Monday, October 13, 2008

Employee steals from adoption subsidy program

Ex-Official Pleads Guilty In Fraud at Welfare Agency
Weiser, Benjamin New York Times, Aug 1, 2008.

A former official of New York City's child welfare agency pleaded guilty on Thursday to charges including embezzlement, fraud and money laundering. Prosecutors have said he took part in schemes to steal hundreds of thousands of dollars intended for the care of children with disabilities or special needs.

The official, Lethem Duncan, 62, participated in one scheme in which prosecutors have said that another Administration for Children's Services employee manipulated the agency's computers to create phantom adoptions and issue checks as if they were subsidies being paid for real adoptions.

In another scheme, Mr. Duncan, who officials have said was the deputy director of the payments-services department, arranged to have the agency issue checks to a private contractor for fictitious services, and received kickbacks in return.

"I agreed with other persons to embezzle money from A.C.S.," Mr. Duncan said in United States District Court in Manhattan as he addressed the first of six counts to which he pleaded guilty.

The judge, John G. Koeltl, asked Mr. Duncan, "Did you know that what you were doing was wrong and illegal?"

"Yes, Your Honor," Mr. Duncan replied.

The fraud charges involving Mr. Duncan and others were first made public about two weeks ago by the United States attorney's office in Manhattan and the city's Department of Investigation.

That announcement came a day after the sentencing of Judith Leekin, who was convicted of fraud after she adopted 11 children under four aliases and collected $1.68 million in payments meant for their care, which she used to support a lavish lifestyle. She received a prison term of nearly 11 years.

The two fraud cases have focused a harsh spotlight on the lack of internal financial controls at Children's Services. When the scheme involving Mr. Duncan was disclosed last month, Rose Gill Hearn, the Department of Investigation commissioner, said that Mr. Duncan "had the power to authorize A.C.S. payments and checks -- so he did, for himself and his co-conspirators, and it was easy, too easy."

John B. Mattingly, the Children's Services commissioner, said at the time that his agency would investigate to "discover how our internal controls and fiscal accountability systems were violated," and what could be done "to prevent this malfeasance from reoccurring."

An agency spokeswoman referred a reporter for comment to the Investigation Department on Thursday night. There, Ms. Gill Hearn said: "This guilty plea was a substantial step forward in this case. We're glad that this investigation has ended this individual's corruption in his former city position."

In the phony-adoption scheme, Mr. Duncan also worked with an employee of a Brooklyn foster care agency, Concord Family Services, the authorities have said. They said that the employee, Stay Thompson, Concord's fiscal director, received about $79,000 in illegal payments and agreed to share the proceeds with Mr. Duncan and the other A.C.S. employee, Nigel Osarenkhoe.

Mr. Mattingly, the commissioner, has said that the city has halted the placement of children with Concord.

In the other scheme, the authorities said, Mr. Duncan had his agency issue a check for $375,000 to a computer-services firm run by an acquaintance of Ms. Thompson's, which they said had done no work to earn the money.

The head of that firm, which had offices at Concord, then split the money with Mr. Duncan and Ms. Thompson, prosecutors said. Mr. Duncan, they said, received more than $100,000 that way.

Court records unsealed last month indicated that Mr. Duncan has been cooperating with the authorities in hopes of receiving a lighter sentence.

In court on Thursday, Daniel L. Stein, a prosecutor, said that the evidence included recordings of conversations between Mr. Duncan and his conspirators in the case.

The judge told Mr. Duncan that he could face up to 75 years in prison on the charges. Mr. Duncan, who is free on bond pending his sentencing, had no comment as he left the courtroom.

His lawyer, Steven K. Frankel, said Mr. Duncan had retired from the Children's Services agency.

Mr. Frankel added, "A.C.S. should look closely at their internal safeguards, which are literally nonexistent, particularly within the adoption subsidy program." He said that the activities the investigation uncovered "could never have happened if there were any kind of reasonable safeguards in place."

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