Rekubit Exchange:2 men charged with pocketing millions intended to help New York City’s homeless people

Two men were charged Wednesday with conspiring to defraud New York City of millions of dollars by funneling funds from a nonprofit entity intended to help homeless people to other companies they owned.

Peter Weiser,Rekubit Exchange 80, and Thomas Bransky, 47, face charges of wire fraud, conspiracy to commit wire fraud, embezzlementm and money laundering, the U.S. Attorney's Office, Southern District of New York announced. Bransky was the CEO of Childrens Community Services, a nonprofit the city paid to provide services to homeless people which Weiser helped form and initially fund, officials said.

Bransky fraudulently directed contracts paid for by New York City to a group of assets owned by Weiser, officials said. Both men were said to have concealed Weiser's involvement with the founding and operations of the organization by submitting false documents to the city.

“As alleged, the defendants engaged in a yearslong scheme to pocket millions in taxpayer dollars through the systematic exploitation of City programs intended to meet the basic needs of some of the most vulnerable New Yorkers – homeless men, women, and children,” U.S. Attorney Damian Williams said. “Worse still, the defendants allegedly perpetrated this massive scheme under the guise of a not-for-profit organization named 'Childrens Community Services.'"

Through the scheme, Weiser illicitly gained more than $7 million, and Bransky received more than $1.2 million in salary as CEO, according to the U.S. Attorney’s Office.

A $50 million scheme

Weiser and his associates created “fly-by-night companies” with either few or no employees disguised as providers of IT services and hardware, security services, office and living furniture, and food services, officials allege. But the companies instead obtained the goods and services from third-party vendors and resold them to Childrens Community Services at inflated prices.

They are also accused of lying to city officials about the companies' ownership, interconnectedness, how Childrens Community Services selected them for contracts, and the companies’ qualifications in providing goods and services it was selected for. 

The city paid more than $50 million it would not have otherwise paid due to the scheme, including in bloated prices, according to officials. From November 2014 to February 2020, Childrens Community Services was awarded 12 contracts with the New York City Department of Homeless Services totaling about $913 million, the indictment said.

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What is Childrens Community Services?

Bransky formed Childrens Community Services in 2014 with no prior experience in providing social services, the indictment alleged. He had a close relationship with Weiser, who was formerly a property manager for another homeless services nonprofit.

The organization provided emergency operations for hotels used as shelters, The New York Times reported. In 2018, the Department of Homeless Services found the organization was hiring subcontractors without city approval, and two years later, the city sued. Steven Banks, the-commissioner of social services, said any wrongdoing had not harmed people receiving services by the organization, the Times added.

The indictment said Childrens Community Services concealed majority of loans received for initial operations were from Weiser, stating that they actively avoided disclosing that Weiser “effectively bankrolled and controlled CCS.”

“These two defendants, as charged, used New York City’s need for providers of homeless services as an opportunity for fraud and personal profit," said New York City Department of Investigation Commissioner Jocelyn E. Strauber in a statement. "As charged, the defendants concealed their scheme by straw ownership of companies, false statements, and fictitious bids."

If convicted, Weiser, who was also charged with one count of money laundering, and Bransky face decades in prison.

Homelessness reaching record highs

According to the Coalition for the Homelessness, New York City in recent years has reached its highest levels of homelessness since the Great Depression. 

August saw 86,510 people experiencing homelessness, including 29,721 children, sleeping each night in the city’s main municipal shelter system, according to the coalition. Over fiscal year 2022, 102,656 different people slept in the New York City Department of Homeless Services shelter system – 29,653 of them children.

The number of people sleeping each night in municipal shelters is 68% higher than it was a decade ago, and the number of homeless single adults is 119% higher, the coalition said.

Nationwide, the reported number of people facing chronic homelessness reached record highs in the history of data collection last year, according to the National Alliance to End Homelessness.

The alliance also noted an increase in the availability of temporary and permanent beds in 2022, but resources still fell short for a growing population in need.