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.

Juan Gonzalez: DOE Contractors Engage In Outsourcing Scam

From Juan Gonzalez in the Daily News:

A major technology contractor for the Department of Education has been using workers in Turkey and India to service the school system's computer network - and charging taxpayers $110 an hour.

Future Technology Associates paid a Turkish company $3.4 million from 2006 to 2009 to supply 12 programmers from Turkey, Special Commissioner of Investigation Richard Condon has found. An additional three worked from India.

The Turkish firm, Krono Bilgisayar, is owned by the same two men who run Future Technology, records show.

Those execs, Tamer Sevintuna and Jon Krohe, never disclosed their ownership stake in the Turkish company, although city rules require them to list all companies they own or control.

Condon's probe has been underway for more than year.

It first came to light last month, when lawyers for Sevintuna and Krohe persuaded a Manhattan judge to quash subpoenas for the men to be questioned.

Supreme Court Justice Barbara Jaffe labeled the probe a "fishing expedition." Condon's office has appealed.

In an affidavit, Condon deputy Gerald Conroy said the probe centers on possible self-dealing and inflated billings through the use of multiple subcontractors who supplied consultants to one another.

Investigators also want to know if FTA's overseas workers, who had daily access to the school system's computer network, were properly vetted.

FTA has received nearly $100 million in DOE contracts since 2005. From the 10th floor of a DOE building on Court St. in Brooklyn, scores of FTA consultants upgrade systems that track records for vendors, school employees and students.

The firm bills up to $300,000 a year for each consultant. Probers say many of those workers were supplied to FTA by a handful of middleman subcontractors in the U.S. and abroad.

"Our contract prohibits subcontracting without DOE permission, and we never gave FTA permission," DOE spokeswoman Marge Feinberg said.

FTA lawyer Jim Walden denied his clients acted improperly.

"These companies such as Krono [the Turkish firm] are not subcontractors, but rather an employment agency [that] provided temporary consultants," Walden said in a written response to questions from the Daily News.

DOE officials who supervised FTA are well aware that some consultants worked in Turkey and India, Walden said, largely because of the shortage of qualified programmers in the U.S.

Walden accused Condon's office of "harassing" a minority-owned company - Sevintuna is a Turkish national - that provides quality service at a low cost.

Another firm FTA relied on for programmers was Mera Consulting LLC of Jacksonville, Fla., which charged $14 million over a two-year period for workers it provided.

Records show Mera was established in 2008. Its sole owner was Jon Krohe - one of FTA's two executives. Mera listed its headquarters as a mail drop in the same Jacksonville UPS store where FTA was headquartered. Mera stationery listed the same phone and fax number as FTA.

Despite the firms' close connection, Krohe did not include Mera on the list of companies he owned in financial disclosure forms filed with the city in 2009.

Probers questioned him about Mera in May 2010, Conroy's affidavit says. Krohe dissolved Mera two weeks later, then amended his financial disclosure form to include his ownership stake in Mera.

"Mera was dissolved to remove any possible suggestion that it was being used to game DOE," Walden said.

As for his clients' connection to the Turkish company, Walden said: "No FTA principal has any such ownership interest" in Krono Bilgisayar.

The company's registration records in Turkey contradict that assertion. The News obtained a copy of the legal announcement that Krono published in the June 26, 2007, Turkish Trade Registry and had it translated.

It says Sevintuna and Krohe established Krono Bilgisayar in Ankara on June 21, 2007. Sevintuna owned 60% of the shares and Krohe the other 40%.

A second notice in the Turkish Trade Registry listed Krohe and Sevintuna as the firm's owners as recently as September 2010.

Sevintuna and Krohe failed to disclose their ownership interests in Krono Bilgisayar when they filed city financial disclosure forms in 2009 and last year.

Probers say lawyers for Krono in Turkey refused to supply them time sheets to verify work done for the school system, claiming Turkish law prohibits it.

Walden told probers he could "request" the Turkish firm to cooperate, but could not force it to do so.

In other words, Sevintuna and Krohe claim they have no power to get the Turkish company they own to explain where all that money the school system paid for overseas consultants ended up.

Keep digging into this mess and let's see what more there is.

Education "Reform" In Place Of A Jobs Policy

Lois Weiner on Democracy Now:

I think it’s also very important to understand that this focus on educational reform is replacing, is a substitute for, a jobs policy. We need to understand that. Education can democratize the competition for the existing jobs, but it cannot create new jobs. And when most jobs that are being created are by companies like Wal-Mart, education cannot do anything about that. So, we need to—we really need to look critically at Race to the Top and understand the way that it fits into this new economic order of a so-called jobless recovery and that what’s really going on is a vocationalization of education, a watering down of curriculum for most kids, so that they’re going to take jobs that require only a seventh or an eighth grade education, because those are the jobs that are being created in this economy.

The Wall Street Journal on the August 2010 jobs report:

The U.S. jobless rate rose to 9.6% in August, but the government’s broader measure of unemployment rose even more to 16.7%, the highest rate since April.

The comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs.

...

The 9.6% unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The rate is calculated by dividing that number by the total number of people in the labor force.

The U-6 figure includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.

The disparity in the rates in August was largely driven by an increase in the number of part-time workers who would prefer full-time work. That can be a worrisome indication that the jobs being created in the recovery aren’t the same quality as pre-recession positions.

And of course many of the jobs that replaced the ones lost in the recessions of the 80's and 90's weren't the same quality as those that existed before either.

What we have in the economy at large is what Juan Gonzalez and Lois Weiner noted we have happening in education:

LOIS WEINER: Well, I think it’s important to understand that there are—No Child Left Behind is part of this global project to deprofessionalize teaching as an occupation. And the reason that it’s important in this project to deprofessionalize teaching is that the thinking is that the biggest expenditure in education is teacher salaries. And they want to cut costs. They want to diminish the amount of money that’s put into public education. And that means they have to lower teacher costs. And in order to do that, they have to deprofessionalize teaching. They have to make it a revolving door, in which we’re not going to pay teachers very much. They’re not going to stay very long. We’re going to credential them really fast. They’re going to go in. We’re going to burn them up. They’re going to leave in three, four, five years. And that’s the model that they want.

So who is the biggest impediment to that occurring? Teachers’ unions. And that is what explains this massive propaganda effort to say that teachers’ unions are an impediment to reform. And in fact, they are an impediment to the deprofessionalization of teaching, which I think is a disaster. It’s a disaster for public education.

JUAN GONZALEZ: Well, you know, one of the—I’ve been, for several years now, looking deeply into these charter schools, and especially their tax forms. And one of the things that has struck me as I look at their various audited financial statements is that, generally speaking, the pay levels of the teachers in the charter schools are far lower than they are for normal public school teachers, but the pay of the executives—

KAREN LEWIS: Yeah.

LOIS WEINER: Yes.

JUAN GONZALEZ: —of the charter schools is far higher—

KAREN LEWIS: Higher, yeah.

LOIS WEINER: Yes.

JUAN GONZALEZ: —than it is for superintendents. So you’re, in essence, creating a much bigger wage gap in the schools through the charters—

LOIS WEINER: Yes.

JUAN GONZALEZ: —between management and the employees who actually cover the work.

LOIS WEINER: Yes.

JUAN GONZALEZ: I’m wondering what you found.

LOIS WEINER: Well, that’s part of the—you know, that’s part of the thinking here, that teaching really is not—does not have to be a skilled profession, because we’re not going to teach—we’re not going to educate kids to do anything more than work in Wal-Mart or the equivalent. They only need a seventh or an eighth grade education, at most a ninth grade education, and so we don’t need teachers who are more than, as Grover Whitehurst, a former Undersecretary of Education, said, "good enough." That’s all we need is teachers who are "good enough" to follow scripted curriculum and to teach to these standardized tests. And if you only need teachers who are good enough, you don’t have to pay them very much. And that’s the project. And regardless of the rhetoric, regardless of the intentions of some of the people who are supporting these reforms, people like the Education Trust, whose work I respect, I think it’s important that we look at something beyond the intentions and the rhetoric, and we really look at this project as being a project that’s global in its nature.

This is why so many of the education reformers are hedge fund managers and Wall Street types.

It is in THEIR interests to de-professionalize the teaching corps, lower costs and open up public education to for-profit companies.

And of course so many of the charters they run have six day school weeks, 9-10 hour school days, and 48 week school years, so both students and staff get socialized to expect to work longer and harder to make less money and have fewer job protections.

And rather than FIGHT this trend, Randi Weingarten and the unions bring a prime financier of it (Gates) to speak to the union.

Rather than fight this anti-labor, anti-teacher administration on this, the unions say "Well, it would be worse if the Republicans were in charge..."

How?

Seriously, how?

As was noted over at Fred Klonsky's blog a few days ago, so many of these "Democrats" on the side of education reform also belong to right wing organizations like the Cato Institute, the Manhattan Institute and the American Enterprise Institute.

These guys ARE Republicans, no matter what they call themselves.

And those are the policies they are pursuing.

This Labor Day Weekend we will hear pro-labor jive from President Obama as the administration starts to get worried that the midterm elections are going to make 1994 look like a minor GOP victory.

But don't you believe it.

As I posted yesterday, these guys in the administration DESPISE labor.

They need the GOTV organization labor has, so they pay lip service to unions and working people every so often, but their policies and attitudes are distinctly anti-labor as summed up by Rahm Emanuel's "Fuck the UAW!" comment when someone in the administration pointed out that if they didn't help the auto industry out, thousands of auto workers would lose their jobs.

And their attitudes about teachers can best be summed up by their applauding of the firing of the teachers in Rhode Island as part of their Race to the Top program.

It is time to STOP supporting these anti-labor, anti-teacher Dems and instead find pro-labor, pro-teacher politicians to support.

Yes, I know there aren't many out there.

There are some.

And yes, it's true the Greens won't win many races.

But maybe if we can help them to win some, Dems will start to wake up to the fact that there is a very large and angry constituent of former Democratic supporters who are looking for a pro-labor, pro-teacher party to belong to.