An
investigation conducted by this office has substantiated that Ross Lanham
(“Lanham”), while employed as a consultant for the Department of Education
(“DOE”) to oversee “Project Connect,” billed millions of dollars to the DOE for
five consultants whom he employed through his company, Lanham Enterprises,
Inc., without the knowledge and/or agreement of the DOE….. All of the vendors profited, to
some extent, from Lanham’s scheme. The investigation also
established that Verizon, in order to be awarded a multi-million dollar
contract, agreed to Lanham’s demand that Verizon use subcontractor Custom
Computer Specialists (“CCS”) at a higher cost to the DOE than Verizon would
have charged for the same services. …
Custom
Computer Specialists
In an
interview with SCI investigators, a Senior Manager at CCS, which was a
subcontractor to IBM on Project Connect, stated that Lanham approached him in
April 2002, and asked him to hire two consultants, Michael Ginzburg at $70 per
hour and Jennifer Thornton at $30 per hour, and to pay them directly. The
Senior Manager stated that CCS would then bill Lanham Enterprises, a consulting
company owned by Lanham and his wife, Laura, at $75 and $35 per hour
respectively for their services. The Senior Manager stated that in April 2002,
service agreements were executed between CCS and Lanham Enterprises and CCS and
each of the consultants. The CCS Senior Manager told investigators that, at
some point, Consultant Tamika Stevenson “came on board.”
When
investigators asked the Senior Manager whether he contacted anyone at the DOE
regarding CCS hiring the consultants, the Senior Manager indicated that he did
not and added that he also did not know whether anyone else from CCS ever
contacted the DOE about this matter. …Iacoviello [DOE Director of
Deployment and Implementation]
recalled that Lanham had in formed him that the DOE did a lot of business
through IBM and CCS, and had said that CCS will “become your best friends,
because without them nothing gets done around here.”…. Iacoviello stated that he then
began to question Lanham about the price that CCS was charging for construction
and integration costs which averaged approximately $75,000 per school, and
sometimes higher. Iacoviello recalled that when he asked the Business
Account Manager why the DOE was paying so much money, he replied that Lanham
told Verizon that Verizon had to use CCS if they wanted to get the work.
Iacoviello told investigators that when Lanham directed Verizon to use CCS, he
acted on his own and bypassed both the Verizon and City bidding processes. ….
Lanham
subsequently added three more consultants, Lanham’s brother, Robert Lanham,
Tamika Stevenson, and Karen Tempio, using a similar pass-through arrangement,
but using Verizon instead of IBM. Although these consultants were being paid
$60 to $70 an hour, Lanham billed CDC $225 per hour for each of these
consultants. CDC then either billed Verizon $247.50 an hour for the
consultants, or submitted their invoices to CCS, who in turn billed Verizon
$247.50 an hour. The DOE was subsequently billed at least $290 an hour by
Verizon….
CCS
facilitated Lanham’s concealment of the employment of the
consultants. CCS also benefited by Lanham’s threat to Verizon that
they would lose millions of dollars in
business if they did not hire CCS. SCI was not able to determine the extent of
the relationship between Lanham and CCS....
Verizon concealed
from the DOE and law enforcement that they got millions of dollars in contracts
through Lanham only after agreeing to hire CCS as a subcontractor. All of
the subcontractors named in this report, except Bayview, facilitated the
concealment of the fact that Lanham was profiting from the DOE while he was
being paid to represent the DOE….[emphasis added.]
It
is the recommendation of this office that the DOE recover all the money paid to
IBM and Verizon for the Lanham consultants. It is further recommended that the
DOE bring in outside auditors to determine any additional cost to the DOE and
the Federal government engendered by Verizon’s use of CCS as a subcontractor on
work that Verizon could have done at a lower cost.
Helen Rosenthal, chair of the City Council Contracts Committee, has been a persistent advocate for more public transparency around DOE contracts, to stem the waste, fraud and corruption that caused millions of dollars in taxpayer dollars to be squandered, as occurred during the Bloomberg administration. After last year's mindboggling fiasco of Custom Computer Specialists, in which the Panel for Educational Policy rubberstamped a contract originally worth up to $2 billion over nine years, later reduced to $1.1 billion, for a company that had engaged in a kickback scheme against the DOE just a few years earlier, the DOE promised her that they would make more information public about proposed contracts at least seven to ten days before the PEP vote. 
