fraud alert

Suit: Princeton Review charged city for tutoring it didn't provide

This chart from the Justice Department's lawsuit against Princeton Review shows how many times the company billed the city for tutoring students who were absent or when school was closed — and how much it was paid. (Click to enlarge)

A company hired to provide tutoring services in New York City bilked the city out of millions of dollars in federal funding for poor students, according to the U.S. Justice Department.

The department today filed a civil fraud lawsuit against The Princeton Review, Inc., alleging that the company had gotten the city to reimburse it for tutoring it had not provided. According to the suit, the company’s fraudulent claims continued even after a city investigation — never made public — turned up misconduct in 2006.

The tutoring program, known as “supplemental education services” and mandated for low-performing students in high-needs under the No Child Left Behind law, reimbursed providers based on the number of students they served. Princeton Review documented how many students it had tutored by turning in signed attendance sheets; it also gave bonuses to supervisors of tutoring sites where attendance was high. One of those supervisors, Ana Azocar, is also named in the lawsuit.

The bonus system incentivized fraud, according to the suit. Investigators found that many of the signatures showing student attendance were falsified — and sometimes names were even misspelled. The company sought reimbursement for tutoring students who were out of the country and holding sessions when schools were closed, according to the suit. At one school, the now-closed M.S. 399 in the Bronx, the company said it had tutored 74 students on New Year’s Day.

“The Princeton Review and its employees were supposed to tutor needy students, not cheat a federal program,” said Preet Bharara, U.S. Attorney for the Southern District, in a statement. “As alleged, the company and certain of its employees forged student signatures, falsified sign-in sheets, and provided false certifications in order to deceitfully profit from a well-meaning program.”

The complaint covers the years 2006 to 2010 but notes that the city’s own investigator, Special Commission of Investigation Richard Condon, had scrutinized the program’s records from before that in 2006. That year, Condon released two separate reports detailing improprieties by a number of tutoring providers — but neither named Princeton Review. Only a small fraction of SCI investigations are ever released.

A Department of Education spokesman said today that Condon’s office had referred the current allegations to Bharara’s office.

Princeton Review had a contract with the city to provide SES tutoring from 2002 until 2010, when it closed its SES division. The company is not currently a citywide vendor, but some schools have hired the company to provide preparation for standardized tests such as the SAT. More than 100 other companies are approved to offer SES tutoring to city students, and the number of eligible students grew this year as more schools failed to hit federal accountability benchmarks.

A spokesperson for Princeton Review did not deny the allegations but said that the alleged improprieties are part of the company’s past.

“The activity allegedly occurred within the company’s former Supplemental Educational Services division, which the company discontinued in 2010,” said the spokesperson. “No former SES employees or executives are with the company today, and current management — most of whom joined the company after the division was shuttered — had no involvement or role in the affairs of SES.  We are working closely with the U.S. Attorney’s office to resolve this matter expeditiously.”

The Justice Department’s press release about the suit is below, followed by the complaint filed today in Manhattan Federal Court.

JUSTICE DEPARTMENT SUES PRINCETON REVIEW

FOR CLAIMING REIMBURSEMENT FOR TUTORING SERVICES IT DID NOT PROVIDE

NEW YORK – The United States has filed a civil fraud lawsuit against The Princeton Review Inc., a leading provider of educational products and services, and Ana Azocar, a former employee at the company, for Princeton Review’s repeated submission of false claims for reimbursement in connection with a federally-funded program to provide tutoring services to underprivileged children in New York City, Preet Bharara, U.S. Attorney for the Southern District of New York, and Brian M. Hickey, Special Agent-in-Charge of the Northeastern Region of the U.S. Department of Education’s Office of Inspector General (ED-OIG), announced today.  As a result, Princeton Review received millions of dollars in federal funds for tutoring services that it did not provide.  The lawsuit seeks treble damages and civil penalties under the False Claims Act for the fraudulent reimbursement claims submitted by Princeton Review.

U.S. Attorney Bharara said, “The Princeton Review and its employees were supposed to tutor needy students, not cheat a federal program.  As alleged, the company and certain of its employees forged student signatures, falsified sign-in sheets, and provided false certifications in order to deceitfully profit from a well-meaning program.  As today’s suit demonstrates, this type of fraud will not be tolerated.”

ED-OIG Special Agent-in-Charge Hickey said, “The Supplemental Education Services program provides critical resources for deserving students who seek to improve their academic performance.  Today’s actions allege that Princeton Review billed and retained SES payments for students it did not tutor.  That is unacceptable.  Tracking down those who would cheat this important program is a priority of our office.”

As alleged in the complaint filed today in Manhattan Federal Court:

From 2002 to 2010, Princeton Review participated in a federally-funded program under which it provided Supplemental Educational Services (SES) – specifically, after-school tutoring – to underprivileged students attending underperforming schools in New York City.  Under the program, Princeton Review was paid a fixed amount of money per hour for each student it tutored by the New York City Department of Education (NYC DOE), with funds provided to New York state by the federal government.  The allegations in the complaint relate exclusively to Princeton Review’s provision of SES tutoring in New York City from 2006 to 2010.  Princeton Review exited the SES business in 2010.

At each of its tutoring classes, Princeton Review had students sign in and out on an attendance form.  The company was required to keep a daily attendance record as a condition of getting paid.  However, many of Princeton Review’s site managers — employees who oversaw the day-to-day operations of its New York City SES program — routinely falsified entries on the daily student attendance forms to make it appear as though more students had attended tutoring classes than had in fact attended.  Azocar and other supervisors (called “directors”) used threats of termination and pay cuts to pressure site managers to maintain high daily student attendance.  Azocar also instructed and/or encouraged some site managers to falsify entries on the attendance forms, including by signing in for absent students.

From 2006 to 2010, Princeton Review’s daily student attendance forms and invoices were replete with falsifications such as:

  • Entries were changed to indicate that students were present after the students were initially marked as absent.  In some of these instances, the students’ signatures were obvious forgeries because the students’ own names were misspelled.  On one attendance form, a student named Dontae was signed in as “Donate.”
  • Students were signed in as present on days when their parents later confirmed they were absent.  For example, one student was in Mexico on a family vacation on four days when the student’s purported signature appears on daily student attendance forms.  Another student was signed in as present on three days when in fact a note from the student’s doctor shows that the student was home from school recuperating from surgery.
  • Princeton Review was paid for tutoring students on days when records from the NYC DOE show that the students were absent from school or school was closed.  For example, Princeton Review billed the NYC DOE for tutoring 74 students at MS 399 in the Bronx on New Year’s Day in 2008, when there were no SES classes due to the holiday.

Furthermore, Princeton Review maintained an incentive compensation system that encouraged the falsification of attendance records.  Specifically, the company paid directors substantial bonuses if the site managers they supervised consistently reported high daily student attendance.  For example, Princeton Review paid Azocar bonuses of $9,600 and $6,600 in 2008 and 2009, respectively, because the site managers she supervised consistently reported high daily student attendance.

For each invoice that Princeton Review submitted to the NYC DOE for its purported tutoring, Princeton Review certified that the information on the invoice was “true and accurate.”  Despite these certifications, most, if not all, of the monthly invoices contained false information, and the invoices billed the NYC DOE for thousands of hours of tutoring services that Princeton Review never actually provided.  As a result of these false monthly invoices, the NYC DOE paid Princeton Review millions of dollars in federal funds for tutoring services that it never in fact provided.

The complaint further alleges that Princeton Review management had previously been made aware of similar misconduct in the company’s New York City SES program, but failed to take adequate corrective action.  Specifically, in 2006, the Special Commissioner of Investigation for the New York City School District investigated whether Princeton Review had overbilled the NYC DOE for SES tutoring during the 2005-2006 academic year (the academic year immediately preceding the years at issue in this suit).  Although the company hired an outside law firm to conduct an internal investigation and implemented certain compliance measures, the company failed to implement adequate corrective action, as evidenced by the fact that the company’s compliance officers routinely approved attendance forms with clear signs of fraud.  Moreover, in 2008, a Princeton Review manager was told that Azocar had instructed a site manager to forge student signatures, but the manager failed to investigate the matter adequately and allowed Azocar to keep her job.  As a result of Princeton Review’s failure to deter or detect fraud, the fraud continued.

By filing its complaint, the government joined a private whistleblower lawsuit that had previously been filed against Princeton Review under the False Claims Act.

U.S. Attorney Bharara thanked the ED-OIG for its extraordinary assistance in this case.

The case is being handled by Assistant U.S. Attorney Christopher B. Harwood from the U.S. Attorney’s Office for the Southern District of New York’s Civil Frauds Unit.

The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Princeton Review Complaint

Busing Ban

As school districts push for integration, decades-old federal rule could thwart them

PHOTO: RJ Sangosti/The Denver Post
Several districts across the country want to use federal money to pay for school buses as part of their desegregation plans. A federal spending restriction could get in the way.

In Florida, officials plan to use federal money to shuttle students across vast Miami-Dade County to new science-themed magnet programs in a bid to desegregate several schools.

In South Carolina, a tiny district west of Myrtle Beach intends to spend federal funds on free busing for families who enroll at two predominantly black schools, hoping that will draw in white and Hispanic students.

And in New York, state officials want to deploy federal school-improvement money to help integrate struggling schools, believing that may be the secret to their rebirth.

But each of these fledgling integration efforts — and similar ones across the country — could be imperiled by obscure budget provisions written during the anti-busing backlash of the 1970s, which prohibit using federal funding for student transportation aimed at racial desegregation. The rules have been embedded in every education spending bill since at least 1974, as Rep. Bobby Scott of Virginia pointed out in September when he tried unsuccessfully to remove the provisions from the latest appropriations bill.

The rules are “a relic of an ugly history when states and school districts across the nation resisted meaningful integration,” said Scott, the top Democrat on the House education committee, during a floor speech where he called the persistence of the rules “morally reprehensible.”

After Scott’s amendment to eliminate the provisions was blocked, advocates are now working behind the scenes to convince members of the Senate from both parties to strike the rules from the latest spending bill during negotiations. More than 40 integration advocates and experts have signed onto a letter to lawmakers calling for the anti-busing language to be removed, and members of that coalition plan to meet with lawmakers in the coming days.

Advocates are especially worried about funding for magnet programs, like those in Miami and the South Carolina district, which rely on special science or art offerings or rigorous academic courses to draw students of different races into the same school — a choice-based approach that has become the primary way districts now pursue desegregation.

This is the first year districts that receive federal magnet-school grants are allowed to spend some of that money on transportation, after Congress changed the rules as part of its education-law overhaul in 2015. Among the 32 districts that received a total of nearly $92 million in magnet grants this year, at least six plan to use some of that money for transportation, according to their applications.

Now, just as those funds are about to flow to busing — which many families insist upon before they will enroll their children in magnet schools across town — the decades-old spending restriction could cut them off, advocates warn.

That could create a major problem for districts like Miami-Dade County.

It hopes to attract students from across the district to three heavily black and Hispanic schools by launching magnet programs that focus on zoology, cybersecurity, and mobile-app development, according to its application. To pull that off, it requested $245,000 for buses next year since, as the application notes, the “most limiting factor” for many families is “the cost associated with transporting their child to the magnet school.”

The district in Lake City, South Carolina wants to pull new families from different neighborhoods into an elementary school and a middle school that suffer from sagging enrollment and intense poverty. Previous recruitment efforts that didn’t provide transportation amounted to “failed attempts,” the district said in its application.

However, if the anti-busing provisions are not removed from the next federal spending bill, they would cancel out the new rule allowing those districts to spend some of their magnet money on transportation (though districts could still use local funds to fill in the gap). As such, magnet-school representatives are pushing hard for lawmakers to remove the provisions during budget negotiations.

“We’re hoping this doesn’t see the light of day,” said John Laughner, legislative and communications manager at Magnet Schools of America, an association of magnets from across the country. He plans to discuss the issue with lawmakers next week.

Beyond magnet schools, other desegregation efforts could be undercut by the anti-busing provision, which was included in a spending bill for fiscal year 2018 that the House approved and one the Senate has yet to vote on.

At least one state — New York — listed socioeconomic and racial integration among the ways it could intervene in low-performing schools under the new federal education law. In addition, New York officials announced a grant program this week where up to 30 districts will receive federal money to develop integration plans.

Advocates fear the anti-busing rule could disrupt any of those plans that require transportation and aim to reduce racial segregation. (New York education officials said they did not want to speculate on the impact of a spending bill that hasn’t been approved.)

A Democratic Congressional aide who has studied the issue said the provision could even block federal funding for planning or public outreach around desegregation programs that involve busing, not just busing itself.

Either way, advocates say the provision could dissuade districts from using the new education law, the Every Student Succeeds Act, to pursue integration — even though research suggests that student achievement on tests and other measures improve when they attend less segregated schools.

“We shouldn’t have this,” said Philip Tegeler, a member of the National Coalition on School Diversity, which is leading the charge to remove the restriction. He added that the provision stemmed from mandatory desegregation busing of an earlier era: “It’s clearly an anachronism that doesn’t really fit any more with what states and districts are doing voluntarily.”

A U.S. education department spokeswoman said Secretary Betsy DeVos would be bound to enforce any funding prohibitions that Congress approves, though she noted that state and local funds are not subject to the same restrictions.

Negotiators from the House and Senate must still agree on a single spending bill, which would go before the full Congress for a vote. Until then, lawmakers have voted to temporarily extend 2017 spending levels through December. It’s possible Congress will pass another extension then, meaning a final deal — and a decision on the anti-busing language — may not arrive until early next year.

In the meantime, advocates are pressing lawmakers like Sen. Lamar Alexander, the Republican chairman of the Senate education committee who helped craft ESSA, with the argument that the anti-busing provision limits the flexibility and local control the law was meant to provide districts.

Margaret Atkinson, a spokeswoman for the senator, would not say whether he is open to removing the provision, but said he would continue working to ensure ESSA “is implemented as Congress intended.”

The anti-busing language — found in two sections of the current appropriation bills — prohibits using federal funds for transportation “to overcome racial imbalance” or “to carry out a plan of racial desegregation,” or forcing students to attend any school other than the one closest to home. (A separate education law contains a similar restriction, but ESSA exempted magnet schools from it.) The provisions emerged in the early 1970s, just after the Supreme Court ruled that busing students to schools outside their own racially isolated neighborhoods was an appropriate tool for school desegregation.

At the time, many white parents raged against what they called “forced busing.” In response, the U.S. House of Representatives passed at least one law annually from 1966 to 1977 meant to curb school integration, according to historian Jason Sokol, and in 1974 the full Congress voted in favor of an anti-busing amendment to an education bill. The restrictions in the current spending bills appear to have originated around the same time.

The attacks on busing reflect how crucial free transportation is to school desegregation, said Erica Frankenberg, a professor at Pennsylvania State University who studies segregation. Busing was included in guidelines outlining how districts should comply with desegregation requirements in the 1964 Civil Rights Act, and later upheld by the Supreme Court, she pointed out.

More recently, studies have shown that non-white parents are more likely to opt into magnet schools when they provide transportation, and that magnets that don’t offer busing are more likely to enroll students of a single race, Frankenberg said. Yet, many politicians remain reluctant to endorse busing for desegregation — which may reflect a deeper ambivalence, she added.

Resistance to busing, she said, “is a very politically acceptable way to be opposed to integration.”

Yes and No

In a first, New York officials reject 2 proposed charter schools, but sign off on 5 for New York City

PHOTO: Geoff Decker
Charter-school advocates staged a rally outside the state capitol building 2015.

New York’s top education policymakers voted Monday to approve five new charter schools in New York City – but, for the first time, rejected two proposed charters.

The moves by the state Board of Regents sent a mixed message on charter schools. While the Regents have approved more this year than at any point since 2013, the rejections suggest they won’t rubber stamp applications – even those, like the two shot down Monday, that have earned the state education department’s blessing.

Four of the approved schools will be based in the Bronx, and one in Staten Island. (Technically, Monday’s vote is preliminary and the board must finalize its decision at Tuesday’s full-board meeting.)

A new charter high school on Staten Island plans to enroll a significant number of students with disabilities — an area of great need in a borough where a quarter of students have some disability. Students will have the opportunity to graduate with as many as 60 college credits through a partnership with St. John’s University.

The Bronx charters include a new elementary school that will serve high-functioning students on the autism spectrum, an all-boys middle school inspired by an Obama-era program aimed at uplifting young men of color, and a high school for students who have fallen behind academically.

The final Bronx school is KIPP Freedom, slated to open in 2018, which will mark the first time the national network has opened a new school in New York City in six years.

“The community has tremendous support for the charter,” said Board of Regents Chancellor Betty Rosa about KIPP, who suggested the school could even help reduce segregation if sited in the right location.

The two schools the board rejected would have been located in districts in Mount Vernon, in Westchester County, and Homer, in upstate New York.

Board members raised concerns about the applications, including that their curriculums were not very innovative. They also worried that the schools would drain resources from their surrounding districts, potentially forcing them to cut extracurricular programs from traditional schools.

Regent Judith Johnson, who represents the Mount Vernon district, expressed concern that the school only planned to serve students grades 6-8, while the district is moving towards a model that keeps children in the same school from kindergarten through eighth grade. She suggested waiting to see how the district’s efforts pan out.

“I would suggest this is premature,” Johnson said. “I’m not going to support this at this time.”

The vote comes as top state officials have been skeptical of charter schools and policies regulating them.

At past meetings, Regents have wondered aloud whether the schools are serving their fair share of high-needs students. And Board of Regents Chancellor Betty Rosa and State Commissioner MaryEllen Elia have been on a warpath against a new policy that will allow some charter schools to certify their own teachers.

However, those concerns have not stopped the Regents from approving new charter schools. During a low point for approvals in 2015, when the state approved only four charters, few applications made it past the education department’s vetting process and to the board for final approval.

Since then, there has been a steady uptick in approvals. The board signed off on seven new schools last year, and is set to approve at least eight this year. (The board, which typically accepts applications in two or three rounds each year, approved three schools earlier this year.)

State education department officials on Monday also presented new ways to evaluate charter schools and decide whether they should remain open, based on proposals that the Board of Regents floated last month.

The additions to the state’s “Charter School Performance Framework” could include measures of student chronic absenteeism, the schools’ suspension rates, and the results of student and staff surveys. In previous meetings, Regents have also suggested surveying families who decide to leave charter schools.

Charter schools are already required to meet certain enrollment and retention targets, or to make “good faith efforts” to reach them. The state also considers the quality of a school’s curriculum and its outreach to families.

At Monday’s meeting, some Regents proposed adding yet another measure: whether charter schools are sharing innovative practices with the district schools.

“If the original intent [of charter schools] was to create opportunity for innovation,” said Regent Johnson, “we have to decide now, after those twenty plus years, did that happen?”