Cash Drain

July 17, 2008 permalink

Ever wonder why foster and adoptive kids live in poverty after legislatures appropriate billions? Here is an answer from New York.

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The New York Times

Officials Accused of Taking Agency Money in Fake Adoptions

By BENJAMIN WEISER, Published: July 17, 2008

Two officials of New York City’s child-welfare agency and the fiscal director of a Brooklyn foster care agency have been charged with creating phantom adoptions in a scheme to pocket hundreds of thousands of dollars intended for the care of children with disabilities or special needs, federal authorities said on Wednesday.

One of the two officials of the city agency, the Administration for Children’s Services, was also charged with issuing government checks for work that was not performed in return for kickbacks.

The senior Children’s Services official accused, Lethem Duncan, was the deputy director of the payments-services department, federal prosecutors said.

In the phony-adoption scheme, the officials said, Mr. Duncan worked with the second employee, Nigel Osarenkhoe, who they said used the agency’s computers to create false names and issue checks as if they were subsidies for real adoptions.

Prosecutors said that Mr. Osarenkhoe told Mr. Duncan that he had figured out a way to manipulate the agency’s computer system to cause adoption subsidy payments to be mailed to whomever he wanted.

“All he needs is a name — any name — to send payments to,” said the United States attorney in Manhattan, Michael J. Garcia.

“These defendants were driven by greed,” Mr. Garcia added, “and they placed their own self-interest above the well-being of the children served by A.C.S.”

The announcement of the charges came a day after the sentencing of Judith Leekin, who was convicted of fraud after she adopted 11 children under four aliases and collected $1.68 million in payments meant for the children’s care, which she used to support a lavish lifestyle. Ms. Leekin was sentenced to nearly 11 years in prison.

Rose Gill Hearn, the investigation commissioner, said that after Ms. Leekin’s fraud was discovered last year, her office began to work closely with Children’s Services to study how such a fraud could occur. One of the officials that the agency assigned to work with her office was Mr. Osarenkhoe, who by then, without the knowledge of officials, was already involved in his own fraud involving similar adoption subsidies, she said.

The children’s services commissioner, John B. Mattingly, said that Mr. Duncan and Mr. Osarenkhoe had been suspended.

Prosecutors said that the phony-adoption scheme relied on cooperation from Stay Thompson, the fiscal director of the Brooklyn foster care agency, Concord Family Services, which they said had received more than $28 million in contracts for foster care and other services in recent years.

In that scheme, prosecutors said, Ms. Thompson received about $79,000 in illegal payments and agreed to share the proceeds evenly with Mr. Duncan and Mr. Osarenkhoe. Ms. Thompson was arrested on Tuesday.

Mr. Mattingly said the city had halted the placement of children with Concord and told it to suspend Ms. Thompson.

“We will not tolerate this type of fraud and are working at the direction of Mayor Bloomberg to immediately correct any gaps in our financial controls,” Mr. Mattingly said.

Ms. Thompson was also involved in the fictitious-services scheme, Mr. Garcia and Ms. Gill Hearn said.

In that case, they said, Ms. Thompson was stealing money from Concord’s petty cash fund and giving it to Mr. Duncan, and when he could not repay it, she proposed that they work together to embezzle money from the city agency.

Prosecutors said Mr. Duncan had the city agency issue a check for $375,000 to a computer- services firm run by an acquaintance of Ms. Thompson, which they said had done no work to earn the money.

The head of that firm, Philbert Gorrick, who had offices at Concord, then split the money with Mr. Duncan and Ms. Thompson, prosecutors said.

The government said that Mr. Duncan received more than $100,000 that way, and that Mr. Gorrick, who was also charged, used some of his money to buy a 2006 BMW 750 Li sedan, worth $84,500, and a 2006 Range Rover, and for rent for an apartment.

Ms. Gill Hearn said that Mr. Duncan “had the power to authorize A.C.S. payments and checks — so he did, for himself and his co-conspirators, and it was easy, too easy.”

She added: “We have now turned that spigot off.” She said that she would work with Children’s Services to “put in proper internal controls.”

In a criminal complaint unsealed in Federal District Court in Manhattan, prosecutors said that Mr. Duncan had been cooperating with the Department of Investigation in its inquiry, hoping to receive a reduction of any sentence he might face.

In March, for example, Mr. Duncan, at the Department of Investigation’s direction, met with Mr. Osarenkhoe in a session that was being secretly recorded and asked whether he could “reactivate that stuff we did,” which prosecutors called a reference to the scheme, which they said began in 2005.

Mr. Osarenkhoe agreed, the complaint said, but “expressed concern that adoption subsidies were being looked at more closely, now that ‘they are doing the checking.’ ”

The authorities said that they believed that Mr. Osarenkhoe was referring to controls the city agency put in place after Ms. Leekin’s fraud was discovered.

Mr. Osarenkhoe was arrested at the Children’s Services offices on Wednesday. He, Ms. Thompson, and Mr. Gorrick were released on bond by a federal magistrate judge. Mr. Duncan, while charged, is not in custody.

The claims of problems involving money at Concord are not new. Late in 2006, its executive director resigned after an audit by the city comptroller’s office found that she had spent tens of thousands of dollars at luxury stores using the agency’s credit card. The director said at the time that the purchases were made to benefit foster children.

A person who answered the phone at Concord on Wednesday said that there was no one available to answer questions about the new case, and a message left there was not returned. Lawyers for the four defendants either declined to comment or could not be reached by phone for comment on Wednesday night.

Source: The New York Times