NYS AG settles with Sodexo for school food services

By Eileen Buckley

Buffalo, NY – A multi-million dollar settlement with a food services provider to 21 school districts across New York State has been reached.

State Attorney General Andrew Cuomo announced a $20 million settlement has been reached with Sodexo.

The investigation is part of an on-going industry wide investigation. The probe determined that Sodexo illegally overcharged the school districts and the SUNY system for food services.

Sodexo is among the world's largest food services companies.

The 21 K-12 schools participate in the New York State Education Department's Child Nutrition Programs and the National School Lunch Program. Those programs require that rebates, credits and discounts be credited to the schools.

The AG investigation says on average, Sodexo received 14% rebates from its suppliers.

"This company cut sweetheart deals with suppliers and then denied taxpayer-supported schools the benefits," said Attorney General Cuomo.

The investigation was sparked by former employees of Sodexo under the New York False Claims Act, which allows whistleblowers to come forward to disclose wrongdoing without fear of retribution. The settlement was unsealed in Federal Court in Massachusetts and is the largest monetary settlement under the Act that does not involve Medicaid funds.

"The state and federal regulations regarding such contracts exist to protect taxpayers, and I thank the whistleblowers for having the courage to bring this to our attention," said Cuomo.

A majority of the 21-school districts are in Western New York, including Maryvale and Cleveland Hill in Cheektowaga, Elmwood Franklin in Buffalo, Lackawanna and Tonawanda City School District.

As part of this settlement, Sodexo must also implement greater transparency in the contracting process and create built-in safeguards to ensure that clients are informed about rebates. The company must:

Disclose in future contracts with public entities that it is receiving rebates and indicate whether rebates will be retained by Sodexo or credited to the client

Provide written disclosure to school district clients for the next two years that it is receiving off-invoice rebates

Establish a hotline for clients to call with any questions concerning rebates

Pay for an independent auditor's review of its off-invoice rebate program for the next three years

The settlement funds will be distributed to the whistleblowers ($3.6 million), New York State ($15 million) and the impacted school districts:

Children's Village and Abbott House (Westchester County):
$1.03 million

Albion CSD (Orleans County): $2,918

Cheektowaga - Maryvale (Erie County): $2,806

Cleveland Hill Union FSD (Erie County): $1,757

Dunkirk City School District (Chautauqua County): $2,210

Elmwood Franklin School (Erie County): $1,264

Lackawanna City School District (Erie County): $11,597

Lakeshore CSD (Erie County): $26,022

Letchworth (Wyoming County): $1,370

Lewiston Porter CSD (Niagara County): $2,113

Lockport City School District (Niagara County): $7,551

Medina CSD (Orleans County): $2,022

North Tonawanda (Niagara County): $12,121

Royalton - Hartland CSD (Niagara County): $2,440

Salamanca City School District (Cattaraugus County): $2,637

Schenectady City School District (Schenectady County): $14,044

Sodus City School District (Wayne County): $2,397

Springville - Griffith CSD (Erie County): $2,874

Tonawanda City School District (Niagara County): $3,541

Tuckahoe Union FSD (Westchester County): $8,556

JCCA - Buffalo (Erie County): $59,381