Large-scale fraud found at Seedco

From the NY Times:

City investigators have discovered evidence of large-scale fraud in one of the agencies leading Mayor Michael R. Bloomberg’s signature initiative to find jobs for unemployed New Yorkers.

The Department of Investigation found that Seedco, a nonprofit organization that frequently works with the Bloomberg administration, falsely claimed to have helped at least 1,400 people — out of about 6,500 — find jobs; those people are in fact jobless or found employment on their own.

Seedco “developed systematic practices to report false placements” to the city’s Department of Small Business Services, according to a report on the investigation that was released on Friday.

The Department of Investigation noted that the number of fraudulent claims could be much higher, because Seedco, with permission from the city, shredded job placement documents between 2008 and February 2011.

Federal prosecutors have begun their own inquiry and have interviewed several former Seedco employees. Seedco is cooperating with that inquiry, the agency president, Barbara Dwyer Gunn, said through a spokesman.

The reports of fraud come as a blow to Mr. Bloomberg, who sought a third term based on his ability to lead the city in a tough economy and has heralded his administration’s success in finding jobs for unemployed New Yorkers. The mayor has praised the role nonprofit groups, paid by the city, have had in the jobs effort.

The news is also troubling for Seedco, a well-regarded nonprofit organization that has stood at the heart of many of the mayor’s initiatives, including job placement and cash grants for welfare clients, and loan programs for small businesses and entrepreneurs.

The small business commissioner announced on Friday that the city would transfer Seedco’s $7 million annual contract to another nonprofit organization.