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Not-For-Profit Vendor Fraud Unit

DOI's cases are sometimes about children, elderly and low-income New Yorkers who look to City-funded, not-for-profit organizations to provide much-needed programming and assistance but instead see those funds siphoned off by organization leaders. This was the case at the Gloria Wise Boys & Girls Club in the Bronx, where DOI found that Gloria Wise executives took more than $290,000 for their own personal use; gave $875,000 to one executive's private business venture — which subsequently declared bankruptcy; and routinely falsified records on how public funds were spent. In addition, in order to pass a health inspection they created falsified records indicating children in their nursery schools had been vaccinated. When DOI began its investigation, executives even falsified records to give to DOI, purporting to show some of the fraudulent expenditures were legitimate.
Read DOI's Gloria Wise report

  • The result of DOI's investigation was that two of the executives pleaded guilty to grand larceny and obstructing government administration, they must pay back thousands in restitution and are barred from working at a not-for-profit for three years. DOI also recovered $625,000 in City funds from Gloria Wise that had been misspent by the agency.
  • DOI issued a series of recommendations demonstrating ways that City agencies and not-for-profits can help protect themselves against fraud and abuse. In addition, DOI assisted the new administration of Gloria Wise to rebuild that once-vibrant social services agency so that it can again provide essential services to the Co-Op City community.

The vast majority of non-for-profit vendors that contract with the City are honest. Gloria Wise highlighted how City funds, including Member Item money, given to not-for-profits could be siphoned away by unscrupulous individuals. An outgrowth of that investigation and the investigation that resulted in the arrest of former State Senator Efrain Gonzalez, Jr., (read the press release on the Gonzalez sentencing ) was the formation in 2007 of the Not-For-Profit (NFP) Vendor Fraud Unit. The NFP Unit, with its forensic auditors and investigators, examine these types of issues.The results have been prolific: numerous arrests resulting from DOI's forensic auditors' success in following the money stolen by unscrupulous insiders, City employees, public officials, and others. In 2009, one investigation resulted in the 30-month prison sentence of a former deputy director of two nonprofits who embezzled hundreds of thousands of dollars in public funds intended for the City's neediest children. At another nonprofit, DOI arrested two executives for embezzling $200,000 and spending it on clothing, restaurants, travel, campaign contributions, and other personal expenses. The NFP Unit's work has led to results: investigators have made more than 40 arrests, with most ending in convictions so far.

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