Friday, April 29, 2011

Major Tech Scandal at NYCDOE/Tweed

From NYT below:
The investigation revealed another embarrassing lack of supervision in one of the city’s technology projects, just four months after federal authorities charged seven people in what they called an $80 million scheme to steal from CityTime, an automated payroll system that ballooned in cost to more than $700 million, nearly 10 times over budget. It also comes as the Education Department plans to invest more than half a billion dollars next year to upgrade Internet access in every school.
See also WSJ: “Mr. Condon's report also criticized the DOE for giving Mr. Lanham complete control over the project while "no one exercised any oversight."… In January, Mayor Michael Bloomberg and the City Council agreed to cut $4 million from IT consulting contracts at the DOE, to stave off the closing of 20 fire companies at night. At the same time, the DOE is set to increase technology spending to about $542 million in 2012.
In a letter to then Chancellor Cathie Black last month, Manhattan Borough President Scott Stringer expressed doubts about boosting spending for the iZone. Charging the department has not yet provided any data on the iZone’s success, Stringer wrote, “the current capital amendment calls for increasing the number of iZone schools from some 80 schools this year to 400 in 2013/14. Until this rapid expansion of iZone can be backed up by hard data, I strongly recommend that these funds be directed toward reducing class sizes, addressing overcrowding issues, rapidly replacing dangerous lighting and heating systems in schools, and other urgent needs.”
Today Stringer reiterated these concerns. In a statement, he chided the education department for its “opaque” bureaucracy and said, “It is extremely distressing to learn that the department can’t seem to keep track of its own contractors — or the money they spend.”
For his part, Liu called today’s charged “infuriating,” and added, ” Even more disconcerting, however, are indications that corporations with billions of dollars in city business have aided and abetted and profited from the scam. As with the CityTime scandal, oversight of subcontracting is acutely needed right now.”
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."

The full  report is posted here:  It has fascinating nuggets such as: “

Subsequent to the meeting at Verizon, there was a meeting held at CCS. Lanham drove Iacoviello { DOE Director of Deployment and Implementation] to the meeting and afterward, Lanham drove them past Lanham Estates, a location where Lanham had built four or five houses for his relatives. Lanham explained to Iacoviello that he had a 60-acre development in Bridgehampton on which he intended to build 20 homes, each worth $7 to $8 million dollars. Lanham continued that he planned to finance the development himself, building one home each year. According to Lanham, his friend, the Owner of CCS, inherited the land on which Lanham would construct the homes, approximately $3 million per home. Lanham noted that he hoped to be at the DOE for a few more years so that each year he could earn enough money to cover the cost of building a house…
And: Lanham stated that CIO Consulting was another company that Lanham established with his wife, Laura. Lanham explained that CIO Consulting’s first contract was with Achievement First, a Charter school based in Connecticut and that he was building the computer network for Achievement First. Lanham further disclosed that he had built three homes and remodeled another home on a four-acre lot in East Northport, Long Island….

… Lanham usually met with vendors without anyone from the DOE being present. A Verizon manager related that, when he met with Lanham, no one from the DOE was present and, when Lanham sent him e-mails, no one from the DOE was copied. Lanham hired five consultants and orchestrated payments for these consultants through his company, Lanham Enterprises, Inc., without the knowledge or approval of the DOE. Records obtained by SCI investigators revealed that Lanham’s profit from the consultants amounted to more than $3,600,000 over the six-year period from 2002 through 2008….

Condon concludes: “It is difficult to understand how the DOE could allow so much power to reside in a consultant, even an honest one, which Lanham was not. Project Connect was a billion
dollar undertaking, yet no one exercised any oversight of Lanham. Gill did not know what Project Connect was and Romano did not recall Lanham. Eaione maintained that Lanham cleared major decisions with him, but that obviously was not true. Eaione had not even heard of CDC and did not attend most of the vendor meetings. Everyone at the DOE assumed that everything was fine. It was not until Lanham’s contract was not renewed and his replacement, Joseph Iacoviello, another consultant, started looking at documents and asking questions, that some of the scheme came to light. By then, Lanham had deceived the DOE for more than six years and even continued to collect on the consultants for another year.”
thank you Joel Klein and all those lax and incompetent managers at Tweed, who obviously knew nothing about either education or running an organization. 
Let’s hope that his new position running Murdoch’s online company doesn’t lead to even more taxpayer money being wasted or stolen.
In this case, it looks like Verizon and IBM were colluding with this consultant .
Of course all this will be chickenfeed compared to the scandals that will come out of the spending disaster due to occur next year, if DOE really plans to spend $540 M in more wiring in one year..

Consultant to the Schools Stole Millions, Officials Say

Published: April 28, 2011
Aided by lax oversight and by corporations that profited from his scheme, a former technology consultant stole $3.6 million over six years from the Department of Education to finance flashy cars and real estate speculation, federal authorities said on Thursday.
John Marshall Mantel for The New York Times
Willard Lanham was in charge of technology projects.
The investigation revealed another embarrassing lack of supervision in one of the city’s technology projects, just four months after federal authorities charged seven people in what they called an $80 million scheme to steal from CityTime, an automated payroll system that ballooned in cost to more than $700 million, nearly 10 times over budget. It also comes as the Education Department plans to invest more than half a billion dollars next year to upgrade Internet access in every school.
As in the CityTime case, the charges revealed on Thursday revealed the enormous responsibilities and power given to technology consultants working on city projects.
The former consultant, Willard Lanham, 58, surrendered to federal authorities on Thursday on charges of mail fraud and theft from a billion-dollar school-wiring and Internet-access project financed partly by the federal government.
Mr. Lanham, who was being paid $200,000 a year by the city, used layers of contractors and subcontractors to hide his scheme, and each of them profited a little from it, according to the federal complaint. He hired several people, including a brother, to work on the city contract, then billed another company for those hires, marking up the invoices. The company, for its part, charged Verizon or I.B.M., the two major vendors, more than what it had paid Mr. Lanham.
According to a report by Richard J. Condon, a special investigator for the city schools, Verizon and I.B.M., in turn, billed the Education Department, also marking up the amounts. Verizon marked up the bills by $800,000, and I.B.M. by $400,000, said Mr. Condon’s report, which he had forwarded to the federal authorities. “I.B.M. and Verizon, by their silence, facilitated this fraud,” the report said.
The companies have not been implicated in the criminal case, and none of their employees have been charged. In statements, both Verizon and I.B.M. said they had been cooperating with the authorities.
Verizon went a step further, saying it was “prepared to return any inappropriate profits” to the Education Department.
A lawyer for Mr. Lanham, Joseph W. Ryan, said in a statement that his client “denies that he is guilty of any wrongdoing,” calling him a “problem-solver extraordinaire” for the projects he managed for the department.
Mr. Lanham, known as Ross, was hired as a consultant for the Education Department in 2000, part of a team charged with handling the installation of Internet cables and connections in city schools, as well as a cost-savings system to centralize the department’s telephone bill payments. By 2002, he had become the projects’ manager, in charge of a costly contract and many people, with seemingly no oversight.
Just around that time, leadership of the schools’ technology team was shifting and, according to Mr. Condon, Mr. Lanham set out to operate freely, putting in motion a scheme that would go undetected for years, though some people began having suspicions about him. He often met vendors alone and e-mailed them without giving copies to anyone at the Education Department.
In all, he hired five consultants, including his brother, who worked from home and made $60 to $70 an hour. Mr. Lanham billed a cabling subcontractor, Custom Design Communications, an hourly rate of $225, pocketing the difference. That company billed Verizon roughly $250 an hour, then Verizon billed the Education Department $290, all for the same work, Mr. Condon’s report says.
The scheme developed in much the same way with every consultant Mr. Lanham hired and every subcontractor and vendor he coaxed into playing along, including I.B.M., the report said.
The federal complaint says that with the money he made, Mr. Lanham and his wife bought a Corvette, a Porsche and other equally expensive cars, and he tried his hand at real estate, building luxurious homes on a piece of land he owned on eastern Long Island.
Mr. Condon’s report said that Verizon officials questioned Mr. Lanham’s demand to bring in Custom Design Communications as a subcontractor, but acquiesced after he threatened to give their work to I.B.M. (Two phone numbers are listed for Custom Design Communications, but neither line was in service Thursday, and the company’s Web site was disabled.)
Mr. Lanham was fired in 2008, roughly two years after Mr. Condon’s office received anonymous complaints that he was getting kickbacks from vendors. The investigators could not find evidence of kickbacks, but while checking the accusations, they discovered that I.B.M. had been billing the Education Department for work performed by consultants hired by Mr. Lanham without authorization. The case broadened in 2008, after a senior director at the department’s Division of Instructional and Information Technology accused Mr. Lanham of hiring consultants and having their work billed by Verizon.
The schools chancellor, Dennis M. Walcott, said in a statement, “We are entrusted with the public’s money, and should have been more vigilant in our oversight of this project.”
After Mr. Lanham was fired, the department said, it rolled out new safeguards against rogue consultants, including an in-house contract manager responsible for approving and monitoring purchases and payments and a unit charged with carrying out price and cost analyses for contracted services.
Mr. Lanham surrendered at 10 a.m. Thursday and appeared in court for a few minutes later in the day. United States Magistrate Judge Theodore H. Katz set bond at $250,000 and ordered Mr. Lanham to surrender his passport, get a job and not incur any new lines of credit.
Noah Rosenberg contributed reporting.
A version of this article appeared in print on April 29, 2011, on page A22 of the New York edition with the headline: Consultant To the Schools Stole Millions, Officials Say.

1 comment:

Francesco Portelos said...

This is crazy and makes me sick.