Contact: Colleen Roche/Samantha Lugo (212) 788-2958
Lorna Goodman (212) 788-0999
Nicholas Scoppetta, Commissioner of the Administration for Children's Services said, "By taking back $49 million, the United States is penalizing the City and the State for what is essentially a record keeping failure by overburdened foster care workers. It reflects insensitivity on the part of the federal government and a wrong-headed misuse of Federal authority. It is regrettable that the Federal government has seen fit to take back this money which was intended to assist abused and neglected children throughout the State because of ministerial failings on the part of a prior administration."
This lawsuit began with an allegation that during the Dinkins administration City employees had entered false information into computerized foster care records in order to overclaim federal reimbursement. (New York City initially pays 100% of the cost of foster care and then seeks reimbursement from the State and the Federal Government.) There was no allegation that any individual profited by this practice or that any federal money was used by the City or State for anything other than to provide services to eligible children.
The Criminal Division of the United States Attorney's office investigated this claim for over two years and declined to bring any charges. The Civil Division then took over the case and filed a complaint based on the Federal False Claims Act, a civil war era statute that was designed to uncover fraud by federal armaments contractors. The false claims act also provides that the person who brings the fraud to the government's attention --known as the relator --may share in the recovery.
The allegations of entering false information turned out to be baseless and the Hon. Denny Chin of the United States District Court for the Southern District dismissed the False Claim Act claim on the ground that it impermissibly imposed a penalty on municipalities and States. In the course of the litigation, however, the United States added a claim to the lawsuit that the State had wrongfully received federal 1'incentivc funds" which it was not entitled to because 90 percent of local foster care records did not demonstrate compliance with 100 percent of a federal regulations. Should that allegation have been proven, the City and every other locality in the State would have risked losing over $100 million in foster care funding It is this claim, and not the allegation of fraudulent claiming which has been settled.
Corporation Counsel Michael Hess deplored the "inexplicable payment by the U.S. Attorney's office of millions of dollars of in public monies to the relator in light of Judge Chin's decision that the False Claims Act is not applicable here." He called upon the U.S Congress to amend both the False Claims Act and federal reimbursement statutes, which allow the Federal Government to shirk its responsibility to share in the cost of public assistance.