Food Service Management Company Settles False Claims Act Allegations for $18 Million

According to the United States Department of Agriculture, in 2010 16.2 million children in America (nearly one in five) lived in food-insecure households and, as a result, struggled with hunger at some time during the year.  These children lack the means to get enough nutritious food on a regular basis.  Due to these severe problems, food vendors in many states, including New York, have started to provide discounts to public schools in order to provide their students with nutritious daily meals.

On September 19, 2012, New York Attorney General Eric Schneiderman announced an $18 million settlement with Compass Group USA, Inc.  Compass is a food service management and support services company that operates across New York State and negotiates contracts, handles food-related procurement, and staffs and supplies culinary facilities for New York public schools.  Compass was accused of violating the State of New York’s False Claims Act by receiving discounts from food vendors it worked with from but failing to pass along the savings to the schools.  As a result, the schools, which are tight on cash in any case, were overcharged for the food provided by Compass.  The New York State government will keep about $15 million of the settlement.  The rest of the money will be returned to the schools and school districts across New York who were overcharged by Compass.

In addition to paying $18 million, Compass will also be using an updated contracting process.  Under the terms of the contracts, Compass will now have to provide written disclosure to its New York State educational clients with explanations of the company’s rebating process, establish a hotline for educational customers to call with questions regarding rebates, pay for independent auditor’s review of rebating practices, and give semi-annual reports to the Attorney General’s office, and provide annual written reports to the Attorney General’s office on the progress of its compliance with the Nutritional Code of Conduct.

While fraud, in any capacity, is unacceptable, when a company allegedly try to make money by making food more expensive for children, it is truly reprehensible.  The attorneys at Tycko & Zavareei praise the Attorney General’s Taxpayer Protection Bureau for conducting the investigation against Compass and the Attorney General’s office for reaching this excellent settlement with the company.

To learn more about this settlement and other False Claims Act cases, please visit our website and


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