Expert bank robber Willie Sutton was once asked “Why do you rob banks?” His answer was profound in its simplicity: “Because that’s where the money is.”
The same might be asked about fraud on the government. Why do people do it? Just ask Willie Sutton.
As such, the recent settlement of a New York False Claims Act case should come as no surprise. In FY 2009, the federal government spent $9.8 billion on the national school lunch program. With that kind of money out there, there is no question someone has thier hand in the cookie jar, no pun intended.
A qui tam whistleblower who worked for Sodexo uncovered the fraudulent scheme at issue. It seems Sodexo, which is one of the biggest players in the food-service market, used its massive size to play hard-ball with its suppliers; as a result, Sodexo received rebates from its suppliers that averaged 14% of the company expenditures.
Nothing untoward in that–in fact, it’s smart business. Sodexo probably thought that what they did next was smart business also–but it wasn’t. Not only did Sodexho not pass along those 14% discounts to New York state, they didn’t even disclose the special prices they were able to get from thier suppliers.
The investigation was sparked by former employees of Sodexo under the New York False Claims Act, which, like the Virginia Fraud Against Taxpayers Act, allows whistleblowers to come take action when they have first-hand information about fraud on the government. Such persons are entitled to hire thier own private counsel and prosecute the case in tandem with the government.
The press release does not disclose how much money the whistleblower recieved, but you can access it here:
https://www.ag.ny.gov/media_center/2010/july/july21a_10.html
We know, however, that the individual would be entitled to recieve somewhere between 15% and 25% of the total recovery.
The total amount of the settlement with Sodexo was $20 million. The settlement was for fraud on 21 New York public school districts as well as the SUNY system. The settlement was unsealed in Federal Court in Massachusetts and is the largest monetary settlement under the New York State False Claims Act that does not involve Medicaid funds.
The next logical question is this–was Sodexo the only food service company doing this? Probably not….