The largest food vendor for the District’s public school system has agreed to pay $19 million to settle a lawsuit alleging that the company overcharged the city and mismanaged the school meals programs, with food often arriving at schools late, spoiled or in short supply.
The settlement agreement is the result of a whistleblower lawsuit by a former director of food services for D.C. Public Schools against Chartwells and Thompson Hospitality, which formed a joint venture that provided food services for schools in the District starting in 2008.
The suit led to an investigation and then a complaint from the D.C. attorney general’s office.
“Chartwells has quite reasonably acknowledged and addressed mistakes it made in administering the contract to provide food and food services to DCPS,” Attorney General Karl A. Racine said in a statement Friday. “It is important to ensure that contractors who receive District funds are held accountable for fulfilling their obligations under the contracts, and today’s settlement does just that.”
The whistleblower lawsuit was brought by Jeffrey Mills, executive director of the school system’s Office of Food and Nutritional Services from 2010 until he was fired in early 2013.
Last year, Mills settled a separate lawsuit with the school system for $450,000. That suit alleged that he was terminated for raising flags about the system’s mismanagement of the contract.
“I hope that my lawsuit against Chartwells and the settlement announced today will help improve the food programs for D.C.’s school children, which has always been my goal,” Mills said in a statement issued Friday by Phillips & Cohen, a District-based law firm that filed Mills’s whistleblower lawsuit in 2013.
“The issue of private food vendors prioritizing profits over the well-being of students is a national concern,” Mills said. “I urge all school districts using private food vendors to examine their contracts and the performance of those vendors.”
The settlement leaves the validity of the original claims undetermined, as it does not represent an admission of fact or liability by the contractor.
Owen Donnelly, a spokesman for Chartwells, said in an e-mail that the company “denies any wrongdoing and has agreed to resolve the issues so that focus continues to be on nourishing the bodies, minds and spirits of students to pave the way for a lifetime of success and well-being.”
Donnelly said the underlying issues at DCPS were primarily related to cost overruns and “related reconciliations.”
“In our seven years at D.C. Public Schools, we have significantly increased the quality of food service while saving the District millions of dollars,” he said.
The school system signed a contract with Chartwells in 2008 to provide food services that had formerly been provided in-house. In the District, a majority of students are poor, and many rely on the school nutrition program for meals.
The goals of privatizing the service were to save money and improve the nutritional value of the food.
Another contract was signed in 2012, despite concerns.
The previously sealed complaint from the Office of the Attorney General claimed that Chartwells “knowingly submitted” false invoices that the school system paid.
When the District contracted with Chartwells, the school system’s in-house food program had experienced “million dollar cost overruns,” but those losses did not decrease under the 2008 contract with the company, the complaint said. “Rather, [they] significantly increased.”
Under the terms of the contract, Chartwells was obligated to purchase food “at the lowest possible price.” Instead, the complaint alleged, Chartwells used a corporate affiliate to purchase foods from “companies that manufacture highly processed foods and charge higher prices.”
Chartwells has encountered problems in other parts of the country, including a well-publicized student boycott at a Connecticut high school last fall over the quality of the food the company provided.
In 2012, Chartwells’s parent company, Compass Group USA, paid $18 million to settle allegations by New York’s attorney general that the company overcharged more than three dozen school districts by failing to pass along discounts required by their contracts.
In settling the D.C. lawsuit, Chartwells agreed to make $14 million in credits and payments to the school system and committed to provide $5 million in philanthropic support for the schools, including $4 million to the D.C. Public Education Fund for “innovative programs” and $1 million to several nonprofit organizations that promote literacy and provide mentors, college scholarships and academic enrichment.
The school system plans to continue its contract with the company, which expires June 30, 2017.
“We believe that any issues regarding the provision of school meals, which relate primarily to the prior contract term, have been resolved,” Frederick Lewis, a spokesman for DCPS, said in an e-mail.
He said the current contract has clearer performance expectations and contains “multiple layers of checks-and-balances, including unannounced inspections,” to make sure any issues are addressed.
Ivy Ken, a DCPS parent and longtime advocate for more healthful food in schools, said she is “thrilled” that the lawsuit is bringing to light concerns people have had about the food program that were often dismissed by District officials.
She said she is “appalled” that the contract is being continued, however.
Chartwells is a subsidiary of Compass Group PLC, a British multinational company. Its North American division is headquartered in North Carolina.
The whistleblower — or “qui tam” — provisions of the D.C. False Claims Act allow private citizens to bring lawsuits on behalf of the District and to share in any recovery that is obtained.
Mills could receive up to 30 percent, but an amount has not been set, his attorneys said.
Most of the money from the settlement will return to the District and the schools “to essentially pay the District back . . . for the amount they were overcharged,” said Robert Marus, a spokesman for Racine.
Abigail Hauslohner contributed to this report.