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Consultant Scammed $3.6 Million from City Schools, Officials Say

By DNAinfo Staff on April 28, 2011 7:22pm  | Updated on April 29, 2011 7:33am

A former city consultant allegedly ripped off the city while arranging internet connections for schools.
A former city consultant allegedly ripped off the city while arranging internet connections for schools.
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By Jill Colvin

DNAinfo Reporter/Producer

MANHATTAN — A former Department of Education computer consultant ripped off nearly $4 million from city schools to fund a lavish lifestyle — the latest in a string of black marks for city contractors, federal prosecutors announced Thursday.

William "Ross" Lanham allegedly blew the $3.6 million in cash on high-end cars, including a Lexus, Corvette, Porsche and Cadillac Escalade as well as real estate, including three homes on Long Island.

"Lanham effectively stole from schoolchildren so he could buy fancy cars and valuable real estate," Manhattan US Attorney Preet Bharara said in a statement.

The charges come on the heels of the CityTime scandal, in which contractors designing an electronic payroll system allegedly stole $80 million in city funds.

For six years beginning in 2002, Lanham oversaw jobs including the $1 billion "Project Connect," which was designed to bring the Internet to city classrooms.

But during that time, Lanham hired consultants and overcharged the city for their work, pocketing the difference, according to the complaint filed in Manhattan federal court.

Lanham, who earned $1.7 million working for the DOE, surrendered to federal authorities Thursday morning on mail fraud and theft charges. He could face 20 years in jail if convicted.

IBM and Verizon, vendors for "Project Connect," are accused of turning a blind eye to the alleged scheme, according to a report by Richard Condon, Special Commissioner of Investigation for city schools, also released Thursday.

"IBM and Verizon, by their silence, facilitated this fraud," the report said. Neither company was charged.

Condon's report also slams the DOE for lax oversight.

"It is difficult to understand how the DOE could allow so much power to reside in a consultant, even an honest one, which Lanham was not. Project Connect was a billion dollar undertaking, yet no one exercised any oversight of Lanham," it read.

Schools Chancellor Dennis Walcott said that the DOE will do everything in its power to recover the funds.

"We are entrusted with the public’s money, and should have been more vigilant in our oversight of this project," he said in a statement, adding that since Lanham’s departure in 2008, the department has established new safeguards to increase oversight on projects like his.

The scam was uncovered after Condon's office received anonymous tips, beginning in 2006.

City Comptroller John Liu has also directed a review of contracts with all vendors accused of wrongdoing in the report.

"Federal charges once again, that a consultant has stolen millions from the taxpayers, are infuriating enough. Even more disconcerting, however, are indications that corporations with billions of dollars in City business have aided and abetted and profited from the scam," Liu said in a statement, which called for greater oversight of city subcontracting.

Manhattan Borough President Scott Stringer also slammed the DOE for spending so much on technology without sufficient oversight.

"At a time when the Department of Education is still threatening to lay off more than 4,000 teachers, it is extremely distressing to learn that the department can’t seem to keep track of its own contractors — or the money they spend," he said in a statement.