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New York Recovers $20 Million in School Lunch Fraud Case

July 22, 2010

Food service provider Sodexo has agreed to pay the State of New York $20 million to settle allegations that the company overcharged state school districts. The contracts between Sodexo and the schools – all of which participate in the New York State Education Department’s Child Nutrition Programs and the National School Lunch Program – required that Sodexo supply its products at cost. According to the State, Sodexo failed to disclose certain rebates – averaging some 14% – that it received from its own suppliers. As a result, the prices charged to the schools exceeded the contract rate. “This company cut sweetheart deals with suppliers and then denied taxpayer-supported schools the benefits,” said Attorney General Cuomo. “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.”

According to the Attorney General, the investigation revealed an industry-wide practice among major food service providers. Such companies frequently leverage thier size to obtain rebates from vedors, which they may avoid disclosing to government clients.

If you have knowledge that state or federal instutions are being overcharged by reason of undisclosed rebates or kickbacks, contact Frohsin & Barger.

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