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