A.G. Schneiderman's New "Taxpayer Protection Bureau" Recovers $1.6 M From Company Overcharging Taxpayers For School Lunches

Settlement Provides Reimbursement For 30 School Districts & Education Providers

Schneiderman: Those Who Defraud New York Taxpayers Will Be Held Accountable

 

NEW YORK – Attorney General Eric T. Schneiderman today announced a $1.6 million settlement with a food service provider for illegally overcharging school districts and other education providers. The Suffolk County-based Whitsons Culinary Group received savings from food vendors it worked with, but did not pass on those savings to customer schools, resulting in more than $800,000 in illegal charges. Whitsons must now pay $1.6 million to the state and affected school districts, and comply with a series of reforms to improve transparency in its contracting and service.

This investigation was among the first undertaken by the Taxpayer Protection Bureau, which Attorney General Schneiderman established in January to target fraud and abuse of taxpayer dollars.

“These are difficult financial times for New Yorkers and our state. For a company to profit off of sweetheart deals while overcharging our schools is simply unconscionable,” said Attorney General Schneiderman. “Recovering taxpayer dollars is exactly what the Taxpayer Protection Bureau was established to do – and today’s announcement sends a clear message that those who seek to defraud New York taxpayers will be held accountable. On behalf of students, parents and taxpayers, we are pleased that these schools will get their money back, and that Whitsons will no longer be able to siphon funds meant to benefit students.”

The Attorney General’s investigation determined that from the 2002-03 school year through the end of 2010, Whitsons received rebates from its food vendors but failed to pass those savings onto the schools – a violation of contracts, as well as state and federal regulations. Whitsons also entered into what it called marketing agreements with food and materials vendors, claiming to market services, but the Office considered these agreements to really conceal the receipt of rebates that were required to be credited to New York schools with which Whitsons contracted.

The Attorney General’s Taxpayer Protection Bureau will continue to investigate fraudulent rebates practices in the food services industry, including the conduct of major food service companies, distributors, and vendors. 

In addition, a member of the Office of the Attorney General will testify today, before the United States Senate's Homeland Security & Governmental Affairs Committee, Subcommittee on Contracting Oversight concerning the Attorney General's investigation into food service industry practices and the impact on government programs like the National School Lunch Program.

Funds from today’s settlement will be distributed to the impacted school districts and educational entities. They include:

Manhattan

  • Jewish Child Care Association        
  • Good Shepherd Services     

Nassau County

  • Hicksville Public School District      
  • Syosset Central School District       
  • Plainview-Old Bethpage School District     
  • MercyFirst     
  • Mill Neck Family of Organizations  
  • Kings Park Central School District  
  • SCO Family of Services - The Robert J. McMahon Children's Center    

Rockland County

  • Pearl River Union Free School District       

Suffolk County

  • SCO Family of Services - Madonna Heights          
  • East Hampton Union Free School District 
  • South Country Central School District        
  • Huntington Union Free School District      
  • Bridgehampton Union Free School District           
  • East Quogue School District

Westchester County

  • Mount Vernon City School District 
  • Harrison Central School District     
  • Union Free School District of the Tarrytowns        
  • Port Chester-Rye Union Free School District        
  • Graham Windham   
  • Ossining Union Free School District           
  • Mamaroneck Union Free School District   
  • Leake & Watts Services, Inc. - Woodfield Cottage           
  • Peekskill City School District           
  • Abbott House
  • Blind Brook Public Schools  
  • Pleasantville Union Free School District    
  • Briarcliff Manor School District       

Ulster County

  • Wallkill Central School District       

The settlement also requires greater transparency in the contracting process and to create built-in safeguards to ensure that clients are informed about rebates. Whitsons must:

  • Provide written disclosure to school district clients for the next two years that it is receiving off-invoice rebates;
  • Establish a hotline for clients to call with any questions concerning rebates; and,
  • Pay for an independent auditor's review of Whitsons' off-invoice rebate program for the next two to three years, depending on the progress of Whitsons' effort to eliminate rebates from its business altogether.

This case was pursued under the New York False Claims Act. As a state senator, Attorney General Schneiderman authored amendments to strengthen the False Claims Act. These enhancements, known as the Fraud Enforcement and Recovery Act, allow the state to collect triple damages and between $6,000 and $12,000 per violation from corporations or people who defraud the government, or violate their obligations to pay government entities.

The Attorney General's investigation was led by Taxpayer Protection Bureau Senior Counsel Emily Bradford and Deputy Bureau Chief John F. Carroll, under the supervision of Bureau Chief Randall Fox and Executive Deputy Attorney General for Criminal Justice Nancy Hoppock.  

 

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