Scandal-Plagued Migrant Services Firm Could Limit New York’s Options

NEW YORK — As the migrant situation worsens in New York City, Mayor Eric Adams is in danger of forfeiting his ability to quickly spend hundreds of millions of dollars on the crisis using his emergency powers.

The city comptroller, Brad Lander, has warned the city that he may curtail the city’s power to enter emergency contracts — a power granted by his office — to deal with the influx.

He said that with the crisis now 18 months old, it was “no longer an unexpected situation that merits the broad suspension of due diligence processes to ensure that city funds are being spent wisely and with integrity.”

Lander also informed the city, in a letter sent Friday, that he was beginning an audit to determine how the city came to award a no-bid $432 million migrant-services contract to DocGo.

The company describes itself as a medical services firm. But multiple investigations and various news reports, including in The New York Times, revealed troubling information about its performance, and its lack of experience handling asylum-seekers. Lander subsequently denied approval of the DocGo deal — the first time he has ever rejected an emergency city contract.

The contract took effect May 5, but the comptroller’s office did not see it until Aug. 16. The office then discovered several flaws in the procurement process, as well as inadequate evidence that the company’s subcontractors had been properly screened.

The contract, which was reviewed by the Times, also included provisions that seemed structured to benefit DocGo. In one example, the company was authorized to bill taxpayers $170 per hotel room per night to house migrants — many of them in upstate motels that generally cost a lot less — and then profit from the difference.

“There are just too many outstanding questions and concerns about this contract and this contractor,” Lander said in an interview. “The goal here is real-time oversight and accountability, not a subsequent audit that identifies problems later.”

The ramped-up scrutiny comes as DocGo’s chief executive, Anthony Capone, quit on Friday, a day after admitting to the Albany Times Union that his résumés and biographies falsely claimed a graduate degree in artificial intelligence, sparking another tumble in the company’s already lagging stock price.

A spokesperson for the mayor, Charles Kretchmer Lutvak, warned of devastating consequences for asylum-seeking families if Lander were to revoke fast-track approval for emergency migrant services contracts.

“If the comptroller decides to put politics over the welfare of people seeking asylum and declare this crisis is no longer an emergency, asylum-seekers will have to sleep on the street while they wait for the comptroller to approve city contracts,” Lutvak said.

Despite the questions surrounding DocGo, Adams had signaled his intention to move forward with the contract, insisting Lander had already given him the green light. The mayor has the power to unilaterally approve the contract over the comptroller’s objections.

Lander, who made his plans public on Monday, signaled he would not block payments to DocGo, but would instead begin a “real-time audit” — another tool he has never used before — to ensure DocGo is meeting its contractual obligations and the city is not paying bogus bills.

“We wouldn’t have to wait for what they submit” to the housing agency, Lander said, citing a particular contract provision that empowers him to immediately inspect the company’s financial records.

DocGo officials said on Monday that the company would “respond accordingly” if notified of an audit, and maintained that the firm “continues to deliver high-quality services” as its partnership with New York City strengthens.

There is still an urgent need to give city agencies spending flexibility to care for migrants arriving in New York City by the thousands each month. But Lander said the crisis was no longer an unanticipated emergency, or clear grounds for suspending procurement rules designed to drive down the cost of caring for migrants.

“The DocGo contract in particular raises real serious concerns for us about whether that blanket prior approval is being treated as a blank check,” Lander said in the interview.

If he does revoke the broad prior approval, Lander said his office would have to vet agencies’ proposed use of emergency procurement powers on a case-by-case basis. A contract the size and scope of DocGo’s, for example, would have to be opened up to competitive bidding, he added.

Such a move would not affect the city’s hospital system, a public benefit corporation that has numerous emergency contracts in place to handle the migrant influx. But Lander said a revocation would impact all agencies directly under the mayor, and looking for contracts for asylum-seeker services; some small contracts, such as those under $1.5 million, would still be exempt from competitive bidding rules.

“If we were to revoke the blanket prior approval — yes, then each of those agencies would just need to approach us for approval of any individual contract,” he said.

The company’s contract with the city’s Department of Housing Preservation and Development, which has not been made public, calls for DocGo to provide some of its subcontracted services with no markup. For example, laundry and food service are “billed at actual cost,” with laundry charges capped at $270,000 a month, and three meals costing no more than $33 per person each day, the contract says.

But DocGo is allowed to turn a tidy profit from its largest single monthly expense: the hotel rooms housing the migrants. Under the contract, the city is required to pay the company a flat $170 per room per night, so the contractor can keep the difference between what it pays for the hotel and the amount it gets from the city; the city has to pay for microwaves and refrigerators if they are not included in the rooms, the contract says.

In Albany, DocGo is paying approximately $100 a night for rooms at the Holiday Inn and about $80 a night for rooms at the Ramada Plaza, the hotel where a Times reporter witnessed migrants being threatened by DocGo’s security team, sources familiar with the rates say.

DocGo said the rates it pays to the hotels housing migrants were the product of “confidential business negotiations” and declined to release them.

“Our pricing has been accepted by the City of New York based on our track record of delivering high quality services,” the company said through an outside spokesperson from 5WPR, a public relations firm with expertise in crisis management.

The housing agency said it should not be assumed that DocGo was profiting off the $170 rate because slightly more than half of the migrants in its care were staying in hotels in New York City, where rates tend to be higher, and establishing a set rate allowed the city to avoid unpredictable spikes.

Allowing DocGo to rake money off the top of the hotel rooms it provides to migrants may help explain why the company told investors last month that it was counting on about $300 million in net revenue from its no-bid city contract and it projected a gross profit margin exceeding 35% through the end of this year.

The city says that there are about 4,200 migrants in DocGo’s care in New York City and upstate. With an estimated $70 million owed to DocGo so far, that works out to about $16,700 per migrant going to DocGo so far under the contract, which took effect May 5.

DocGo called the figure “misleading” because the number of migrants has varied over time, and a city housing spokesperson said the $16,700 did not account for migrants who have already left the hotels. The spokesperson also pointed out that the cost was far less than the $383 per night the mayor cited in early August as the expense of caring for migrants in the city.

Even so, the contract isn’t meeting all the migrants’ needs. In interviews and accounts in news stories, migrants and their advocates have complained they are not getting needed medical care, even though the company and City Hall have said repeatedly that medical care is included in the contract.

The fine print, however, shows that DocGo is only required to provide remote telehealth appointments, and they are capped at 600 visits, at a total cost of no more than $39,000 per month.

Any on-site medical care first must be ordered by the city and, with a month’s notice, provided or coordinated by DocGo only after mutual agreement with the company, and assuming it has the “ability to provide it,” the contract says. DocGo and the housing agency said DocGo had been providing on-site medical care at upstate sites where there are migrant families with children.

This article originally appeared in <a href="https://www.nytimes.com/2023/09/18/nyregion/docgo-lander-audit-contract.html">The New York Times</a>.