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Settlement benefits local schools

Mayfield, Fonda-Fultonville to get money

September 20, 2012
By JOHN BORGOLINI , The Leader Herald

The Mayfield and Fonda-Fultonville school districts are among 39 schools getting reimbursed by a food company the state says overcharged lunch programs.

As part of an $18 million settlement with Compass Group USA, Fonda-Fultonville will receive $24,776 and Mayfield will receive $18,844.

The state says Compass Group overcharged lunch programs at 39 school districts.

Attorney General Eric T. Schneiderman announced Wednesday the districts will receive $3 million from the settlement for vendor rebates that by law should have been passed on. The remaining $15 million will go to state taxpayers for damages and penalties under New York's False Claims Act.

The attorney general's office says Compass Group - which supplies schools with food through its national operating subsidiary Chartwells - failed to share its savings from discounts with vendors with the districts for more than seven years from 2003 to 2010.

Compass Group released a statement via email Wednesday saying the company withheld the money from the districts because of a misinterpretation of the New York state contracts.

"A misinterpretation of the New York contracts caused Chartwells to neglect to complete proper reconciliation of operating costs to the K-12 schools," Compass spokeswoman Sarah Hada said Wednesday, adding those contracts are unique. "When the investigation in these legacy K-12 contracts uncovered discrepancies between the contract and our practices, we offered to make immediate payment of amounts due, which amounted to approximately $350 thousand annually over an eight-year period. We also took corrective measures to ensure that such discrepancies would not occur again."

Fonda-Fultonville Interim Superintendent Patrick Michel said today the district was under contract with Compass for three years.

According to Michel, the contract was clear with how rebates are handled.

"They broke the law and paid for it," he said. "They're supposed to put the amount of the rebate [in paperwork], and if they fail to do that, good for the attorney general [for finding that]."

Ernest Clapper, Board of Education president at Mayfield, said the Mayfield district hasn't used Chartwells in three years.

He said the refunded money will help the district.

"Obviously, all small, rural districts need money desperately," Clapper said. "At this point, our attorneys are checking out the situation."

In a news release from the attorney general, Schneiderman said he doesn't believe the company made an innocent mistake.

Schneiderman said the company improperly profited by overcharging the taxpayers and shortchanging the schools.

"There are no excuses for this kind of misconduct," he said in the news release. "On behalf of students, parents and taxpayers, we are pleased that New York's schools will get their money back, and that this corporation will be held accountable for siphoning funds meant to benefit students."

The settlement is the largest recovery since the anti-fraud statute for state and local governments was amended in 2007, enhancing penalties and whistle-blower protections, according to the attorney general's office. Schneiderman, then a state senator, sponsored the measure, which has been used in probes of contractors.

Compass will be required over the next two years to make quarterly disclosures of the settlement to the 39 customers and provide detailed semi-annual reports of its sales and rebating practices to the Taxpayer Protection Bureau. The company also agreed to take steps to comply early with the enhanced nutritional standards passed by Congress in January, including partnering with local suppliers of fresh foods.

The investigation that led to the discovery was led by the Taxpayer Protection Bureau, which was established by Schneiderman in 2011 to combat fraud and abuse of taxpayer dollars.

The attorney general's news release said the bureau will continue to investigate fraudulent rebating practices in the food- services industry by focusing on the conduct of other major food-service companies and food distributors.

The Associated Press contributed to this report.



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