New York Attorney General Continues Investigation Into Food Service Companies; Settles with Compass Group for $18 million

Posted by </sup>gt;Kristin Graham Koehler and Amy Markopoulos

The New York Attorney General’s Office and Compass Group USA, a foodservice management company, reached a settlement in which Compass Group will pay New York $18 million for illegally retaining rebates from food vendors rather than passing those credits on to New York schools for more than seven years.

According to Attorney General Eric Schneiderman, the settlement with Compass Group requires that it repay almost $3 million to the schools for vendor discounts that by law should have been passed on. Compass Group will also have to pay $15 million in damages and penalties under New York’s False Claims Act.

Part of an ongoing investigation by the Attorney General’s Taxpayer Protection Bureau of food management companies and food distributors doing business with the state, it follows last year’s $1.6 million settlement with the Whitsons companies. The settlement also follows the 2010 settlement of a qui tam lawsuit against foodservice management company, Sodexo. Like Compass Group, Sodexo was charged with illegally pocketing vendor discounts, and in July 2010, agreed to pay $20 million to settle charges. After the Sodexo settlement, the New York Attorney General’s office launched an investigation into rebate practices by Compass Group and other foodservice companies. The Sodexo settlement remains the largest non-Medicaid settlement under the New York False Claims Act.

The Taxpayer Protection Bureau was established by Schneiderman last year to help with fraud recoveries from contractors, who collect about $13 billion annually from state taxpayers and billions more in local government contracts.