A state audit of the State University of New York Downstate Medical Center in Brooklyn found that there were fake bids for construction contracts and other problems with the system for purchasing goods and services, according to Comptroller Thomas DiNapoli. Fraud and forensic auditors and investigators uncovered practices that included attempts to circumvent the bidding process with fake bids, improper relationships between staff members and vendors, and problems with software implementation.
DiNapoli’s office conducted the audit after receiving three anonymous letters that alleged fraud. It has forwarded its findings to the state Joint Commission on Public Ethics.
“The systemic breakdown in oversight found at SUNY Downstate Medical Center allowed for questionable practices that may have undermined the integrity of the purchasing process and raises concerns about whether the best price was obtained,” DiNapoli said in a statement. “Officials must take action to change how business is done and put necessary safeguards in place to protect public dollars from this kind of fraud and abuse.”
Auditors and investigators reviewed payment records from January 1996 to October 2010 that totaled $1.2 million. They learned that Eagle Two Construction was affiliated with several other companies that had submitted competing bids in six separate procurement processes. All the companies are located at 294 20th St. in Brooklyn. Eagle Construction always won the bids when one of the affiliated companies bid against it. Some of Eagle Two Construction’s bids were forged, they found.
On three other projects, payments totaling $49,890 were made to Eagle Two and an affiliated company, JIT, to avoid change orders on existing contracts, according to DiNapoli.
Roxanne Tzitzikalakis, owner of Eagle Two Construction, asserted her Fifth Amendment right against self-incrimination when auditors tried to interview her, DiNapoli said. Her father, Demitrios Tzitzikalakis, was involved in day-to-day operations of the company and has been convicted with several felonies in connection with a previous company that submitted falsified and inflated invoices to the New York City Department of Citywide Administrative Services, he said.
Procurement staff at SUNY Downstate admitted to auditors that they shouldn’t have accepted the alleged competing bids from Eagle Two, DiNapoli said. SUNY Downstate did not agree that improper relationships with vendors existed.
Other problems auditors uncovered in the audit:—A former Technical Systems Integration Group employee who became a SUNY Downstate project manager five years ago improperly oversaw and approved work by the company on several occasions. State employees who previously worked in the private sector must consider recusing themselves from all matters connected to the former employer within the previous two years, according to state ethics laws.—SUNY Downstate paid about $2 million between February 2007 and May 2011 to set up a new business operations system, but just 10 of more than 200 departments within SUNY Downstate were using the new system as of July 2011.