27 March 2016

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US Contractor to pay $3.1 million penalty for illegal outsourcing to Mumbai company

US Contractor to pay $3.1 million penalty for illegal outsourcing to Mumbai company

Focused Technologies Imaging Services and Its Officers Unlawfully Shipped Personal Data of Over 16 Million People to Indian Contractor and Illegally Denied Work to New Yorkers with Disabilities.

Company and Its Officers Required to Pay $3.1 Million, Increase Hiring of Disabled Workers, And Submit to an Independent Monitor


New York State Attorney General Eric T. Schneiderman and New York State Inspector General Catherine Leahy Scott today announced a groundbreaking $3.1 million agreement with Focused Technologies Imaging Services, LLC (“FTIS”), its sole owner Charles “Chuck” Tobin, and its former co-owner Julie Benware, for unlawfully outsourcing government-funded work to a subcontractor based in Mumbai, India in 2008 and 2009.

The outsourcing was illegal because even though FTIS was required to perform the work at a warehouse in Albany, New York, FTIS unlawfully sent personal information of over 16 million people to a foreign business that was unauthorized to receive this information.

The outsourcing also resulted in the failure of FTIS to adhere to a requirement that over 50% of the labor hours of the contract be performed by individuals with disabilities.

This is a first-of-its-kind agreement obtained by Attorney General Schneiderman concerning a government contractor illegally shipping jobs overseas.

“The agreement announced today sends a clear message: if you are a government contractor and you illegally ship jobs overseas, you will be held accountable,” said Attorney General Schneiderman. “Contractors have an obligation to follow the law and keep the promises they make to the State of New York.”

“This Capital Region company entered into a covert and unauthorized outsourcing that swelled its profits while disregarding its commitment to employing individuals with disabilities, as required by its contract with the State. In doing so, the company circumvented virtually all contract provisions governing the handling of sensitive records to which they were entrusted,” said Inspector General Leahy Scott. “I will use all the resources at my disposal to relentlessly pursue State contractors who violate the law, and I thank Attorney General Eric Schneiderman and his office for their partnership in bringing this matter to justice.”

FTIS is a small business located in Menands, New York that employs many individuals with disabilities and veterans as part of its operations.

The agreement announced today arises from a $3.45 million contract in 2008-09 between the New York State Industries for the Disabled (“NYSID”), a non-profit, and the New York State Division of Criminal Justice Services (“DCJS”), to digitize and index approximately 22 million fingerprint cards into a searchable database. Fingerprint cards must be provided to the State by all New York State law enforcement officials, prisoners, parolees, arrestees, and personnel undergoing background checks, among others.

In addition to fingerprints, the cards at issue contained, among other things, a unique New York State identification number that DCJS assigns to any individual it fingerprints, the individual’s Social Security number, the reason that the individual was fingerprinted, and other personal information such as date of birth and basic physical characteristics.

Because of the confidential nature of the information of the fingerprint cards, FTIS was, among other things, required to perform all of the work in Albany, New York and it could only use employees that had passed a criminal background check. Additionally, FTIS was prohibited from subcontracting any of the work to any other entity.

In October 2008 and continuing to about September 2009, in violation of these security requirements, FTIS and Tobin secretly solicited and retained a document-handling business located in Mumbai, India, to perform the indexing of more than 16 million of the 22 million fingerprint cards.

Tobin, and other FTIS personnel acting at his direction, including Julie Benware, secretly arranged for scanned images of the DCJS fingerprint cards to be uploaded onto a server to be accessed by employees of the Indian company in Mumbai for indexing. At all times DCJS and NYSID remained unaware of the outsourcing to India. In fact, FTIS and Tobin produced false records to conceal the outsourcing.

The outsourcing was also illegal because it resulted in less than a majority of the labor hours of the contract being worked on by individuals with disabilities. FTIS had obtained the DCJS contract from NYSID as part of the state’s so-called “Preferred Source Program.” Under this program, the state provides no-bid contracts to NYSID, a not-for-profit, which subcontracts the actual work to qualified for-profit companies that must perform a majority of the labor hours (over 50%) of the contract using individuals with disabilities.

FTIS was the for-profit vendor that obtained the subcontract and, because of the illegal outsourcing to India, it only performed approximately 31% of the work with such individuals.

FTIS paid the Indian company just over $82,000 for this indexing between October 2008 and September 2009. Overall, the Indian company performed approximately 37.5% of the work on the contract. There is no evidence that the Indian company, nor any of the employees of the Indian company, knew that it had obtained the work illegally.  Nor was there any evidence that the Indian company sent personal data of any individual to any third party or otherwise utilized the data. The Indian company fully and voluntarily cooperated with the investigation.

Under the agreement, FTIS, Tobin, and Benware admit to violating the New York False Claims Act by illegally outsourcing the work to India.

FTIS and Tobin will pay $3.05 million in penalties, fees and costs, and Julie Benware will pay $50,000. FTIS has also agreed that it will perform 69% of the work of certain new preferred source contracts it obtains within two years with individuals with disabilities. Finally, FTIS will have to pay for an independent monitor for five years to ensure FTIS’s compliance with government contracts.

This Assurance of Discontinuance is the latest recovery under the New York False Claims Act.

The New York False Claims Act is one of the state’s most powerful civil fraud enforcement tools because it allows whistleblowers and the government to take legal action against companies or individuals that defraud the State or local governments. Persons found liable under the False Claims Act must pay treble damages, penalties and attorneys’ fees.

Under the False Claims Act, whistleblowers may be eligible to receive up to 30 percent of any money recovered by the government as a result of information they provide.

The joint investigation that led to this settlement was a direct result of the prompt and helpful reporting of the possible outsourcing by the NYSID. The Attorney General and the Inspector General recognize and commend NYSID for its actions in this matter.

The investigation was led by Gregory M. Krakower, former Senior Advisor & Counselor to the Attorney General, assisted by Legal Support Analyst Emilie C. Schwarz of the Attorney General’s Taxpayer Protection Bureau.

Attorney General Eric T. Schneiderman formed the Taxpayer Protection Bureau to handle False Claims Act cases in 2011.  Bureau Chief Thomas Teige Carroll and Deputy Bureau Chief Scott J. Spiegelman oversee the Bureau within the Criminal Division of the New York Attorney General’s Office, which is led by Executive Deputy Attorney General for Criminal Justice Kelly Donovan.

Source – New York Gov. Office

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Tags – India Outsourcing USA FTIS Mumbai