homelessness

City Red-Flagged Failed Homeless Hotel Firm Before $359M Deal

City Social Services Commissioner Steven Banks
City Social Services Commissioner Steven Banks Photo: Ben Fractenberg/THE CITY

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City officials awarded a Queens nonprofit a $359 million contract to shelter homeless families in hotels — even after questioning everything from loans to a massive hiring spree, records show.

Childrens Community Services agreed in February 2017 to be overseen by a fiscal monitor — and to address “concerns about governance capacity,” according to documents obtained by THE CITY.

The nine-page corrective action plan the Department of Homeless Services inked with the nonprofit before sealing the deal four months later apparently didn’t work.

Childrens Community Services was put under a court-appointed receiver last week after city lawyers alleged fraudulent billing involving an array of subcontractors. The nonprofit, which formed in 2014, has seen its contracts swell to nearly $800 million.

An examination by THE CITY of the corrective action plan, contracts and court papers suggests that the de Blasio administration had existing serious issues with Childrens Community Services — but went ahead with new deals anyway as New York’s homeless crisis grew.

Among the revelations contained in the documents:

• In the months before the city gave Childrens Community Services the $359 million contract in June 2017, the nonprofit was instructed to enlist a board chair — and hire a chief financial officer, executive director and human resources director.

• Meanwhile, the nonprofit told the city it rapidly expanded its payroll from 35 to 785 employees by hiring former temp workers. It later emerged in court papers that Peter Weiser, an ex-board member, allegedly operated an unlicensed temp agency that was due a 43% cut of gross salary for staff recruitment for the nonprofit.

• City officials sought evidence of board approval of a $100,000 loan from CEO Thomas Bransky to the organization in 2014. Also missing was documentation for a $1.8 million interest-bearing loan made to the nonprofit by a private trust allegedly connected to Weiser.

• Department of Homeless Services officials also requested a list of board members, ethics rules, job descriptions, salaries and tax filings — as well as proof that board members had settled liens for unpaid taxes.

A Rapid Rise

Bransky, a former Chicago hotel manager, started Childrens Community Services six years ago and initially cobbled together $23 million in smaller deals with New York City to house homeless families and individuals.

His firm’s initial big break came amid a shift in the city’s approach to providing temporary housing for the homeless, which suddenly relied on thousands of hotel rooms for shelter, shifting away from individual apartment leases.

Barely two years after forming, Childrens Community Services was awarded an emergency six-month contract worth $48.3 million to shelter homeless families and single adults in hotels from April to December 2016.

That contract wasn’t formally signed until February 2017, the same month as the corrective action plan.

His nonprofit’s rapid transition to becoming the city’s second largest homeless services provider raised eyebrows after it scored the $359 million contract that June to provide 1,210 hotel rooms as shelter for families under a three-year agreement.

Seven months later, DHS expanded the deal to 2,110 rooms for nearly $600 million.

Two shelters run by Childrens Community Services at 470 and 476 Pulaski street in Brooklyn.
Two shelters run by Childrens Community Services at 470 and 476 Pulaski street in Brooklyn. Photo: Ben Fractenberg/THE CITY

Lawyers for Bransky and Weiser didn’t respond to requests for comment. Department of Homeless Services officials didn’t respond to a series of questions about the outcomes of the corrective action plan.

When the receivership case was filed last month, city Social Services Commissioner Steve Banks told reporters that DHS had withheld payments on “tens of millions of dollars … that we have identified as potentially fraudulent.”

He also said that signing the June 2017 deal was part of an effort to gain firmer leverage on Childrens Community Services: “We made the decision to bring them under contract, shrink their footprint.”

Raids and Affidavits

It wasn’t until May 2018 that Banks’ agency contacted the city Department of Investigation, leading to raids last month on the offices of Childrens Community Services and its subcontractors.

In a court affidavit filed in the receivership case, Vincent Pullo, DHS’ chief contracting officer, suggested the corrective action plan was a flop. The fiscal monitor’s report on the company’s “financial status and internal controls” was due to the city by March 15, 2017.

“DHS was unsatisfied with the fiscal monitor’s report and requested follow-up, which has not been provided to date,” Pullo said in the Jan. 29, 2020, affidavit.

Pullo also highlighted concerns about the dual role of Weiser, whose company, SASY Enterprises, is also a defendant in the case brought by the city.

In the complaint filed in Manhattan Supreme Court, city Corporation Counsel James Johnson alleged that invoices submitted by the nonprofit and subcontractors showed signs of “fraud and bid rigging.”

Those issues, the city alleges, included “incorrect and duplicate billing” and “patently fictitious price lists.”

An ‘Honest Employee’

According to court papers, Childrens Community Services never supplied proof it had sought competitive bids as required for subcontractors.

The nonprofit fired Bransky and Chief Operating Officer Ruth Mandelbaum last month, according to DHS.

Mandelbaum’s attorney, Jacob Laufer, called her a “very dedicated, loyal and honest employee.”

“We’re confident that when the smoke clears, that will be plain to everyone,” he said.

Bransky hasn’t made any public statements since the court filing last month. In a 2016 application to manage thousands of commercial hotel units, he pitched himself as natural for the work —  characterizing the 20 years he said he’d toiled in hotels as the “provision of housing.”

The application says his foothold in the city’s big-bucks shelter industry came with a May 2014 meeting for new vendors held by the Department of Homeless Services — which led to the placement of two families in Childrens Community Services apartments.

“This marked the beginning of CCS’s successful expansion as both a non-profit provider of social services and a manager of vendors,” the application reads.

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