Pre-K Provider Stole Millions, State Audit Says
By DAVID M. HALBFINGER, NY TIMES
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One of New York City’s largest providers of special education services to preschoolers with disabilities illegally diverted millions in taxpayer financing to a girls’ religious school, summer camps and a kosher supermarket owned by the group’s officers and board members, state auditors said on Monday.

The auditors were unable to confirm that any of the hundreds of children who were supposed to get one-on-one instruction from the agency, Island Child Development Center, ever actually did, said the office of the state comptroller, Thomas P. DiNapoli.

After subpoenaing more than 13,000 checks from the agency’s bank, auditors said they gave up counting after the first 1,549 checks they reviewed turned up $5.8 million in what they said was fraudulent spending over a six-year period when Island Child billed the state and the city more than $27 million.

Mr. DiNapoli’s office called it the largest misappropriation unearthed yet in its inquiry into New York State’s $2 billion special education prekindergarten program. Spending on the program has jumped in recent years, and regulation has not kept pace.

Several proposals for enhanced oversight have been debated as part of the state budget process, though prospects for their approval are not clear.

“To take advantage of taxpayer dollars designated for special-needs children and instead use these moneys for personal gain is reprehensible,” Mr. DiNapoli said in a statement. “New Yorkers deserve greater oversight of these programs.”

As of last April, Island Child was billing taxpayers for providing one-on-one teachers to nearly 200 disabled children ages 3 to 5, records show.

Yet Island Child, in Far Rockaway, Queens, paid nearly $2 million to Bnos Bais Yaakov, a nearby school for Orthodox Jewish girls, of which the auditors said Rabbi Samuel Hiller, the assistant executive director of Island Child, is both dean and an owner. Another $877,000 went to various Jewish summer camps, two of them tied to Mr. Hiller, and more than $330,000 in nonpayroll checks went to Mr. Hiller himself, the auditors said.

Mr. DiNapoli’s office referred its audit to the Queens district attorney’s office, which said it was reviewing the findings.

Mr. Hiller declined to comment. His lawyer, Marc Agnifilo, did not address the details of the audit, but said he intended to work with Queens prosecutors to resolve the investigation.

Auditors said Island Child also bought $344,000 in food, including $73,000 from Super Sol, a kosher supermarket whose founder, Laurence Garber, led Island Child’s board. The special education prekindergarten program prohibits purchases of food.

Auditors cited what they said were many other improper or fraudulent expenses, including $200,000 in construction, $12,000 to two jewelers, $235,000 to credit-card companies, $44,000 to “cash,” and nearly $200,000 to five fictitious workers.

From Betsy Combier, Editor:

and then we have:

New York tutoring service awarded $4.5 million is under federal investigation
Juan Gonzalez
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City Controller John Liu refused to approve the contract this week for Champion Learning Center LLC, the largest provider of after-school tutoring services for city public schools. 'There is sufficient reason to believe that the proposed contractor is involved in corrupt activity,' Liu said in a letter Friday to the Department of Education.

The largest provider of after-school tutoring services for city public schools pupils, Champion Learning Center LLC, has been under investigation since last summer by the Manhattan U.S. attorney’s office, the Daily News has learned.

The federal probe came to light this week after City Controller John Liu refused to approve a new $4.5 million contract the Department of Education awarded the company in November.

“There is sufficient reason to believe that the proposed contractor is involved in corrupt activity,” Liu said in a Jan. 11 letter to the Department of Education, a copy of which The News obtained under a Freedom of Information request.

The firm, Liu noted in his letter, has twice been found to be improperly billing the city for its services — once by the department itself and once by Liu’s auditors. As a result, Champion has been forced to repay more than $6 million since 2009.

In addition, Liu said, the firm revealed in an Oct. 9 update to the city’s VENDEX system that it is the target of an ongoing federal civil probe.

Kenneth Fisher, an attorney for Champion, declined to discuss that investigation. He said the company informed department officials about it before the latest contract was awarded.

Ellen Davis, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, would not confirm or deny any federal investigation.

According to Fisher, the company’s previous mistakes resulted from poor administration, not fraud.

“Champion took several steps to improve its internal controls last year, and on that basis the DOE determined to continue its relationship with the company,” Fisher said.

Officials at Tweed initially sought a much larger three-year renewal contract for Champion last September, but they dropped that plan after the press began questioning the company’s track record.

In November, the DOE won approval from the Panel for Educational Policy for a one-year, $4.5 million renewal for Champion, but none of the documents submitted to the PEP mentioned any federal probe.

Since Champion’s founding in 2005 by Abraham Sultan — then a 22-year-old college grad — the company has mushroomed into the city’s biggest provider of tutoring for at-risk children.

Between 2006 and 2012, it received a whopping $87 million from the DOE. At one point, it was serving about one fourth of the 80,000 public school students who qualified for tutoring under the No Child Left Behind Act.

Champion “is proud of having successfully helped tens of thousands of New York City schoolchildren and of being the preferred choice of parents,” Fisher said.

In March 2009, this column reported that Champion was paying many of the college students it hired as part-time tutors as little as $15 to $17 an hour, while it was charging the DOE $79 an hour.

The payments to tutors were far lower than the “contracted rates,” DOE spokeswoman Connie Pankratz said. “We confronted them, and they agreed to pay the $5.2 million difference.”

A separate 2012 audit by Liu found that Champion had submitted incomplete, unsigned or possibly inaccurate bills to the tune of $859,000, and ordered restitution.

“Our taxpayers were overcharged and our students were shortchanged,” Liu said in a statement. “We simply cannot reward bad behavior with multi-million-dollar contracts.”

Now DOE officials must decide whether to press forward with the Champion contract in the face of Liu’s rejection.

jgonzalez@nydailynews.com