New York City education officials have stopped doing business with 20 companies that provide education services in private schools amid concerns about fraud in the industry.
In emails sent over the past few weeks, the city education department instructed employees to block the hiring of the companies to provide special education or child care services.
The move marks a sharp change in the city’s approach to education contracting, particularly in cases of parents of private school students with disabilities seeking city-funded services. While parents must go through a legal process and ask a hearing officer to order the funding, the city has for years had a policy of fast-tracking approvals of most such requests. Now, the city will fight requests for it to pay a significant number of companies.
Together, the companies received $60 million to provide special education alone last year. All of them primarily serve students in private Jewish schools, known as yeshivas, especially in the fervently religious Hasidic community.
The new policy comes after an executive at some of the city’s top-earning special education providers, Martin Handler, was arrested last month and charged with stealing millions of dollars in public money intended to pay for early education for low-income children. Mr. Handler has pleaded not guilty.
Officials say the 20 firms all have ties to Mr. Handler or one or more of his four co-defendants or their families.
“Obviously the allegations in the indictment are very serious and New York City Public Schools is taking a close look at the issues they raise,” said Nathaniel Styer, a spokesman for the city education department, in a statement.
Mr. Handler’s attorney did not respond to a request for comment, nor did representatives of many of the companies now shut out of funding.
The indictment, and the ensuing city order, followed a New York Times article in December that revealed that many special education providers in the Orthodox Jewish and Hasidic communities had received a windfall of taxpayer money in recent years for services that were sometimes not needed, or even provided. In response to the article, city officials say they are scrutinizing requests more closely.
The Times had reported in September that scores of Hasidic boys’ yeshivas across Brooklyn and the lower Hudson Valley have collected about $1 billion in taxpayer money in recent years while failing to provide their students with a basic secular education.
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Last month, the state education department told Mayor Eric Adams’s administration that by June it must complete a long-delayed investigation into the quality of secular education at more than two dozen Hasidic yeshivas in Brooklyn. The order, signed by state education commissioner Betty Rosa, is the latest signal that the state is ramping up pressure on the city to improve yeshiva education. Last fall, Ms. Rosa ruled that one Brooklyn yeshiva was violating a state law requiring private schools to provide basic English and math instruction. That ruling overturned an earlier determination by the city that the school was in compliance.
Former Mayor Bill de Blasio began the inquiry into yeshivas in response to a written complaint from dozens of the schools’ former students.
An interim report issued in 2019 by Mr. de Blasio’s administration found that most of the yeshivas examined were failing to provide adequate secular instruction, but the probe was largely abandoned when the pandemic began in 2020.
Mr. Adams, who is a longtime ally of Hasidic leaders, told The Times last summer that his administration would complete the investigation some time this year.
This week Mr. Styer said officials have recently visited all the yeshivas in the original complaint and plan to visit each school at least once more. The visits are scheduled in advance, as they were under Mr. de Blasio.
Mr. Styer said the city plans to issue determinations on whether each school is complying with the law by the June deadline. He said the final report will identify each school by name, unlike Mr. de Blasio’s 2019 report.
The criminal case against Mr. Handler and his co-defendants could take months to work its way through the court system. According to an indictment unsealed last month in Federal District Court in Manhattan, he stole money through child care firms, some of them secretly owned, including by creating what prosecutors called a “fake after-school program” and billing for services that he never provided. Mr. Handler used the money to dole out no-show jobs, buy real estate and purchase an array of historical religious artifacts at auctions, prosecutors said.
The firms cut off by the city included two that are linked to Mr. Handler in public records: Special Education Associates and Kids Domain Childcare Centers. Both companies are run out of the same building in Borough Park, Brooklyn, as are Mr. Handler’s child care businesses.
But also shut out from city business were other firms, including a large company called Special Edge, which received nearly $30 million last year to provide special education in private schools, mostly yeshivas.
In a statement, representatives of Special Edge and another education company, Evalcare, said none of the indicted men had never had an ownership interest, officer position or management role in either firm, and had never been employed by Special Edge. The city’s “refusal to engage in conversation with us and restore Special Edge and EvalCare Inc. as providers in good standing is only harming deserving students who need special education services,” the statement said.
While the companies make much of their money by serving individual parents who request their services through legal proceedings, the new city policy also means that the firms will be shut out of opportunities to receive contracts from the city to provide services to groups of students in schools.
In one email to city employees, obtained by The Times, Department of Education officials described the policy as far-reaching.
“Effective immediately, the DOE is not permitted to agree, authorize or otherwise arrange for the provision of or payment for services to students by the vendors,” the email said.
Julie Tate contributed research. Alex Lemonides contributed reporting.