A Department of Education consultant illegally billed the city for an extra $3.6 million connecting public schools to the Internet, and then used the money to pay for luxury cars and Long Island real estate, the U.S. attorney's office claims.
Willard "Ross" Lanham was charged Thursday with one count of mail fraud and one count of theft concerning a program receiving federal funds. His lawyer, Joseph Ryan, said he was released on $250,000 bail and denied that he is guilty of any wrongdoing.
Richard Condon, the school system's Special Commissioner of Investigation, said his office uncovered the scheme based on two anonymous tips that Lanham was receiving kickbacks from vendors. He said it lasted for six years, between 2002 and 2008, when Lanham managed three major Department of Education initiatives, including one to provide Internet access to city classrooms.
Condon claims Lanham abused his position by hiring outside consultants, including his own brother, to work for him on the three projects that he oversaw. In two different arrangements, he got IBM and Verizon to bill the Department of Education for work conducted by his consultants at jacked-up rates, claiming he was authorized by the DOE to deal with the two big companies.
"So by the time the Department of Education was paying for these $70 and $30 consultants they were paying $200-something I believe," said Condon of one of the schemes.
Condon said both IBM and Verizon wound up profiting from the arrangement because they charged their own fees to the DOE. The two companies say they're now cooperating with the authorities.
"We very much value our relationship with the New York City Department of Education and, although Verizon employees were unaware of any wrongdoing in connection with the project, we have told DOE we are prepared to return any inappropriate profits, and we expect to discuss this further with DOE," said John Bonomo, Verizon's director of media affairs.
The Bloomberg Administration was rocked last last year by another case involving contractors accused of stealing $80 million to work on the CityTime project, intended to upgrade the city's payroll system.
Condon said the latest case shows the city needs to do a better job policing its contracts: "There's so much money and so many layers of contracting. ... You know you hire one consultant, and then they subcontract with another consultant."
Schools Chancellor Dennis Walcott said the DOE severed ties with the consultant, Ross Lanham, in 2008 and has improved its system for vetting and monitoring contractors.
"We are entrusted with the public’s money, and should have been more vigilant in our oversight of this project," he said, in a statement. "We'll do everything in our power to recover the money stolen from our schools."