Fraud At DOE Involving Outside Consultant, I.B.M. And Verizon

CityTime comes to the NYCDOE:

A former consultant for the Department of Education surrendered to federal authorities on Thursday to face charges that he stole $3.6 million in the six years he worked managing projects that were meant to provide Internet access to city schools.

Verizon and I.B.M., the largest of the vendors involved in the projects, played a role in the scheme and profited from it, according to the city’s special commissioner of investigation, Richard J. Condon.

The allegations emerged just as the department is gearing up to increase its technology spending by roughly $550 million in the next year alone, even as it contends with sharp drops in state aid that could force teacher layoffs.

According to the federal complaint, the former consultant, Willard Lanham, coaxed subcontractors into billing the department for work performed by people he had hired at rates higher than they were actually paid.

Mr. Lanham then pocketed the difference, according to the complaint, using the money to finance a lavish lifestyle that included luxury cars and a large plot of land on Long Island, where he built three high-end homes.

Mr. Condon’s office began unveiling the scheme in 2006, after receiving two anonymous complaints that Mr. Lanham was getting kickbacks from vendors.

While investigating the accusations, investigators discovered that I.B.M. had been billing the Education Department for work performed by consultants hired by Mr. Lanham without proper authorization, the complaint says.

In November 2008, the office received yet another complaint, from a senior director at the Department of Education’s Division of Instructional and Information Technology, Sheila Raskob.

In a report released on Thursday, Mr. Condon said that Ms. Raskob accused Mr. Lanham of hiring other consultants whose work was billed by Verizon through its separate contract with the department.

Mr. Lanham hired a brother as one of the consultants, according to the federal complaint. The brother was paid $40 per hour, though the invoices received by the Department of Education showed an hourly rate of $175, the complaint said.

“We are entrusted with the public’s money, and should have been more vigilant in our oversight of this project,” Schools Chancellor Dennis M. Walcott said in a statement. “Since we severed ties with this contractor and reported his criminal activity in 2008, the Department of Education has established new safeguards to ensure that no contractor has oversight over his own projects.”

Mr. Lanham is to be arraigned Thursday afternoon at Federal District Court in Manhattan.

So much to unpack here.

First, note that this scheme took place over several years and the DOE provided no meaningful oversight of the consultant's work for most of those year - he did his own oversight.

Second, note that the defrauding of the DOE was done not only by the consultant, who has now been arrested, but also by two of the largest vendors involved in the projects - I.B.M. and Verizon.

These aren't some fly by night companies that conspired to defraud the DOE of millions.

This is Verizon and I.B.M we're talking about.

Next let us note that Bloomberg plans to spend $550 million dollars on technology upgrades in the next year alone even as he lays off 4,666 teachers and lets another 1,500 jobs disappear by attrition to save the DOE $300 million.

How much of the $550 million is going to simply be stolen either by the outside consultants who apparently work for the Bloomberg administration without ANY oversight whatsoever or by the vendors who also apparently work with the city without ANY meaningful oversight whatsoever.

Bloomberg is proud to say he brought "accountability" to the DOE.

Go to the NYCDOE website and you'll see an "accountability and performance" link where visitors can see how schools, administrators and teachers are being held "accountable" by the DOE.

But apparently there is NO accountability or performance controls for any of the outside consultants or vendors who work with the city or with Bloomberg.

They steal hundreds of millions of dollars from the city and Bloomberg is going to throw them another $550 million this year for tech upgrades even as the arrests of the outside consultants start to ratchet up.

First came the CityTime arrests.

Now comes the first of the DOE arrests.

The more outside investigators dig into this business, the more crookedness they will find.

Juan Gonzalez has already pointed in the direction of another outside consultant/tech company that may be stealing money from the DOE (and thus the taxpayers.)

Gonzalez has pointed out how the outside consultants Bloomberg hires are often free from outside scrutiny because their salaries come out of the capital budget and they do not have to be revealed in public expense reports.

No one actually knows how much they're paying these guys or what it is exactly that they do.

We only know that they will not be getting laid off or taking pay cuts even as teachers do.

Given the arrest of the outside consultant in this scheme and involvement of the two vendors, I.B.M. and Verizon, in defrauding the DOE and the city, given the CityTime mess and the questions Gonzalez has raised about the Turkish contractors working for the DOE, it is time to put a FREEZE on ALL NYCDOE contracts for technology.

Bloomberg does NOT deserve the benefit of the doubt on this.

How dare he drop 6,166 teaching jobs, including laying off 4,166 teachers, when he is allowing these outside consultants and vendors to STEAL THE CITY BLIND.