December 19, 2012; Source: U.S. Department of Justice
We generally do not write newswires based on press releases in the NPQ Newswire, but this announcement from the Manhattan U.S. Attorney about a civil fraud lawsuit against SEEDCO merits a quick response. The NPQ Newswire has covered the charges, raised by a courageous whistleblower, that SEEDCO falsified job placement records in order to get payments under various contracts that it held with the New York City government. SEEDCO first denied the charges and began to trash the reputation of the whistleblower, an employee named Bill Harper. Later, it begrudgingly suggested that there might have been some record-keeping errors but no malicious intent. Finally, after a change in leadership, the organization acknowledged that it had been, at least in some ways, in the wrong.
The settlement with the U.S. Attorney in response to a lawsuit under the False Claims Act will require SEEDCO to pay $1.725 million in damages, admit that it had been engaged in a practice of false reporting, and initiate a new program of compliance. In a press release, Manhattan U.S. Attorney Preet Bharara said, “Programs that provide job placement assistance to the unemployed and under-employed perform an urgently needed service. In addition to being illegal, it is insensitive to the people who desperately need employment help to exploit public funding for these programs by falsifying job placement reports, as SEEDCO admitted to doing in this case…At a time of high unemployment and strained federal budgets, we will not tolerate the abuse of federally funded programs.”
The specifics of SEEDCO’s fraudulent reporting are kind of breathtaking for their creativity and illegal audacity. They include the following:
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- Taking credit for a job candidate’s prior employment as job placements;
- Reporting job placements when the job candidates remained unemployed;
- Falsifying dates of job placements;
- Using other SEEDCO programs to collect information on clients in order to falsely report job placements; and
- Reporting job placements for people who were not SEEDCO clients and had not been placed in their jobs by SEEDCO.
SEEDCO had long been among the top economic development nonprofits in the nation, admired widely for its creative programs. For SEEDCO to have devolved into this sort of operation was a huge disappointment, as we noted in the NPQ Newswire, though we expressed hope that SEEDCO’s new leadership would take the proper steps to set things right. The U.S. Attorney’s $1.725 million penalty and the regimen of the government’s required compliance steps should help SEEDCO remember exactly what it has to do to restore some of the organization’s past good name.
However, we also take note of the simultaneous announcement of a settlement between SEEDCO and Bill Harper, the former SEEDCO employee who blew the whistle. As a whistleblower, he did what he was supposed to do. According to his attorneys’ brief description of the settlement, Harper discovered the fraudulent placements and raised them within SEEDCO, expecting that the organization would want to correct the problem. That didn’t happen. Rather, Harper “was marginalized,” according to the attorneys, and he began to suspect that SEEDCO’s inaction was actually a cover-up. Harper then went to Michael Powell at the New York Times, who covered the story with solid reporting of the facts of the case, though SEEDCO chose to use Powell’s story as an opportunity for disparaging Harper personally and professionally. Nonetheless, Harper’s information and Powell’s reporting added up to enough to compel SEEDCO—and the city agencies that were surprisingly accepting of SEEDCO’s scheme—to begin backtracking and, ultimately, accept culpability. One part of that culpability is that the settlement requires SEEDCO to publicly retract its comments about Harper.
In a statement e-mailed to NPQ, Harper explained why he did what he did:
“My only motivation throughout this process has been to hold Seedco accountable to the community they were hired to serve. The part of the story that is often overlooked is that these weren’t just numbers being made up. They were people. Tax paying citizens of the City of New York who came for public funded job placement services and instead were taken advantage of. They were people in need whose information was used to further the careers of individuals and the reputation of a non-profit organization. Deep down I’m just a typical social worker whose main desire was for the individuals and organizations involved to tell the truth and do what was right. I am hopeful that others can learn from this experience and practice the advocacy that my profession holds so dear.”
Robert Sadowski of Diamond McCarthy LLP, who represented Harper, said in the release, “Mr. Harper acted courageously and is a tribute to those who will not tolerate the misuse of taxpayer dollars.” Although SEEDCO behaved inappropriately toward Harper, to put it mildly, Harper represents what whistleblowers in the nonprofit sector are supposed to do—and it takes a pretty big dollop of courage to do so. —Rick Cohen