NYS Attorney General: Local school among those overcharged by food suppliers

By WKTV News

A local school is among 39 schools that will split an $18 million settlement after being overcharged by food suppliers.

According to New York State Attorney General Eric Schneiderman an $18 million settlement was reached with Compass Group USA, a food management services provider, for improperly overcharging 39 schools in New York State, including the Oneonta Central School District. Schneiderman says that compass received discounts from food vendors it worked with, but did not pass on those savings to New York's schools, as required by law. In addition to the multimillion dollar settlement, the corporation will institute a nutritional code of conduct that will result in better quality food for New York school children.

In addition to school districts statewide, educational entities receiving compensation from Attorney General Schneiderman's settlement include the Fresh Air Fund and New York School for the Deaf.

"Compass improperly profited by overcharging New York's taxpayers and shortchanging our schools. There are no excuses for this kind of misconduct," said Attorney General Schneiderman. "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."

An Attorney General investigation found that Compass, which negotiates contracts, handles food-related procurement, and staffs and supplies culinary facilities for New York state schools through its national operating subsidiary Chartwells, failed for more than seven years - from 2003 to 2010 - to disclose or pass through to many of its educational customers cost-saving rebates paid to the company by vendors and suppliers on its food-related purchases, in violation of specific contractual obligations and state and federal regulations. This resulted in cash-strapped New York schools and school districts being charged more than was permitted for the food provided by Compass.

The investigation leading to this settlement was conducted by the Taxpayer Protection Bureau, established by the Attorney General in 2011 with the intention of combating fraud and abuse of taxpayer dollars. Schneiderman's office says it is part of an ongoing, industry-wide investigation of food management companies and food distributors doing business with the state of New York. The Compass agreement comes on the heels of last year's $1.6 million settlement with the Whitsons companies.

In addition to paying the $18 million settlement amount, Compass will be required, over the next two years, to make quarterly disclosures of the settlement to all of its New York state educational customers and to provide detailed semi-annual reports of the company's New York sales and rebating practices to the Taxpayer Protection Bureau. The nearly $3 million in overcharges will be returned to schools and school districts statewide, and the remaining $15 million will be returned to New York State taxpayers.

Compass also agreed to a first-ever nutritional Code of Conduct requiring that it work diligently to comply with the enhanced nutritional standards of the Healthy, Hunger-free Kids Act passed by Congress on January 25, 2012, ahead of the scheduled time tables and, in addition, through partnering with local suppliers of fresh products, among other measures. Paying all rebates owed to schools, so that they can better afford to deliver healthy meals to more New York students, is a critical part of this effort. 

The Attorney General's Taxpayer Protection Bureau will continue to investigate fraudulent rebating practices in the food services industry, focusing on the conduct of other major food service companies and food distributors, and working with other states' Attorneys General to promote national reforms in this area.

Funds from the Attorney General's settlement will be distributed to impacted school districts and educational entities across the state. They include:

  • Albany Housing Authority (Summer School Program)
  • Ballston Spa Central School District
  • Bedford Central School District
  • Blessed Sacrament School (Albany, NY)
  • Cairo-Durham Central School District
  • Deer Park Union Free School District
  • Enlarged City School District of Troy
  • Fonda-Fultonville Central School District
  • Fort Ann Central School District
  • Fresh Air Fund (New York, NY)
  • Garden City Public Schools
  • Gateway-Longview, Inc.
  • Germantown Central School District
  • Glens Falls City School District
  • Golden Goal LLC (Fort Ann, NY)
  • Hampton Bays School District
  • Kings Park Central School District
  • Lansingburgh Central School District
  • Lawrence Union Free School District
  • Lindenhurst Union Free School District
  • Magen David Yeshiva (Brooklyn, NY)
  • Malone Central School District
  • Manhattan Day School
  • Mayfield Central School District
  • New York School for the Deaf
  • Northeastern Clinton Central School District
  • Oneonta City School District
  • Peekskill City School District
  • Ramaz School
  • Salanter Akiba Riverdale Academy
  • Schenectady City School District
  • Schenectady Inner City Ministry
  • Schodack Central School District
  • Scotia-Glenville Central School District
  • St. Mary's Academy (Champlain, NY & Hoosick Falls, NY)
  • West Hempstead Union Free School District
  • Westchester Day and Summer Day School
  • Windham-Ashland-Jewett Central School District
  • Wynantskill Union Free School District

Under its terms, Compass must:

  • Provide written disclosure to its New York state educational clients for the next two years explaining the company's rebating practices and notifying them of the review of their accounts by an independent auditor;
  • Establish a hotline for educational customers to call with any questions concerning rebates;
  • Pay for an independent auditor's review of rebating practices and submit semi-annual reports to the Office of the Attorney General for the next two years; and
  • Provide annual written reports to this Office on the progress of its compliance with the Nutritional Code of Conduct.

This investigation was pursued under the New York False Claims Act.

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