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Homeless Services Provider With $600 Million In City Contracts Accused Of Fraud
By
Sophia Chang
Published Jan 30, 2020
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By
Sophia Chang
Published Jan 30, 2020
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The non-profit agency awarded nearly $600 million in contracts to operate some of the city's homeless shelters is being accused of fraud, including subcontracting with a former board member who charged a 25 percent markup on services.
The city filed a lawsuit against the Jamaica, Queens-based Childrens Community Services agency Wednesday in Manhattan Supreme Court, alleging breach of contract, fraud and unjust enrichment through fraudulent billing and invoicing practices, according to court documents.
The agency's practices "put in jeopardy the approximately 1,900 households experiencing homelessness, including individuals and families with children, served by CCS in connection with the City's mandate to provide shelter," the suit said.
CCS's top officials -- chief executive officer Thomas Bransky of Woodmere and chief operating officer Ruth Mandelbaum of Monsey -- were named in the suit as defendants as well.
The city awarded CCS contracts beginning in 2014 for "cluster site" housing in apartment buildings as well as shelter services in facilities and hotels around the city -- in the end, the total of the contracts were more than half a billion dollars. These services were to house families in about 28 shelters, including 25 in hotels, and provide social services for about $270 per day.
The city is now disputing "financial irregularities" from eight previous contracts and agreements with CCS.
One issue was CCS subcontracting with an "unlicensed temp agency" called SASY Enterprises Inc. for administrative and computer work. SASY Enterprises Inc., which has an address listed in Lawrence in Long Island, received "large lump sum payments for provisioning and furnishing rooms without explanation," their provided services were allegedly "unclear" in nature and employee titles unidentified, and duplicate invoices submitted. The invoices also allegedly included a 25 percent markup on everything, including all gas and electricity bills paid in shelter units. SASY also allegedly demanded a 43 percent cut of gross salary for staff recruitment and 10 percent of gross salary for training staff. The city said it never agreed to these markups.
Other subcontracted vendors submitted suspicious invoices with wrong addresses, failed to identify purchased goods and services, and submitted duplicate or erroneous billing, the lawsuit claims.
None of these vendors ever participated in competitive bidding, which was a requirement of the city contracts. At one point, when asked for proof of competitive bids, CCS told the city "they lost the proof of bids from other vendors." Other investigations revealed that city auditors called a vendor who could not provide an address as to where the company was physically located.
There were signs of conflicts of interest as well: "Peter Weiser, a former CCS Board member, directly or indirectly controls several CCS vendors, including Defendants AMX, AZ, Delta, and SASY" Enterprises, the complaint notes.
There was also the matter of a mysterious 2018 Ford vehicle that CCS bought and billed the city $38,467.50 -- the car invoice lacked crucial information such as the vehicle identification number, color, and starting mileage, the complaint said.
Red flags abounded. As far back as February 2017, the city's Department of Homeless Services had "concerns about CCS's financial practices, governance and management" and CCS agreed to more training, a fiscal monitor and DHS reviews of executive staff. The city is still awaiting a follow-up report from the fiscal monitor. The New York Times said DHS had refused to pay the invoices connected to the subcontractors under investigation and rejected CCS's application to operate two new shelters.
DHS asked the city's Department of Investigations for help in May 2018. On Monday, the DOI and federal prosecutors executed search warrants on CCS and its associated vendors. The city filed suit Wednesday asking a federal judge to appoint a temporary receiver to continue providing services to its clients:
"There is a real and substantial risk that, without payments from CCS, vendors, such meal service providers, security, maintenance and other important service providers, will be unable to continue providing services to shelter clients. Most importantly, without use and occupancy payments to hotels and other shelters and personnel expenses associated with the provision of services, shelter clients would be left to fend for themselves and be at risk of eviction from their shelter placements. Shelter clients would have to be relocated. Such a massive relocation of 1,900 households would be almost impossible on an emergency basis," the complaint said.
Staff who answered the phones at CCS took a message but did not return calls for comment. The DHS has not responded to email or phone inquiries. A spokeswoman for the DOI said they were "aware" of the matter but could not comment.
CCS has been the subject of skepticism before with critics questioning how "a small-time operation with a budget $250,000 in the red in 2014 (grew) into one of the biggest city contractors, with nearly a half-billion dollars in contracts," a 2018 NYN story said, and noted the CCS offices were "a mostly empty listed headquarters in Jamaica, Queens." Bransky worked in Chicago in the hotel industry before founding CCS in 2014, the Daily News reported in 2018.
Meanwhile, the number of homeless people using hotel shelters is increasing, as City Limits reports.
Mayor Bill de Blasio said the CCS contracts highlighted the lack of service providers in the field.
"I don't want people to labor under the illusion that there's endless organizations that provide homeless services," de Blasio said at an unrelated press conference Tuesday. "It's a pretty small sector. We need the services. That's not a choice, we have right to shelter. We're going to work with any organization we think can do the job, but if they prove they can't do the job or there's something wrong, of course we're going to step away. But there really is a limit in that field. We can't simply pull away the services. So, we need to bring in other leadership to keep the services going while we reset the larger equation."
With Jessica Gould/WNYC
Sophia Chang
Sophia Chang is a former WNYC and Gothamist reporter.
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Gothamist is funded by sponsors and member donations
Gothamist is funded by sponsors and member donations
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