money laundering scheme that diverted more than half a million dollars from the Commonwealth of the Northern Mariana Islands Public School System, according to federal authorities in the Districts of Guam and the Northern Mariana Islands.

Federal officials announced that CLARISSA ADLAWAN, 55, a lawful permanent resident originally from the Philippines, and GISELLE BUTALID, 34, a naturalized United States citizen residing in Saipan, were sentenced on May 6, 2026, by Chief Judge Ramona V. Manglona in the United States District Court for the Northern Mariana Islands.

According to federal prosecutors, the scheme exploited procurement systems inside the CNMI Public School System (PSS), an educational institution receiving substantial federal funding intended for public education and student resources.

CLARISSA ADLAWAN was sentenced to 48 months imprisonment after pleading guilty to conspiracy to commit an offense against the United States and conspiracy to commit money laundering. In addition to the prison sentence, the court imposed three years of supervised release and ordered her to complete 100 hours of community service.

GISELLE BUTALID received an 18-month federal prison sentence after pleading guilty to the same offenses. The court additionally imposed three years of supervised release and 100 hours of community service.

Federal authorities stated the court ordered both defendants jointly responsible for restitution totaling $548,788. The court additionally ordered forfeiture proceedings involving two properties owned by the defendants in the Philippines.

According to prosecutors, the fraud operation centered around BUTALID’s position inside the CNMI Public School System procurement process.

Federal investigators stated BUTALID used her employment access and procurement authority to steer fraudulent educational purchases through a company operated alongside her mother known as One Legacy LLC while concealing the conflict of interest from school officials.

Court records allege the scheme operated between October 2021 and August 2022 and involved fraudulent procurement submissions tied to educational materials and online learning resources that were either never ordered or never delivered to the school system.

Investigators determined that several procurement records had been falsified to conceal what prosecutors described as “ghost purchases,” where payments were issued despite no legitimate products being procured by the Public School System.

Federal prosecutors stated the defendants instead diverted the funds for personal enrichment while educational programs serving students across the CNMI were deprived of critical resources funded through taxpayer-supported programs.

Investigators identified multiple fraudulent payment transactions tied to the operation.

According to court filings, One Legacy LLC received payments of approximately $50,000 and $52,500 for online educational materials that investigators determined were never actually procured for the school system.

Federal authorities stated that shortly after those payments were received, BUTALID and ADLAWAN traveled to the Philippines where investigators tracked approximately $10,000 in ATM cash withdrawals during the trip.

Investigators additionally identified another fraudulent procurement payment totaling approximately $113,020 tied to educational materials that prosecutors allege were never delivered.

According to federal prosecutors, that payment was followed by approximately $65,000 in cash withdrawals before another overseas trip connected to the defendants.

Federal authorities stated that final transaction occurred shortly after school officials confronted BUTALID regarding her connection to companies involved in the procurement activity.

Prosecutors alleged that although BUTALID resigned from her position after questions emerged regarding the transactions, she remained employed long enough to facilitate one additional fraudulent payment before leaving the Public School System.

The investigation also uncovered allegations that stolen funds were used to construct a nine-room residence in the Philippines.

Federal prosecutors argued during sentencing that ADLAWAN failed to fully cooperate regarding the property despite obligations outlined in her plea agreement requiring disclosure and assistance in recovering assets purchased with misappropriated funds.

The court ultimately denied ADLAWAN the sentencing benefit normally associated with full acceptance of responsibility after determining she failed to adequately assist investigators regarding the overseas property tied to the fraud proceeds.

Federal authorities stated the forfeiture process involving foreign-held assets remains ongoing as investigators continue efforts to recover funds connected to the scheme.

The case highlights growing federal scrutiny surrounding procurement fraud involving federally funded educational systems, grant programs, and public-sector procurement environments where internal access to purchasing systems can be exploited to bypass oversight controls.

Procurement fraud investigations frequently involve falsified invoices, shell companies, kickback arrangements, ghost vendors, manipulated bidding processes, and concealed conflicts of interest designed to redirect public funds into private accounts.

Federal investigators emphasized that financial crimes involving educational funding carry broader community consequences because diverted funds directly affect educational resources, classroom support systems, technology programs, and student services.

The investigation was conducted by IRS Criminal Investigation, the Department of the Interior Office of Inspector General, the Federal Bureau of Investigation, and the Commonwealth of the Northern Mariana Islands Office of the Public Auditor.

Federal authorities additionally highlighted the coordinated partnership between federal investigators and local oversight agencies during the investigation into the procurement scheme.

The prosecution was handled by Assistant United States Attorney Eric S. O’Malley for the District of the Northern Mariana Islands.

Federal officials also referenced the Department of Justice’s recently announced National Fraud Enforcement Division, established to prioritize investigation and prosecution of fraud involving taxpayer-funded programs and public financial systems.

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