Special Ed Gold Mine, Part 3: Some Money Intended For Special Ed Ends Up Elsewhere

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Overbilling, waste and out-right fraud. They're part of the business of educating the city's neediest children. In part three of her special series "Special Ed Gold Mine", education reporter Lindsey Christ looks into where some of the money meant to help those children is really winding up.

The city spends billions of dollars a year on special education and more than half of it goes to outside companies who serve students. At least, those companies are supposed to serve students.

In recent weeks, NY1 learned that one preschool provider gave his wife hundreds of thousands of dollars for a no-show job. Another couple spent thousands on trees and bushes for their Poconos vacation house. A third gave tens of thousands to a son, which paid for an iPhone and a Los Angeles apartment.

That's just a sampling of findings in special education audits by State Comptroller Thomas DiNapoli. It's concerned the City Council for a long time.

In August, federal authorities charged two men with stealing millions of special ed funds from the city. Investigators found the DOE billing office did not pick up on red flags, like bills for students no longer in the school system and forms signed by a DOE employee who had died years ago.

"This was a total fraud from beginning to end," said Special Schools Investigator Richard Condon.

But the contracts continue to grow. This summer, the DOE pushed through $638 million worth of new special ed deals. It said the contracts will cut down on smaller bills, like the ones that led to the most recent fraud.

"Unfortunately, there are going to people who are going to try to beat the system and we're not going to allow that to happen," said Schools Chancellor Dennis Walcott. "But we have internal controls that we've put in place over the past year."

However, several of the new contracts went to companies with blemished records. Integrated Treatment Services got a new three-year, $3 million contract, though it owes the DOE $1 million. DiNapoli revealed money supposed to go to special education services went to big bonuses for family members and office renovations.

A month after approving an $8 million, three-year contract with New York Therapy Placement Services, DOE officials learned it had history of fraud.

The DOE said it's confident in the new contracts and has tightened controls. But DiNapoli recently said he continues to find waste, fraud and abuse in special ed contracts.