A nonprofit agency that once was among Mayor Michael R. Bloomberg’s favorite contractors has agreed to pay $1.725 million to the federal government for falsely claiming to place 1,400 New Yorkers in jobs.
Most of those New Yorkers in fact found jobs on their own, or remained unemployed.
Federal prosecutors announced the settlement on Wednesday of a civil fraud lawsuit against Seedco. The agency, according to prosecutors with the United States attorney’s office for the Southern District of New York, routinely falsified entries in government job placement databases.
“In addition to being illegal, it is insensitive to the people who desperately need employment help to exploit public funding for these programs,” said Preet Bharara, the United States attorney in Manhattan. “We will not tolerate the abuse of federally funded programs.”
Barbara Gunn, the president of Seedco, has acknowledged for at least a year that agency officials made serious ethical errors. “Over a year ago, Seedco terminated a number of employees after an extensive internal investigation following allegations that Seedco employees had falsified data entry,” the agency said Wednesday.
Among those who resigned was Francine Delgado, a former senior vice president for the agency.
The New York Times first revealed the abuses in the summer of 2011, after a former deputy director at Seedco, Bill Harper, approached the newspaper with more than 400 examples of false placements. Later, six other Seedco employees told The New York Times that managers had pressured them to produce thousands of false job placements.
The fraud came as a blow to Mr. Bloomberg, who has long touted his administration’s success in finding jobs for unemployed New Yorkers. Seedco, which now holds no city contracts, stood at the heart of many mayoral programs, from job placement and cash grants for welfare clients to loan programs for small businesses.
But the claims of success in the Seedco program relied on a pressure-cooker atmosphere at the nonprofit, former employees said. They spoke of unrelenting pressure from the Bloomberg administration and the Department of Small Business Services to produce more and more job placements; each year city officials raised the target for placements, even in the teeth of a severe recession.
The Bloomberg administration handed out “performance-based” bonuses to agencies which produced high numbers of jobs. Seedco employees told city Department of Investigation agents that they feared for their jobs if they failed to reach these goals.
Robert W. Walsh, the commissioner of the city’s Department of Small Business Services, said early on that he had “no apologies” for setting aggressive targets, and insisted that the city’s third party verification contractor – which called a small numbers of clients and simply asked if they were employed – would catch most problems.
His confidence was misplaced. His agency has since strengthened contract terms and officials say they count only placements that can be verified directly with employers. They have similarly tightened data practices and say they have made it more difficult to tamper with customer records.
Mr. Harper, the Seedco whistle-blower, now lives in Seattle. As part of its settlement with federal prosecutors, Seedco also settled with Mr. Harper. Agency officials had attacked him personally in The Times’s first article, and Seedco agreed to issue a full retraction of its comments.