Wednesday, December 15, 2010

How Far Does the Sodexo Scandal Reach and Why Aren't We Investigating Them?

Is Sodexo cheating EASD taxpayers?

Posted by: Noël Jones

You may have heard by now about protests going on at Lafayette College, supported by the Service Employees International Union (SEIU), against Sodexo, who is the second largest food services company in the world, supplying schools, colleges and hospitals in 80 countries globally, including the Easton Area School District (EASD). Lafayette students are protesting expensive mandatory meal plans through Sodexo, and there are similar protests that have been happening in other parts of the country as well, over Sodexo employees' working conditions.

I had done a little investigating myself last year to find out why more Lafayette students weren't supporting restaurants in Easton, when students have special cards that they can charge restaurant meals to. The students I talked to said it was cost prohibitive, because they were forced to buy Sodexo meal plans, whether they ate them or not, so to buy a meal in a restaurant would be wasting a Sodexo meal they had already paid for. They also said that not very many Easton restaurants and cafes had gotten on board with the card program. I talked to Troy Reynard, owner of Cosmic Cup, a popular cafe on College Hill, and he said that Sodexo charges 11% to any restaurant that accepts the student cards. Does this sound like a racket or what? Just think about how much economic benefit Easton's downtown restaurants could be absorbing from hundreds of students from middle and upper-middle-class families who are living in Easton for four years? I spoke to mayor about this at the time, and am still waiting to see if any progress has been made. From the looks of the protests--not yet.

But equally disturbing to me is a story you may not have heard about: Sodexo was busted this year in New York resulting in a $20 million settlement for fraudulent overcharges to the school district

there. According to New York Attorney General Andrew Cuomo:

"the company promised to provide goods at cost but failed to acknowledge rebates from suppliers, resulting in illegal overcharges to the schools...this company cut sweetheart deals with suppliers and then denied taxpayer-supported schools the benefits. The state and federal regulations regarding such contracts exist to protect taxpayers, and I thank the whistleblowers for having the courage to bring this to our attention."

As reported by Georger Warner of the in August of this year, New Jersey opened a similar investigation with regard to its school system. According to Lucy Komisar, who who first broke the story with the support of for In These Times:

"The rebate system, endemic to the industry, works like this: A food management company like Sodexo signs contracts to run a client’s cafeteria. The company buys supplies from vendors such as Coke, Kellogg’s or Tyson. Then, chosen vendors send the management company rebates based on a percentage of sales."

The price hike to "earn" the rebate that is forced on vendors (often as much 10% in rebates) is passed on to the school districts, colleges and hospitals that Sodexo "serves," while driving small vendors out of business at the same time. When it comes to the school districts, that translates to our tax money.

So my question is this--in these times of economic strife, when the school district's budget is again in crisis--why aren't we investigating Sodexo? So we really think that what they did in New York and are doing in New Jersey will not be done here?

Kevin Deely, head of local teacher's union told me, when I asked:

'I brought this issue to the attention of Joe Kish over the summer. He accused me of "defamation of character" against Sodexo, but said he would look into it. I am not sure what, if any resolution was made. '

Now why on earth would the Asstistant to the Superintendent Joe Kish be using fear tactics to act as a guard dog for Sodexo? It is certainly not defamation for any union member or general citizen to wonder such a thing aloud about a company that has already been busted on fraud in one state only an hour and a half away, and  is currently being investigated just over the border in a second state.

How much money might taxpayers be losing to fraudulent charges? Our school board and administrators should be turning over every rock in this process to eliminate waste--why the resistance? Why wouldn't Joe Kish want to eradicate kick-backs if they exist?


tunsie said...

If the college bought the food bulk,they can make it healthier and cheaper.there is sooooooooo much wasted by the students themselves,They go thru the line take 6 of everthing eat 2 and throw 4 away.can they do that at home?the collegs ca do it cheaper without a food service,and they wouldn't have to worry if the food service was honest.....tunsie

Anonymous said...

The article sounds like the SEIU talking. Google "SEIU Thugs" and check out two or three of the 104,000 articles that pop up. Enough said.

noel jones said...

the article on Lafayette protests is definitely supported by the SEIU as the SEIU is linked as a supporting site at the bottom, but the main article on the bust in New York is not union-based that I know of, and the fact remains that Sodexo was busted for fraud to the tune of $20 million.

noel jones said...

Last night at the school board meeting, residents spoke up during public comments to request that the district investigate whether or not Sodexo may have frauded school districts in PA the way they did in NY and are currently being investigated for in NJ.

Tim Reilly suggested that the EASD could write a letter to the PA Attorney General to ask them to investigate Sodexo.

It seems like the ball is rolling...

Anonymous said...

Lafaytte students aren't required to enroll in any meal plan after their first year.

noel jones said...

Anon 4:56 is right--Lafayette students are mandated the first year only, while Moravian students are mandated to buy a partial or full meal plan all four years (including commuter students)--see Sara Satullo's article in the ET:

However, Sodexo still charges restaurants 11% on the cards that were developed so that Lafayette students could use them in town, making most restaurants not want to take them.

g_whiz said...

Thats still a year of enforced spending on students parts, whether they want or need these meal plans or not. Its a rather disgusting lack of choice that many more would bemoan if it wasn't on a corporate level and thus involve market shares and profit margins.

Dennis R. Lieb said...

My comments hit on a couple of issues including the Sodexo crisis. I went to a jobs rally at the Unitarian Church in Bethlehem last Friday night. There were people there from the group fighting to save Gracedale from being sold to a private company along with the president of the EASD Teachers Union, some local elected officials, judges, non-profit entities and the comptroller for Northampton County. I brought home a petition to get a question on the next ballot to not sell Gracedale for five years. I'm trying to figure out ways to get signatures on it by the Jan.19 deadline for submission. Anyone who wants to sign please let me know.

Gracedale was projected by county officials to lose $36 million over a recent operating period. During that same period it actually made $4 million - a net $40 million positive return above official predictions. It has always made money. If we sell it there will be an immediate $10 million hit to county taxpayers next year because of the deal structure and additional $2.5 million yearly shortfalls going forward to make up for things Gracedale paid for. If it can be run at a profit to entice private buyers why can't the input of the nurses and other workers be Incorporated into management decisions to make it profitable continuously? I know people who work there who have excellent ideas to cut costs and they are being ignored.

Speakers at the rally also included two people who work for Sodexo at Lafayette College. Though they both work full-time there, they couldn't afford to heat their house last winter and have no health insurance for their little boy. The mother was in tears as she spoke. These are people who want to work but can't live on $9.30/hr with no benefits. Sodexo follows union recognition rules in France because national law there requires it. Here in the US they hypocritically ignore their worker's needs. Lafayette and Moravian College students are to be commended for recognizing a problem and bringing focus to the issue. Afterwards I talked to the father who spoke and asked him where he lived. He said in the vicinity of Cottingham Stadium, which is four blocks from my house. Obviously then, the Sodexo issue is directly affecting West Ward residents. I gave him my WWNP contact info and told him to stop in if he needed help.

The rich get richer. No level of wealth is enough. A hundred, two-hundred, four-hundred million dollars a year for CEOs who run companies into bankruptcy while working people starve, freeze and suffer. Is there really, really, really not enough to go around?



Anonymous said...

We the people need to get aware of how we enable corporations. I look forward to the day when fellow citizens apply peer pressure on each other to stop depending on corporations. The best thing we all can do right now is get out of debt. Every dollar of debt feeds Bank of America. More we can to is to start refusing corporate products - like Sodexo's "food."

Anonymous said...

It is true that Lafayette students are not required to have a meal plan all four years. However, after the first year if you choose to not have a meal plan, you are then required to put a minimum of 325$ flex dollars on your account, which can only be used at the Sodexo food establishments on campus. So, even if you want to do your own grocery shopping and you do not want to eat at on-campus dining locations, you are still required to pay this 325$.

Cowen said...

This is true that Cuomo charges Sodexo. But as you know, SEIU is running a corporate campaign against Sodexo to take Sodexo workers from Unite Here. But Cuomo is just a SEIU pawn. Look how cuomo is in talks with gresham of 1199.
A better question would be: why aren't we investigating the SEIU attack?

noel jones said...

Anon 6:20--Amen.

Anon 2:17--thanks for the info.

Cowen--I am totally aware of SEIU's role, but that is not my main concern. My main concern is that in the midst of a budget crisis in our school district where we are trying to recover money anywhere possible to avoid a tax hike on struggling residents in the this recession, we have a possibility that Sodexo owes us a lot of money, and we should find out so that if so, we can get it returned via a settlement through the state of PA, the way NY did.

Being focused on Sodexo's potential fraud does not make one a union pawn. It is a separate issue from the work conditions issue, and if Sodexo employees want to join a union that is for them to decide as it is their right.