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Another inquiry finds that DOE’s IBM consultants stole from city

The Department of Education is under pressure to tighten its supervision of outside workers after another investigation found that consultants from IBM stole from the city while assigned to a technology project at the department.

Three IBM contractors working in one part of the department’s instructional technology division conducted personal business from the office, illicitly worked from home, and even stole and sold department equipment on eBay, according to a report released today by Special Commissioner of Investigation Richard Condon.

Department officials who were supposed to be monitoring the contractors did not do their job, investigators concluded.

“The Chancellor must insist upon direct supervision of outside consultants by DOE employees,” Condon writes in the report. “Allowing outside consultants to usurp the supervisory role of DOE employees is an open invitation to defraud the DOE.”

In a twist, Condon’s report notes that two of the department supervisors who “turned a blind eye” to the fraud, Joseph Iacoviello and Stephen Vigilante, had previously uncovered and reported fraud by a different IBM contractor. That contractor, Willard Lanham, was sentenced this fall to three years in prison for stealing nearly $2 million from the city.

The department stopped working with the contractors named in today’s report nearly a year ago, and one department employee retired in July after being reprimanded for inadequately supervising the outside workers, officials said, and an internal investigation cleared Iacoviello and Vigilante of wrongdoing. Plus, the department took other measures to guard against improprieties by consultants, including reorganizing the division where the contractors were working.

“After complaints were made in Spring 2011, the Department of Education took quick proactive measures to increase internal controls and oversight and removed those involved,” spokeswoman Erin Hughes said in a statement.

The latest finding is new ammunition for critics of the department’s spending on outside contractors, which Manhattan Borough President Scott Stringer said last year had ballooned by more than 300 percent since 2004. At the time, Stringer, who is running for comptroller, urged an immediate freeze on new education department contracts after a string of what he called “shameful contractor scandals.”

The complete report released today by Condon’s office is below.