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UB group narrowly avoids Web scam; Student leaders signed $300,000 contract

The student-funded government organization that oversees activities at the University at Buffalo almost paid $300,000 for website development to a company whose claims were "false and misleading" and without any assurance that the work would be done.

But because UB Student Association officials discovered the unusual transaction and stopped it before money changed hands, criminal charges are unlikely.

The issue was outlined in an email from association President JoAnna Datz to staff and obtained Thursday by The Buffalo News. University police reviewed the matter and the Student Association is investigating.

"The contract seems deliberately designed to get as much cash in the vendor's hands as quickly as possible and leaves SA with little or no recourse if the vendor fails to perform," Datz wrote in the email.

At the center of the situation are a company called Adaban Inc., doing business as Virtual Academix, and two students who were elected to the Student Association executive board, according to Datz.

The students were the ones who signed the contract with the company on March 13 before any other quotes were solicited, and without the knowledge of or review by the group's president, administrative director, IT manager, attorney or any other staffer.

The deal was "significantly larger" than any other contract the organization ever executed, and the process that was followed disregarded the Student Association's past practice in awarding contracts greater than $5,000, according to an internal report.

Under terms of the contract, the Student Association would have paid nearly $150,000 up front, $119,000 later and about $30,000 when the services were ready to be launched.

Datz said many of the company's claims "appeared to be false or misleading."

The company never got paid, but the matter is still being reviewed.

It remains unclear whether this is a case of criminal wrongdoing, or just inexperience or naivete on the part of the students.

Virtual Academix listed a Boston-area phone number, a Boston address and a New York City-area fax number on its contract with the Student Association. Its website lists a different address.

The company's website touted relationships with prominent universities -- including Harvard, Massachusetts Institute of Technology and Stanford -- which could not be verified, according to the internal review performed by the Student Association's IT manager, Marc Rosenblitt.

The company's website itself raised concerns for Rosenblitt, according to his report. The site included unoriginal stock graphics, and the domain first had been registered in January.

In addition, the services Virtual Academix promised could have been obtained for about $50,000 to $150,000, Rosenblitt concluded in his report.

A message seeking comment left at Virtual Academix's main phone number was not returned. Ted Miale, the company's vice president and the official with whom the SA dealt, did not respond to an email seeking comment.

The two student board members who signed the contract with Virtual Academix were Vice President Meghan McMonagle and Treasurer Sikander M. Khan. Neither could be reached to comment through their university email accounts. They also were not in the association office Friday afternoon.

The Student Association at UB, whose budget this year is approximately $3.8 million, is financed through student activity fees and includes the student Senate and Assembly. It oversees most student organizations and clubs, and organizes events for students.

No taxpayer funds are used to support its operations, representatives said.

Joshua Korman, attorney for the group, said in an interview Friday he does not believe the contract between the association and Virtual Academix is enforceable because it is premised on representations that are untrue, known by the legal terminology "fraud in the inducement."

Student Association representatives formally met with University police on March 27, according to the group's internal report. Three days later, Khan turned in two bids from other companies for the work.

After the police were called, they consulted with the Erie County District Attorney's Office.

The District Attorney's Office determined it should be handled as an internal matter, and "criminal conduct could not be established," according to a memo dated Thursday from University Police Inspector D.R. Jay, a copy of which was obtained by The News.

"It is our understanding, based upon informal conversations, that a factor in law enforcement declining to pursue this matter criminally, in part, was due to the fact that no money was actually paid to this company," Datz wrote in her email to staff.

District Attorney Frank A. Sedita III declined to comment on the matter on Friday, while John C. Doscher, head of the District Attorney's Special Investigations Bureau, could not be reached to comment.

The Student Association is working on establishing stronger internal controls, representatives said.

It also has had no contact with the company since questions began surfacing.

The terms of all elected representatives of the organization expire at the end of the month. None of the current elected officers are returning as members of the elected board.

UB spokesman John DellaContrada issued a statement Friday afternoon, which read in part:

"Mandatory student fee guidelines for large contracts require that the Student Association must obtain competitive bids and present the proposed contract to the university for an administrative review. These steps must be completed before the SA executes a contract.

"The Student Association did not follow this procedure in this case. SA President JoAnna Datz has acted appropriately by raising objections about this contract before any funds have changed hands. We are encouraging the Student Association to review its policies and practices, and if necessary, to implement stronger controls."