NEW YORK, May 1 (Reuters) - The Princeton Review claimed millions of dollars in reimbursement for tutoring services it did not provide in a federally funded program for underprivileged children, U.S. prosecutors said in a civil fraud lawsuit against the company.
The lawsuit, filed in Manhattan federal court on Tuesday, also charged a former employee at the Framingham, Massachusetts-based company, which is best known for providing preparation guides for competitive exams like the SAT, GRE and GMAT.
"The Princeton Review and its employees were supposed to tutor needy students, not cheat a federal program," Manhattan U.S. Attorney Preet Bharara said in a statement.
From 2002 to 2010, the Princeton Review had a contract with the New York City Department of Education to provide after-school tutoring services for low-income children at underperforming schools.
The city, using federal grant money, paid Princeton Review $35 to $75 per student per hour as a contract Supplemental Educational Services provider, the lawsuit said.
Starting in 2006, the lawsuit said, Princeton Review managers and aides at local schools illegally billed the city for students who never showed up to class, artificially boosting the attendance sheets.
Denise DesChenes, a Princeton Review spokeswoman, said the employees involved in the program were no longer with the company.
"The activity allegedly occurred within the company's former Supplemental Educational Services division (SES), which the company discontinued in 2010," DesChenes said in a statement. "We are working closely with the U.S. Attorney's office to resolve this matter expeditiously."
The city paid the company $38 million between 2006 and 2010, but it was not clear exactly what portion of that sum was for students who actually were tutored.
On one occasion, the lawsuit said, the Princeton Review billed the city for tutoring 74 students at a Bronx school on New Years Day -- a holiday when there were no classes.
The lawsuit said the Princeton Review allowed the suspected fraud to continue despite a 2006 investigation that uncovered wrongdoing.
The lawsuit named former Princeton Review site manager and director Ana Azocar who, the lawsuit said, would encourage other company administrators to falsify claims.
The administrators were paid bonuses based on the attendance rate at the programs, the lawsuit said.
A lawyer for Azocar could not immediately be identified.
The case is U.S. v. The Princeton Review, Inc, U.S. District Court for the Southern District of New York, No. 09-6876.
(Reporting By Basil Katz and Grant McCool)
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