Non Profit Fraud

NEW YORK - A nonprofit organization hired by New York City to help residents find employment locally faked 1,400 job placements and possibly many more, investigators said Friday.

Officials at the local Workforce1 centers run by Seedco — a nonprofit that operates in 14 states and Washington, D.C. — ordered subordinates to collect information on past and present employment from potential and current clients, then used the data to falsely report that they had placed the individuals in jobs, the city Department of Investigation found.

At times, the organization claimed credit for placing people in jobs they'd lost before seeking help, investigators said. The investigation covered a period from 2010 to 2011, but a city policy permitting the shredding of many documents means that an untold number of additional false claims may never be uncovered.

The inquiry followed an August 2011 New York Times column that detailed the allegations of a whistleblower who was a former deputy director at one of the centers. Bill Harper's complaints to his managers had earlier led to an internal audit in April 2011 that didn't uncover much of the wrongdoing. Investigators said that audit had examined only inconsistencies with start dates.

City officials said they didn't learn of the depth of the allegations until they surfaced in the newspaper, when they quickly referred the matter to city investigators.

"Seedco was engaged in fraudulent practices, which is completely unacceptable and won't be tolerated," Rob Walsh, commissioner of the city Department of Small Business Services, said in a statement. "SBS has taken immediate action to end contracts with Seedco and to strengthen our job placement validation process."

The agency's contracts with the nonprofit — worth $22.2 million — are to be reassigned over the next two months.

Barbara Dwyer Gunn, president and CEO of Seedco, said in a statement that the organization "deeply regrets" what happened at the local centers.

"Seedco takes full responsibility for its contractual obligations to the city and in no way tolerates deception by any of its employees," she said. "Seedco separately conducted a broad review of its operations, removed staff from the Workforce1 program, and implemented significant policy and programmatic changes to ensure that our data is accurate. These measures were designed to ensure that this does not happen again."

According to the report, the Department of Small Business Services found 12 false placements by the organization made as recently as February 2012, despite the ongoing investigation. Following that incident, one of Seedco's employees was fired.

A number of other Seedco employees mentioned in the investigators' report have been fired or have left the company.

The other states where Seedco operates are Alabama, Connecticut, Florida, Georgia, Illinois, Louisiana, Maryland, Massachusetts, Mississippi, New Jersey, Oklahoma, Tennessee and Texas.