Milk Wholesaler Agrees To Repay School Overcharges

Attorney General Spitzer today announced a settlement with one of the state's largest dairy products companies for overcharging public school districts on milk contracts.

The settlement, which follows a six-month investigation by Spitzer's Public Integrity Unit, requires Crowley Foods of Binghamton to repay as much as $500,000 in overcharges to school districts across the state.

"This settlement is a win for the schools, which will be fully compensated for past overcharges," Spitzer said. "In addition, the settlement sends a clear message to school districts and their suppliers on the need for scrutiny of all contracting and billing practices."

The investigation also led Spitzer to propose a series of reforms. Specifically, the Attorney General has developed an "Integrity Rider" that he recommended be included in all future milk purchase contracts to help prevent fraud. In addition to simplifying the complex billing process that facilitated the overcharges, the integrity rider provides significant penalties for overcharges and requires unscrupulous vendors to pay for the cost of the audit that catches them.

"Good government means watching every taxpayer dollar more closely. My proposal makes it easier for school districts to do that, without any additional costs or red tape. In addition, the proposal would set in place a law enforcement mechanism that requires any cheater to bear the full cost of enforcement," Spitzer said.

The investigation by the Attorney General's Public Integrity Unit and Syracuse Regional Office revealed a pattern of overcharges on milk contracts with dozens of school districts across the state. Crowley serves more than 135 school districts in counties stretching from Westchester to the Canadian border, west across the Southern Tier and Central New York.

An initial forensic audit of six school districts' invoices and contracts indicated aggregate billing overcharges of more than six percent.

Among the specific findings were that during the 1998-99 school year, the Utica City School District in Oneida County was overcharged more than $34,071 or 14.5 percent; the Ithaca City School District in Tompkins County was overcharged $5,686 or 6.5 percent. During the 2000-01 school year, the Johnson City Central School District in Broome County was overcharged $2,879 or 6.6 percent.

Under the settlement, Crowley has agreed to pay 150 percent of all overcharges, as well as the costs of a forensic audit of more than 135 public school districts and an additional six BOCES districts, and the costs of the Attorney General's investigation.

Crowley also agreed to pay for future audits by the Attorney General's office for the next five years and to reform its contracting and billing practices to prevent future overcharges.

Spitzer commended the company for working with his office to address the findings of the investigation. "This could have been a stain on the integrity of one of the state's great home-grown companies," said Spitzer. "Instead, Crowley agreed to repay overcharges and implement reforms that will be a model for the rest of the industry."

School milk supply contracts typically require that monthly milk prices be adjusted according to a formula that takes account of changes in the federally-imposed minimum milk price. The resulting price fluctuations can make it difficult for school districts to detect overcharges.

As part of the settlement, Crowley agreed to provide school districts with the applicable federal minimum milk price and a sample price calculation in all future invoices. Crowley also agreed to end its practice of inserting into bids for school milk contracts an unlawful clause purporting to allow it to "pass on" future, unspecified costs. By law, school milk contracts are let by competitive bidding.

The Attorney General will recommend to all school districts in New York that they impose on every milk supplier, by contract, the transparent bidding and billing practices that Crowley has now agreed to follow. To that end, the Attorney General's office has drafted and will furnish to the school districts a recommended "integrity rider" that they can require milk wholesalers to sign as part of any milk supply contract.

This case, a joint investigation, was handled by: Winthrop Thurlow, Assistant Attorney General in Charge of the Syracuse Regional Office; Mark Peters, Assistant Attorney General in Charge of the Public Integrity Unit; and Assistant Attorneys General Judith Malkin and Dylan Smith.

Attached is a listing of the 135 Public School Districts and the 6 BOCES Districts whose payments to Crowley will be reviewed to determine if they were overcharged.

PUBLIC SCHOOL DISTRICTS UNDER CONTRACT TO CROWLEY FOODS
DURING THE PERIOD UNDER REVIEW
(Sept. 1997 - June 2001)

Albany County

Menands Union Free School District
South Colonie Central Schools

Broome County

Binghamton Central Schools
Chenango Forks Schools
Chenango Valley Central Schools
Deposit Central School
Harpursville Central School
Johnson City Schools
Maine Endwell Schools
Susquehanna Valley Schools
Union Endicott Central Schools
Vestal Central Schools
Whitney Point Central Schools
Windsor Central Schools Chenango County
Afton Central Schools
Bainbridge-Guilford Central School
Greene Central Schools
Otselic Valley Central Schools
Oxford Academy and Central Schools
Sherburne Earlville Schools

Clinton County

Ausable Valley Central Schools
Chazy Central Schools
Northeastern Clinton Central Schools
Northern Adirondack Schools
Peru Central Schools
Saranac Central Schools

Cortland County

Cortland City Schools
Marathon Central Schools

Columbia County

Hudson City Schools

Delaware County

Charlotte Valley Schools
Delhi Central Schools
Downsville Central Schools
Hancock Central Schools
Roxbury Central Schools
Sidney Central Schools
Walton Central Schools
Wappingers Central Schools

Dutchess County

Arlington Central Schools
Beacon City Schools
Hyde Park Central Schools
Millbrook Central Schools
Pine Plains Central Schools
Poughkeepsie City Schools
Red Hook Central Schools
Spackenkill Union Free School District
Webutuck Central Schools

Essex County

Crown Point Central Schools
Elizabeth-Lewis Central Schools
Keene Central Schools
Lake Placid Central Schools
Moriah Central Schools
Schroon Lake Central Schools
Ticonderoga Central Schools
Westport Central Schools
Willisboro Central Schools

Franklin County

Saranac Lake Schools
Tupper Lake Central Schools

Fulton County

Gloversville City Schools

Greene County

Cairo Durham Central Schools
Hunter Tannersville Central Schools
Windham-Ashland-Jewet Schools

Hamilton County

Long Lake Central Schools

Madison County

Cazenovia Central School District
Chittenango Central School District

Montgomery County

Canajoharie Central Schools
Fonda-Fultonville Schools
Fort Plain Central Schools
St. Johnsville Central Schools

Oneida County

Camden Central Schools

Utica City Schools

Orange County

Chester Union Free School District
Cornwall Central Schools
Florida Union Free School District
Goshen Central Schools
Greenwood Lake Union Free School
Highland Falls Fort Montgomery Central Schools
Middletown City Schools
Minisink Valley Central Schools
Pine Bush Schools
Tuxedo Union Free School District
Washingtonville Central Schools

Otsego County

Cooperstown Central Schools
Edmeston Central Schools
Gilbertsville Mount Upton Central Schools
Laurens Central Schools
Richfield Springs Central Schools
Schenevus Central Schools
Unatego Central Schools
Worcester Central Schools

Rensselaer County

Averill Park Central Schools
East Greenbush Central Schools

Rockland County

Haverstraw-Stony Point Central Schools
Nyack Union Free School District
Ramapo School Central Schools
South Orangetown Central Schools

Saratoga County

Burnt Hills Ballston Lake Central Schools
Edinburg Common Schools
Mechanicville Public Schools
Shenendehowa Central Schools
Stillwater Central Schools

Schenectady County

Mohonasen Central Schools
Niskayuna Central Schools
Schenectady City Schools

Schoharie County

Jefferson Central Schools

Schuyler County

Odessa-Montour Central Schools
Watkins Glen Central Schools

Steuben County

Addison Central Schools

Sullivan County

Delaware Valley Central Schools
Eldred Central Schools
Jeffersonville-Youngsville Central Schools
Livingston Manor Central Schools
Roscoe Central Schools
Tri-Valley Central Schools

Tioga County

Candor Central Schools
Newark Valley Schools
Owego Applachin Central Schools
Spencer -Van Etten Central Schools
Tioga Central Schools
Waverly Central Schools

Tompkins County

Dryden Central Schools
Groton Central Schools
Ithaca City Schools
Lansing Central Schools
Newfield Central School
Trumansburg Central School

Ulster County

Ellenville Central School District
Highland Central Schools
Marlboro Central School District
New Paltz Central School District
Onteora Central Schools
Rondout Valley Central School District
Wallkill School District

Warren County

Glens Falls City Schools

Westchester County

Peekskill City Schools
Tuckahoe Union Free School District

BOCES Districts

Broome-Tioga BOCES, Binghamton
Clinton-Essex BOCES, Plattsburg
Dutchess BOCES, Poughkeepsie
Essex-Franklin-Hamilton BOCES, Saranac Lake
Steuben-Allegany BOCES, Hornell
Sullivan BOCES, Liberty

Attachments:

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