homelessness

A Long Line of Red Flags Trailed Embattled Homeless Operator

Department of Social Services Commissioner Steve Banks (right), with Mayor Bill de Blasio
Department of Social Services Commissioner Steve Banks (right), with Mayor Bill de Blasio Photo: Ben Fractenberg/THE CITY

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The city on Wednesday filed a complaint in Manhattan Supreme Court seeking a temporary receiver for one of New York’s largest homeless service providers — an act officials referred to not just as unprecedented, but as a source of pride.

They had diligently built a case alleging fraud against Childrens Community Services — a firm that’s reaped nearly $500 million in recent years — and were now taking action to protect both taxpayers and the homeless, officials said.

“We’re proud that our staff saw something and said something,” said Isaac McGinn, a Department of Social Services spokesperson.

But the city’s own court filings show that warning signs about the firm began to emerge as early as September 2015.

A review of those filings and other documents by THE CITY reveal a nonprofit formed in 2014 by a former hotel executive that quickly expanded into a multi-million dollar operation that provided nearly 2,000 units of housing for the homeless.

But the company kept getting contracts to help with the city’s homeless crisis even as concerns over its operations grew. The suspicions culminated in raids this week by city and federal officials amid the city’s accusations of fraud, bid-rigging and bogus vendor headquarters.

Paper Trail

From the fall of 2015 into the following spring, the Department of Social Services received invoices submitted with repeat and duplicate charges, the filings show.

The expenses were for a subcontractor, SASY Enterprises, that had been hired with the dual role of preparing apartments for homeless people to move into and also serving as a staffing agency.

Invoices submitted by SASY, which the court records refer to as an “unlicensed temp agency,” had problems that included large lump sum payments without explanation — and a 25% markup on all spending.

Concerns about the Childrens Community Services’ “financial practices, governance and management” continued into 2017, even as the company was gradually accumulating multimillion dollar contracts, the court papers say.

In February of that year, the city reached a so-called corrective action plan that required CCS to retain a fiscal monitor to get its house in order.

The court papers say the company engaged with the fiscal monitor, but didn’t respond when city officials who were unsatisfied with the monitor’s report tried to follow up.

In June 2017, the city entered into a three-year, $369 million contract for Childrens Community Services to provide shelter services at commercial hotels. The contract was later increased to $600 million, which officials attributed to an expansion of the number of housing units.

Two contracts to provide services at shelters in Brooklyn followed later that year — for a combined $37 million — while another was inked in March 2018 for $32 million in Queens, the court papers say.

“The warning sign to me more than anything else was how does an organization without a track record” land hundreds of millions of dollars in contracts, said Stephen Levin (D-Brooklyn), chair of the City Council’s Committee on General Welfare. “That was the real head-scratching thing.”

’Obscure Nonprofit’

In April 2018, a piece by New York Nonprofit Media told the story of CCS under the headline, “How an obscure nonprofit became one of NYC’s largest contractors.”

The story noted that the founder of Childrens Community Services, Thomas Bransky, was a hotelier with no background in homeless services when he launched the nonprofit in early 2014 — and raised questions about whether the company had a physical administrative office.

A copy of Branksy’s resume THE CITY obtained through a public records request shows his previous titles — all at Chicago hotels — were account manager, sales manager and front desk manager.

A message left at a phone number he submitted in documents to the city wasn’t returned.

In May 2018, city social service officials’ concerns about “CCS’s suspicious subcontracting, invoicing and billing practices” prompted them to notify the city’s Department of Investigation.

This week, DOI and federal prosecutors executed search warrants of addresses linked with the firm and its vendors, the court filings show.

Questions sent to DOI late Wednesday about the length of the investigation weren’t immediately answered.

‘Had to Build a Case’

Department of Social Services Commissioner Steve Banks on Wednesday hailed his agency’s actions in bringing CCS under contract in June 2017 — saying the only reason the firm’s expenses could be scrutinized so closely was because of that step.

Previously, firms that managed commercial hotels used to house the homeless weren’t required to sign contracts with the city.

“We had to build a case. We built the case and now we’re going to court,” Banks said during a phone call with reporters.

He said the agency had withheld tens of millions in funding from CCS over the years because of billing concerns.

“Even that didn’t work,” Banks said. “Every other step we took… didn’t result in the change we wanted.”

Among the irregularities cited in the court filings were invoices from a host of subcontractors that officials believed were indications of “fraud and bid rigging.”

Four of the firms were controlled directly or indirectly by a board member at CCS, the filings allege. And four subcontractors provided addresses that were determined to be to residential apartments or houses — including one that was vacant.

City officials said they were taking the unprecedented step of seeking a receiver for the firm because its portfolio was too large to be absorbed by other providers.

The documents say the agency provides services to about 1,900 households — including homeless families with children.

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