Suspected school lunch fraud investigated

los angeles, students, lunches, healthy
Big companies that decide what food goes on your student's tray may be cheating schools and taxpayers out of millions.
CBS News

(CBS News) COLORADO SPRINGS, Colo. - CBS News has learned of a major investigation into the school lunch industry. The big companies that decide what food goes on your student's tray may be cheating schools and taxpayers out of millions. CBS investigative correspondent Sharyl Attkisson has details.

Behind America's school lunches are giant corporations many schools hire to manage every part of the meal, from budgets to choice of food.

Rick Hughes saw firsthand the profit-driven culture of the school lunch industry. He once worked for the biggest food manager in the U.S., Sodexo.

"There's a lot of money in food. Food is a big profit business," he said.

Sodexo encouraged employees to buy from big food processing companies that in return gave Sodexo cash rebates.

"When we followed those procurement guidelines, we received bonuses for those," he said.

Watch the report that aired on "CBS Evening News" below:

But New York Attorney General Eric Schneiderman says Sodexo's profit motives extended far beyond those employee bonuses, which are legal. He says Sodexo crossed the line when it pocketed cash rebates actually meant for the schools.

"If you promise that you're passing a discount onto your ultimate customer, and you don't pass that discount on, that's stealing money," Schneiderman said.

In 2010, Sodexo settled the case by returning $20 million dollars to New York public schools. Sodexo admitted no wrongdoing.

But the investigation has expanded. Schneiderman said his office has uncovered a nationwide pattern of public schools getting ripped off. He's fired off subpoenas to 10 more food industry companies.

"We know that there are cutbacks in programs for kids in gym and art, and teachers are teaching in larger classes," said Schneiderman. "It's outrageous that there's more money that should be going, that's legally owed to our schools that's not going there."

Rick Hughes eventually left Sodexo to work for a school district that was once Sodexo's customer: District 11 in Colorado Springs.

He said cutting out the middleman actually improved school lunches. The money saved buys fresher food like local organic beef.

"Every time that dollar exchanges hands, a little bit comes off," said Hughes, "and when you buy direct from the farm, or buy direct from your producer, the maximum amount of money goes toward the student's plate."

Hawaii and California have joined in the fraud investigation. And at a meeting earlier this week, New York's Attorney General briefed his counterparts from 15 more states. Some see it as a way to recover millions of dollars at a time when schools nationwide are struggling for every penny they can get.

  • Sharyl Attkisson On Twitter»

    Sharyl Attkisson is a CBS News investigative correspondent based in Washington.

The all new
CBS News App for Android® for iPad® for iPhone®
Fully redesigned. Featuring CBSN, 24/7 live news. Get the App