They are guzzled by the half-pint in schools across New York City each day: cartons of milk labeled low-fat, skim and chocolate, the flashiest among them decorated with cartoons of skateboarding cows.
But behind the millions of boxes of milk handed out in cafeterias each year is evidence that there could be an unseemly business arrangement, the city comptroller, Scott M. Stringer, said in a report released on Wednesday.
Though there was no direct evidence of wrongdoing, Mr. Stringer, at a news conference on Wednesday, pointed to what he described as curiosities in how four of the city’s milk distributors won and then delivered on $134 million in school contracts in 2008.
Using the chocolate fat-free milk contracts as an example, he noted that Bartlett Dairy offered to deliver milk at the same price in seven of the city’s eight zones — 24.2 cents per carton. Elmhurst Dairy bid 22.8 cents in the same zones. In most of those zones, two other companies, Beyer Farms and Derle Farms, submitted competing bids.
But in the contract covering the eighth zone — all of Staten Island — the other two companies sat out. Bartlett’s bid for that zone was almost two cents less than its bid in every other zone, and Elmhurst’s was one cent more than its bids in the other zones.
Each company ultimately won a share of the contracts, but Beyer and Elmhurst quickly subcontracted most of their work to Bartlett. As a result, Bartlett’s share of the market rose to 69 percent from 6 percent, according to the report.
Mr. Stringer’s report noted that none of what he found was proof that the companies colluded — it could cost more or less to deliver to different parts of the city. But at the news conference on Wednesday he let it be known that he thought the process was suspicious.
“This kind of back-room wheeling and dealing has got to end,” Mr. Stringer said.
In statements, Elmhurst and Bartlett said they had followed proper bidding procedures, and Bartlett called the comptroller’s conclusions “false and defamatory.” “Bartlett Dairy, Inc. has done nothing wrong,” Joseph N. Paykin, a spokesman, said.
It was not the first time the industry had come under scrutiny. In a major crackdown in the 1980s, 17 New York suppliers were indicted on charges of conspiring to fix milk prices. And the federal government tightened oversight of milk contracts in 16 states in the 1990s.
Mr. Stringer directed most of his criticism at the city’s Education Department, which he said had ignored irregularities in the bidding. Mr. Stringer also faulted the Education Department for failing to notice that Beyer Farms was on the verge of bankruptcy, with extremely high debt levels. The company folded in 2012.
“All of these warning signs should have raised concerns,” Mr. Stringer said, and added that he had referred the case to the federal Department of Justice.
Education officials noted that Mr. Stringer’s investigation focused on an old contract covering 2008 to 2013 and that the city had already improved its oversight. “We’re going to bring even further transparency to all of our processes,” said Devora Kaye, a spokeswoman for the department.
School milk contracts are often lucrative for dairy suppliers and distributors, especially in New York City, which serves more than 850,000 meals per day to students. Because of the size of the school system, small price differences can have a substantial effect — one cent can add up to $1.5 million in meal costs in a year.
The case was the first audit for Mr. Stringer, who took office in January. A breakthrough came last February, when a white milk truck pulled up at J.H.S. 62 in Brooklyn. Investigators were expecting the milk to be delivered by Beyer Farms, based on the details of the contract. Instead, the truck door was emblazoned with the logo of Elmhurst Dairy.
Source: NYT
