OSI to Pay Nearly $2 million to Settle New Jersey Collection Contract Dispute

New Jersey Attorney General Stuart Rabner announced late Monday that OSI Collection Services Inc. has agreed to pay the state nearly $2 million to resolve issues of overbilling and provision of illegal gifts to state employees. The Attorney General also announced a new indictment charging two former employees of OSI with purposely submitting improper bills to the state.

The seven-count state grand jury indictment obtained by the Division of Criminal Justice charges Enos “George” Blake and Carol Labbe with theft by deception, misconduct by a corporate official, and five counts of false contract payment claims, all second-degree offenses. The indictment also alleges that Blake, as the OSI vice president responsible for managing state projects, and Labbe, as his de facto second in command, purposely submitted improper bills between January 1999 and May 2005 that caused the state to overpay OSI by $1,184,662.

Under the agreement announced by Attorney General Rabner:

• OSI must pay the state nearly $1.5 million in restitution for overbilling New Jersey for tax collection services. OSI will pay $1,184,662 for the improper bills that are the subject of the new indictment, and an additional $315,000 to resolve a separate billing issue. 
• OSI must pay $500,000 to reimburse the state for the costs of its investigation and prosecution of the alleged overbilling as well as the provision of improper gifts to state employees by OSI employees. Six Treasury employees and two OSI sales managers were indicted in August on charges related to such gifts. 
• OSI must make all payments within 10 days. 
• Former New Jersey Attorney General John J. Farmer Jr. will be appointed as an independent monitor to review and make recommendations about OSI’s policies and practices.

“This agreement provides full restitution to the state for all overbilling,” said Attorney General Rabner. “In addition to being excluded from bidding on state contracts for five years, OSI must appoint an independent monitor to guard against the alleged abuses for which its employees have been indicted.”

In return for the payments from OSI and other provisions, the state has agreed not to bring any criminal action against the corporation for the alleged misconduct of its officers or employees.

Under the non-prosecution agreement, OSI, among other things, will retain an independent monitor to review and make recommendations about OSI’s policies and practices on billing government agencies and prohibiting gifts to governmental employees. Attorney General Rabner has agreed to former Attorney General Farmer serving as the monitor.

The Division of Criminal Justice can insist on implementation of the monitor’s recommendations, and the monitor will file quarterly reports with the division on OSI’s compliance with the agreement and implementation of recommended controls.

The state agreed that OSI’s five-year exclusion from performing work for the state extends from Jan. 17, 2006, when the state suspended OSI from bidding on contracts, to Jan. 17, 2011. The agreement does not prohibit OSI and an affiliated company from completing work on five existing state contracts. They end on various dates between Feb. 28, 2007 and July 1, 2008.

According to Division of Criminal Justice Director Gregory A. Paw, Blake and Labbe were responsible for signing off on payment vouchers submitted to the state under three contracts to collect delinquent and deficient taxes. It is alleged that Blake and Labbe purposely submitted improper bills in connection with nine OSI employees that resulted in the state making payments totaling $1,184,662 that were not authorized under the contracts.

The contracts provided for OSI to bill the state on an hourly basis for work performed in connection with the state contracts by employees who fit five defined job titles. It is alleged that Blake and Labbe signed off on bills they knew were improper. In some cases, employees were identified with incorrect job titles that resulted in them being billed at a higher rate of pay, while in other cases employees were billed who should not have been billed, either because they provided clerical or managerial support to OSI as a whole or because they were working for another client of OSI. For example, the state was billed for the work of OSI’s recruiting manager as well as a trainer who trained all new OSI employees, even though their work was not specific to the state contracts.