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April 10, 2012


DiNapoli: Audit Reveals Alleged Procurement Improprieties at SUNY Downstate Medical Center

An audit spurred by anonymous tips revealed fake bids for construction contracts and other procurement problems at SUNY Downstate Medical Center, according to New York State Comptroller Thomas P. DiNapoli. Findings of the audit have been referred to the Joint Commission on Public Ethics.

“The systemic breakdown in oversight found at SUNY Downstate Medical Center allowed for questionable practices that may have undermined the integrity of the purchasing process and raises concerns about whether the best price was obtained,” DiNapoli said. “Officials must take action to change how business is done and put necessary safeguards in place to protect public dollars from this kind of fraud and abuse.”

The Comptroller’s office received three anonymous letters alleging fraudulent activity relating to procurement activities at SUNY Downstate. A team of fraud and forensic auditors and investigators found efforts to circumvent the bidding process with fake bids, improper relationships between staff and vendors, and problems with software implementation.

A review of payment information from January 1996 to October 2010, totaling $1.2 million, found that one company, Eagle Two Construction, was affiliated with several other companies that had submitted competing bids in six separate procurements. Eagle Two Construction and these other companies are all located at 294 20th Street in Brooklyn. DiNapoli’s auditors and investigators found that some bids submitted by Eagle Two were forged.

Auditors found that in six cases involving a total of $92,090 in contracts, bid documents for the fake and affiliated companies of Eagle Two made similar errors and had incorrect phone numbers and mailing addresses. Auditors found that whenever one of these affiliated companies bid against Eagle Two, Eagle Two won the project. On three additional projects, auditors found evidence that payments of $49,890 to Eagle Two and an affiliated company, JIT, were done to avoid change orders to existing contracts.

When auditors attempted to interview the owner of Eagle Two Construction about work with SUNY Downstate, the owner, Roxanne Tzitzikalakis, asserted her Fifth Amendment right against self incrimination.

SUNY Downstate staff in charge of reviewing these bids admitted to auditors that they should not have accepted the alleged competing company bids from Eagle Two.

SUNY Downstate staff was also aware that Demitrios Tzitzikalakis, the father of Eagle Two’s owner, was involved in the company’s daily operations.  Mr. Tzitzikalakis had been convicted of various felonies in connection with a previous company with which he submitted falsified and inflated invoices to the New York City Department of Citywide Administrative Services.

Auditors also identified that a former employee of Technical Systems Integration Group (TSIG), who became a project manager at SUNY Downstate in 2007, improperly oversaw and approved work by the company on several occasions. State ethics laws dictate that an employee who enters state service from the private sector must consider recusal from any matter concerning a former employer within the prior two years.

Additionally, auditors found that from February 2007 through May 2011, SUNY Downstate paid approximately $2 million to implement a new business operations system.  As of July 2011, only 10 of more than 200 departments within SUNY Downstate were using the software and responsibility for implementation has changed at least once.  

The Comptroller recommended that SUNY Downstate:

  • Recoup the $49,890 in funds paid for work that should have been covered under previous contracts;
  • Establish an environment at SUNY Downstate that supports internal controls and compliance with applicable laws and strengthen procurement oversight to detect future instances of waste, fraud and abuse;
  • Assess the integrity of vendors and monitor purchases to assure they are necessary and being used to prevent waste of SUNY Downstate resources;
  • And, cooperate with any Joint Commission on Public Ethics review that may occur as a result of this audit.

SUNY Downstate did not agree that improper relationships with vendors existed. Its full response is included in the audit.

To see a copy of the complete audit go to:

DiNapoli encourages the public to help fight against fraud and abuse. New Yorkers can report allegations of fraud, corruption and abuse of taxpayer money by: calling the Comptroller’s toll-free fraud hotline at 1-888-672-4555; filing a complaint online at; or mailing a complaint to: Office of the State Comptroller Investigations Unit, 110 State Street, 14th Floor, Albany, NY 12236.



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