Corporate Accountability

New York, New Jersey Go After Sodexo Rebates

First New York, now New Jersey. Eighteen months after Investigative Fund piece “Cafeteria Kickbacks” was published in In These Times, New Jersey Assembly members Linda Greenstein and Wayne DeAngelo are now asking New Jersey Attorney General Paula Dow to investigate the extent of Sodexo's rebate fraud in the state.

The request for an investigation comes weeks after New York Attorney General Andrew Cuomo announced a $20 million dollar settlement between Sodexo and New York state for overcharging SUNY and twenty-one New York school districts. Cuomo explained, “the company promised to provide goods at cost but failed to acknowledge rebates from suppliers, resulting in illegal overcharges to the schools.” (For more, read Lucy Komisar's recent post.)

The practice, Komisar found, has been embedded in school cafeteria culture since the 1950s. Relying on dozens of people with knowledge of the rebate system, she documented how it benefited large food service providers and industrial food businesses such as Tyson at the expense of taxpayers, small business owners, local farmers and cafeteria patrons around the country.

Even before an official state investigation, there are already signs that rebate fraud has occured in New Jersey. Bolstered by Komisar's work, a recent report by the Clarion Group found that Sodexo — food service provider to seventy-three school districts in New Jersey alone — had illegally retained rebates in at least two New Jersey school districts: Long Branch and Piscataway.

Komisar ended her article with a plea: “law enforcers, take note.” It seems Andrew Cuomo finally did, and we hope New Jersey's Paula Dow will soon follow suit. The multi-million dollar billing fraud perpetrated by Sodexo (and perhaps by the other major industry players, Aramark and Compass, as well) is more outrageous than ever these days, given that states across the country are struggling with massive shortfalls. Yet, until New York's settlement, little had been done to get these funds back to taxpayers.

The developments in New Jersey suggest that the gravy train may be coming to an end. As state reps Greenstein and DeAngelo note in their letter to Attorney General Dow: “In a time when New Jersey must be deliberate about spending taxpayer dollars and school districts are faced with tight budgets, we are concerned that Sodexo could be purposefully hiding millions of dollars that should be going into our schools or back to taxpayers.” When will elected officials in other states, such as Rhode Island, Massachusetts and Connecticut, where Komisar documented abuses, get angry, too?

About the reporter

George Warner

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