SodexoMAGIC Breaks Ties with Drexel and Files Fraud Complaint against the University

GAITHERSBURG, Md., Oct. 10, 2016 /PRNewswire-USNewswire/ -- SodexoMAGIC, LLC, a joint venture between Magic Johnson Enterprises and Sodexo, formally filed fraud charges against its partner of 21 years, Drexel University. Less than a month after signing a new 10-year contract with Drexel in May of 2015, SodexoMAGIC became aware of discrepancies in reported student growth figures, something that would cost the company millions. Repeated attempts by SodexoMAGIC to negotiate with Drexel were unsuccessful. A notice of default letter was sent to Drexel on July 25 this year seeking a cure that never came. As a result, SodexoMAGIC filed its complaint with the U.S. District Court of Eastern Pennsylvania on September 27, 2016.

Fundamental to the agreement made between SodexoMAGIC and Drexel University is the issue of student enrollment. It was explicitly called out in everything from Drexel's request for proposals (RFP), Sodexo's bid proposal and the negotiated terms of the agreement. The RFP declared that student enrollment would grow at a robust rate, a point that Drexel reinforced throughout contract negotiations. Only after the agreement was signed did it come to light that enrollment numbers would actually decline.

"Drexel's RFP specifically called for vendors to assume hearty growth in student population and to tailor all bids accordingly," said Steve Cox, vice president, corporate communications, Sodexo. "It expressly stated that 'The University's Strategic Plan calls for an enrollment increase from our current number of 26,132 to 30,470 students by 2017 and to 34,000 by 2021. Proposed programs, facilities and infrastructure of services should be aligned to this plan.' Such a blatant misrepresentation of the truth stood to cost SodexoMAGIC millions on top of an already generously negotiated package of investment incentives. Nevertheless, SodexoMAGIC, will honor its commitment to its employees, students, staff and faculty and continue service until December 10^th."

The 10-year contract that SodexoMAGIC entered into with Drexel included multimillion dollar investments for state-of-the-art renovations to Drexel facilities, commissions to Drexel in the tens of millions and seven-figure investments for additional community funding, benefiting organizations named by Drexel.

During the 2015-'16 academic year SodexoMAGIC met with Drexel Administrators numerous times providing budget numbers, forecasts, customer counts and other important data on how the drop in student enrollment made the dining operation insolvent in its ability to provide increases in operating hours, more commissions going back to Drexel, contributions to Drexel funds and capital investments in Drexel's buildings. SodexoMAGIC was transparent throughout, giving Drexel requested information repeatedly, yet the university would not alter the deal structure in order to even let SodexoMAGIC breakeven.  

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Magic Johnson Enterprise and Sodexo delivers more than 100 services across North America that enhance organizational performance, contribute to local communities and improve quality of life. The Fortune Global 500 company is a leader in delivering sustainable, integrated facilities management and foodservice operations.

Learn more about Sodexo at its corporate blog, Sodexo Insights.

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