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Comptroller: Cedarhurst Agency Bilked State out of $2.6M

Audit says executive director used funds to benefit his family.

A Cedarhurst-based special education contractor allegedly “inappropriately” charged the state and other entities more than $2.6 million over two years, with some of the money apparently benefitting the relatives of its director, according to the New York State comptroller.

Educational Services, which provides special education services to 375 children ages three to five, failed to provide auditors with the documentation to support salary and wage costs for 50 employees totaling $1,540,082, said the office of Thomas DiNapoli. About $856,800 of this money was allegedly paid to 11 relatives of Executive Director Morty Kramer. The audit says Kramer routinely deposited the paychecks of his two sons into his own personal bank account.

“Waste, fraud and abuse cannot be tolerated in our special education programs, but my auditors keep finding it,” DiNapoli said in a release. “Allowing these abuses to continue deprives children with disabilities of the resources intended for them and threatens the entire private special education program.”

The comptroller’s office has referred the findings to the Manhattan district attorney.

IncludED ceased operations as of April 1, 2011, according to the audit.

The audit also accuses Kramer and his wife of billing $32,359 to the Department of Education for costs that include non-allowable meal expenses, student loan payments and tuition costs, maintenance of their home and airline tickets. Another $15,382 was allegedly charged to the city and state for rent and expenses for the California home of the son of the executive director.

A woman who identified herself as Kramer’s wife told Newsday, “It was very overblown, the numbers were very overblown.”

According to the release, state education department officials “generally agreed with the audit’s findings and intend to seek restitution as appropriate.”

“The state and localities need to improve their management and oversight of special education providers,” DiNapoli said, “to make sure taxpayers get what they’re paying for and students aren’t cheated.”

Carmela Soprano August 02, 2012 at 08:01 PM
Uh oh, another storefront up for rent! Why aren't they prosecuted for stealing public monies?
richard libbey August 03, 2012 at 04:03 PM
If there was fraud, it is only being followed up because they fell out of favor. Most of the special ed programs are filled with fraud and they, the public servants, have allowed it to occur with these and other programs. It is not their money and maybe they can get a job when they retire or a brown bag while they are working.
Carmela Soprano August 03, 2012 at 04:38 PM
I'm almost certain they will be shuttered. I've been around Medicaid compliance long enough to know, at a minimum, the ability to bill Medicaid will come to a screeching halt. At the least, a 5 year exclusion will ensue. Of course there will be hearings, but this is enough to know it wasn't simply an oversight in billing; outward fraud is apparent. 325 clients and $10 million is a big chunk of change. I hope they're moving clients to other service providers at this time.
Carmela Soprano August 03, 2012 at 04:44 PM
Uh! NY Times reports this: "The company, IncludEd Educational Services of Cedarhurst, closed in April, after a reduction in its tuition rate, retroactive to the 2005-6 school year, left it owing the New York City Education Department $3.15 million, officials said on Tuesday." So, they're already out of business.
richard libbey August 03, 2012 at 04:52 PM
It was done, I think, to spread the 325 clients to other programs. Since corruption is endemic, the goal must be to divide up the booty, the clients, and getting the taxpayer prize into another special friends programs, which might be more expensive or substandard.
Stephen J. Bronner August 03, 2012 at 04:53 PM
I don't doubt the information, but it's very strange since someone picked up their phone yesterday.
Carmela Soprano August 03, 2012 at 05:07 PM
They are associated with two other programs, one of them being "The Learning Workshop." I stand corrected on the number of clients: it was 375, not 325. There is already a criminal investigation going on. Public monies are nothing to play with in New York State anymore. The data mining protocols in the state are pretty sophisticated and NY is known to be the leaders in the U.S. with data mining.
Stephen J. Bronner August 03, 2012 at 05:09 PM
Thanks for keeping us up to date on this!
Carmela Soprano August 03, 2012 at 05:24 PM
Here is a copy of the audit report. It should be noted, according to the last page, the program ceased operations in April, 2011. http://www.osc.state.ny.us/audits/allaudits/093012/10s59.pdf

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