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CulinArt cleared of “fraudulent wrongdoing”

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BRITTNEY DIETZ/THE STATESMAN

CulinArt, the company Stony Brook University contracts to run the University’s food services, has been cleared of previous allegations of financial fraud against Stony Brook’s Faculty Student Association (FSA) after a third-party investigation failed to find any wrongdoing by the corporation.

In February 2023, The Statesman published an article detailing the New York State Attorney General (AG) Letitia James’s office’s investigation into CulinArt. The allegations were based on claims that CulinArt failed to follow profit-sharing procedures outlined in their contract and used Stony Brook funds to pay employee salaries at other locations, among other infractions.

While the corporation was not found to have committed any fraudulent wrongdoing, at the time of the investigation CulinArt still owed FSA over $95,000 from the 2019-20 and the 2021-22 fiscal years when they surpassed the 6% mark for profit-sharing outlined in the contract signed in May 2017. These balances were paid in full to FSA following CulinArt’s meeting with Hogan Lovells.

According to Vice President of Student Affairs Rick Gatteau, multiple investigations have revealed that no fraud took place.

“We did hire an outside firm to conduct an independent investigation of it, and their work was done over the spring and summer,” Gatteau said in an interview with The Statesman. “The findings, which we just recently got, basically indicated there was no wrongdoing on anybody’s part.”

Stony Brook hired law firm Hogan Lovells to investigate the claims perpetuated in The Statesman’s article. The investigation concluded on Aug. 7, 2023, and the final report was obtained by The Statesman through a Freedom of Information Law (FOIL) request. It contains a detailed breakdown of Hogan Lovells’ procedures and the outcomes of the investigation.

Hogan Lovells’ report stated they reviewed a “significant portion” of over 300,000 documents that FSA turned over for the investigation and interviewed Van Sullivan, former executive director of FSA and Maryanne Reinhardt, former chief financial officer of FSA.

“As the board president [of FSA], I was satisfied with that review and outcome,” Gatteau added.

In the original piece published by The Statesman, CulinArt allegedly failed to follow a section of their contract which forced them to split any profits they made above a 6% margin with FSA. The article also alleged that CulinArt artificially inflated its expenses to avoid the profit-sharing obligation.

The law firm determined there was “no way for CulinArt to artificially inflate an invoice” due to internal audit programs CulinArt had instituted to prevent this.

Sullivan instead believed that the incidents reported in the original article were “innocent accidents.”

“Had there really been widespread fraud, Sullivan reasoned, the article would have contained more than one example of each kind of discrepancy,” the report stated.

 

CulinArt’s profits during the 2019-20 fiscal year. OBTAINED FROM HOGAN LOVELLS, LLP INVESTIGATION REPORT.

 

CulinArt’s profits during the 2021-22 fiscal year. OBTAINED FROM HOGAN LOVELLS, LLP INVESTIGATION REPORT.

 

The investigation concluded that the reason both CulinArt and FSA had overlooked the profit-sharing section of the contract during the 2020 fiscal year relied on several factors, including disruptions caused by the COVID-19 pandemic and differences in fiscal year calendars.

The Statesman’s article also reported on a system by which CulinArt was contractually obligated to spend a certain amount of money on each plate they served. However, the contract between FSA and CulinArt said these plate costs did not affect the amount that FSA billed CulinArt.

“Plate costs were also discussed during weekly meetings but were tracked solely because it was a holdover from the prior food service agreement,” the report stated. “The price fluctuation was not unusual and was the result of a number of different factors. They were not changed at CulinArt’s whim.”

Aside from Hogan Lovells, the AG’s office conducted a previous investigation on CulinArt’s operations at the University’s campus. Their conclusions were the same as Hogan Lovells’: CulinArt had not committed any illegal actions against FSA.

 

Excerpt from the investigation outlining the AG’s conclusion on the allegations against CulinArt. OBTAINED FROM HOGAN LOVELLS, LLP INVESTIGATION REPORT.

 

The only infraction found was CulinArt’s failure to properly distribute the funds owed from the profit-sharing agreement. Once the AG’s office found that this cost FSA under $100,000 in damages, the investigation was called off.

The AG’s office also detailed that the three of the individuals who first came forward about CulinArt were former employees of the company.

“In short, that investigation went nowhere and is now closed,” read Hogan Lovells’ report.

Hogan Lovells refuted claims that CulinArt would bill FSA for employees who worked at other locations, which The Statesman’s article reported allegedly occurred. The law firm concluded that CulinArt employees would occasionally work a day or two at another location, but this was resolved through backend internal software so the correct site was charged for their labor.

As the former FSA Executive Director, Sullivan knew there was an investigation into CulinArt being conducted by the AG’s office, but chose not to alert the FSA Board of Directors following the advice of the AG’s office and attorneys he worked with on the issue.

“In hindsight, Sullivan admitted that he wished he would have handled the situation differently and told the Board [of Directors] about the investigation, not because he suspected any impropriety, but because of the article and everything that transpired since,” the report stated. “Sullivan did not believe CulinArt committed any fraud. Rather, at worst, the company practiced sloppy accounting and handled some HR-issues poorly.”

Hogan Lovells also attempted to contact “Dwayne,” one of the anonymous sources quoted in The Statesman’s article. FSA, CulinArt and Sullivan suspected Dwayne to be a terminated former employee who was fired after being caught stealing from an unrelated location operated by CulinArt. The terminated employee worked as a dining hall manager at Stony Brook, so he would have known about the relationship between CulinArt and FSA.

Hogan Lovells first attempted to schedule a meeting with Dwayne in February 2023. In March, Dwayne asked for more information regarding the investigation.

 

Emails between Dwayne and Hogan Lovells, LLP obtained by the FOIL investigation report. Names and emails have been redacted by The Statesman. OBTAINED FROM HOGAN LOVELLS, LLP INVESTIGATION REPORT.

 

While Dwayne was initially cooperative, communication between the two parties eventually fell through. Dwayne allegedly pulled out of a planned meeting on April 14, 2023 with Hogan Lovells two hours before it was scheduled to occur.

 

Emails between Dwayne and Hogan Lovells, LLP obtained by the FOIL investigation report. Names and emails have been redacted by The Statesman. OBTAINED FROM HOGAN LOVELLS, LLP INVESTIGATION REPORT.

 

After Dwayne sent a final, non-cooperative email in May, Hogan Lovells stopped attempting to contact him with what seemed to be no “viable path towards a productive meeting.”

Diana Walker Kubik, executive director of FSA, sent an email to the University’s student body on Nov. 30 with the findings.

“An article in [The Statesman] in Spring 2023 reported allegations of financial mismanagement on the part of CulinArt,” Kubik wrote. “We take our financial responsibility with the utmost seriousness, and upon learning of these allegations, the FSA Executive Board entered into an agreement with an independent law firm to investigate these claims thoroughly. After careful review, the firm determined that there was no evidence of fraudulent activities, and the matter was closed.”

Correction: This article previously reported that CulinArt still owed $95,000 to FSA. There is currently no money due to FSA from CulinArt.

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About the Contributor
Sky Crabtree, Assistant News Editor
Sky Crabtree is an Assistant News Editor for The Statesman and a sophomore studying journalism and political science. He joined the paper in the spring of 2023 as a news reporter and was promoted at the end of the same semester. Outside of The Statesman, you can catch him reporting on WUSB's weekly news show and as a member of the Stony Brook Media Group.
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    Israel CharoDec 10, 2023 at 1:34 pm

    Issues with the food service are a genuine Stony Brook tradition…check the back issues of the Statesman 1967-71 for constant complaints about SAGA… Yummy!!

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