11 Charged With $18M Day-Care Boondoggle

MANHATTAN (CN) - Federal prosecutors on Tuesday unsealed charges against 11 New York City day-care providers and city officials, accusing them of running an $18 million dollar fraud and bribery scheme by siphoning off public funds meant for needy families.

The defendants, who include four day-care providers and seven city employees, were arrested Tuesday on charges of abusing New York's Day Care Subsidy Program, which helps eligible low-income parents send their children to day care.

"These defendants chose payoffs and profit over their promise to serve the best interests of children," Department of Investigation Commissioner Rose Gill Hearn said in a statement.

According to the complaint, Liudmilla Umarov controls a ring of day-care facilities known as "The Congregation." Prosecutors say Umarov and her associates got $18 million in government payments for providing day care to children who never received any such service.

Members of The Congregation allegedly paid officials from New York City's Administration for Children's Services, the Human Resources Administration and Department of Health and Mental Hygiene for the names of eligible families, then used the information as "proof" for reimbursement.

U.S. Attorney Preet Bharara claimed the city officials involved "betrayed the public's trust, taking bribes to look the other way and grease Umarov's gravy train."

Prosecutors began investigating the day-care system in June after a Department of Health employee reported that defendant Lyudmila Grushko had left a ring for her in an envelope.

Grushko allegedly wanted to increase the number of children at one of her day-care facilities, but was limited by the occupancy certificate. The inspector says that Grushko told her, "If you help me, I will help you."

After this bribery attempt, the Department of Investigation discovered that four other Department of Health employees had taken thousands of dollars in cash and gifts from Umarov and her associates, prosecutors said.

Prosecutors added that the Department of Health inspected all of The Congregation's day-care centers last week and found numerous city violations which had been overlooked because of bribes. The Department of Health has shut down six of the facilities, which took care of 250 children.

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