Company settles Schneiderman's lawsuit for $1.6M

By Bryan Cohen | Oct 5, 2011


NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman announced a settlement on Wednesday with a food service provider that allegedly overcharged school districts and other education providers.

The Suffolk County-based Whitsons Culinary Group allegedly received savings from food vendors it worked with and did not pass those savings on to customer schools, resulting in more than an $800,000 difference. Whitsons must pay $1.6 million to the State and the affected school districts and comply with a series of reforms to improve transparency in its service and contracting as part of the settlement.

"These are difficult financial times for New Yorkers and our state." Schneiderman said. "For a company to profit off of sweetheart deals while overcharging our schools is simply unconscionable.

"Recovering taxpayer dollars is exactly what the Taxpayer Protection Bureau was established to do - and today's announcement sends a clear message that those who seek to defraud New York taxpayers will be held accountable. On behalf of students, parents and taxpayers, we are pleased that these schools will get their money back, and that Whitsons will no longer be able to siphon funds meant to benefit students."

Schneiderman alleged that from the 2002-03 school year through the end of 2010, Whitsons received rebates from its food vendors but failed to pass those savings onto the schools, which is a violation of contracts, as well as federal and state regulations. Whitsons also allegedly entered into what it called marketing agreements with materials and food vendors, claiming to market services, but the agreements actually concealed the receipt of rebates that were required to be credited to the schools Whitsons contracted.

The funds of the settlement will be distributed to impacted school districts and educational entities in the six counties of Manhattan, Nassau, Rockland, Suffolk, Westchester and Ulster.

As part of the settlement, Whitsons must provide written disclosure to school district clients for the next two years that it is receiving off-invoice rebates, pay for an independent auditor's review of Whitsons' office-invoice rebate program for the next two to three years, depending on the progress of Whitsons' effort to eliminate rebates from its business altogether, and establish a hotline for clients to call with any questions concerning rebates.

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