Mayor Bill de Blasio was forced once again to defend his embattled homeless shelter system Monday after a weekend of newspaper exposés revealed the CEO of a top provider cashed in as he put pals on the payroll and funneled millions to for-profit companies he controls.
Asked for comment, an annoyed de Blasio prefaced his response by asking the press not to “dumb this down.”
“There are only so many organizations that provide the services,” Hizzoner insisted as he was repeatedly pressed on why the city was continuing to contract with Jack Brown.
His remarks came just hours after The Post documented how Brown, who heads Brooklyn-based nonprofit shelter operator CORE Services Group, established a web of for-profit companies that he funneled millions in taxpayer funds to in recent years.
“It’s not as simple as just get rid of everyone who does anything wrong anytime they do it — because there would be very few [providers] left,” de Blasio said.
“If an organization is unacceptable, we get rid of them. If they can be fixed, if we can work with them to make reforms and they provide a good enough product to serve people who are homeless, we’re going to keep trying to fix that if we can.”
The New York Times published a similar report on Brown Sunday.
New York City is obligated to guarantee every homeless person shelter under the terms of a legal settlement signed in the 1980s during the Koch administration.
Officials have repeatedly claimed they struggle to attract qualified vendors to provide the services.
Well-known nonprofits usually steer away from the work because they say the contracts don’t pay enough — a shortcoming exacerbated by City Hall’s well-publicized troubles paying its bills on time, homeless advocates and experts say.
This time, his nonprofit CORE netted city contracts worth $800 million since 2014 to operate shelters and provide services to the homeless — before landing back in the glaring spotlight of the press and city investigations.
“The city had been chronically late in paying contracts and so the longtime nonprofits weren’t able to expand their shelters as the homeless population soared,” said a nonprofit executive, who asked not to be named because of their group’s relationship with City Hall.
“The city was desperate for more shelters and was handing out contracts to whoever raised their hand regardless of the red flags that were going up.”
The Post’s examination — backed by an examination of more than 2,000 pages of tax returns, court papers and contracting documents — found that Brown:
- Created a string of for-profit companies that have received millions of dollars to provide key services at CORE’s shelters;
- CORE paid a firm, in which Brown holds a substantial stake, that received more than $3 million in rent over two years;
- At least three family members of Brown or members of CORE’s various boards are employed by the nonprofit or related entities;
The for-profit companies provided key services to the shelters Brown’s nonprofit operated, like security, food service and building maintenance and management.
Documents viewed by The Post showed that Brown established the security company, ProCore, the same month CORE was party to a legal settlement that required it to hire a security firm for a new and controversial shelter in Crown Heights.
And they showed that city bureaucrats flagged the apparent conflicts of interest with the vendors in 2017 as part of their review of the contract to operate the Crown Height shelter, but dropped their objections.
At the time, CORE claimed to the city that the contractors were wholly-owned by the non-profit and the proceeds were reinvested back into the shelter operations.
However, those claims were undercut by a 2018 filing with the IRS in which a CORE Services subsidiary reported the for-profit companies were held in a company owned by an executive there — apparently Brown.
He was one of only two executives listed on the subsidiary’s tax return — and he was also named as the CEO of the for-profit companies on filings with the New York Secretary of State.
Meanwhile, The Times obtained records that showed Brown’s for-profit companies were paying him more than $500,000 annually — on top of the more than $500,000 he was already making at Core Services and its non-profit affiliates, meaning he was banking an estimated $1 million a year.
Brown denied wrongdoing in statements provided to both newspapers.
“I don’t think nonprofit folks, in general, should be making that kind of money,” said de Blasio, when asked about Brown’s seven-figure compensation as underwritten by taxpayers.
“How did this individual achieve what he did? I’d like that answer too, and don’t find it acceptable,” he added, saying that City Hall would attempt to claw back funds pending the results of an already-underway audit. “If someone’s doing the wrong thing, they should not be rewarded.”
Officials have already ordered Brown to retire his for-profit companies.
During Monday’s press conference, de Blasio and Homeless Services Commissioner Steve Banks also repeatedly claimed that the scandal at CORE was an isolated incident.
“We work with more than 60 shelter providers and I don’t want the actions of particular executives in this instance to denigrate the work the other great providers do,” Banks said at one point.
Neither man mentioned the three other current and former major shelter operators ensnared by scandal over the last two years, many of which echo the problems identified at CORE.
In February, The Times revealed that the chief of Bronx Parent Housing Network — a major shelter operator — had repeatedly sexually harassed and assaulted homeless New Yorkers, all while giving jobs to family members, setting up for-profit vendors and even leasing a Mercedes on the non-profit’s dime. The executive, Victor Rivera, was indicted in March in a bribery and kickback scheme.
In October 2020, The Post revealed that state Attorney General Letitia James obtained a search warrant for the CEO of Agulia Inc., a politically connected Bronx nonprofit that had scored $250 million in contracts from DHS over the years. The nonprofit’s board sacked the honcho, Jenny Rivera.
Months earlier, in February 2020, federal prosecutors and the Department of Investigation raided Queens-based Childrens Community Services — which netted some $600 million in city contracts — as they examined allegations executives bilked taxpayers with millions in fraudulent billings. The nonprofit was later put in a receivership by a state judge.
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