The city’s Department of Education falsely billed the federal Medicaid system for almost $700,000 in counseling services for low-income pupils with special needs, according to the U.S. Attorney’s office in Brooklyn.

The complaint from the Eastern District says the reimbursement requests were submitted between 2001 and 2004. During that time period, the Medicaid program paid $223 per month for each student who received two or more services in the month. The costs were shared by the state and federal governments. But the complaint alleges the city falsely claimed to have provided thousands of students with many more sessions than they actually received, in order to receive the maximum reimbursements.

A social worker, Dana Ohlmeyer, who provides psychological services to emotionally disturbed elementary and junior high students, brought the allegations to the U.S. Attorney’s office.

The complaint says that between 2001-04, approximately 7,957 students received psychological counseling in District 75, the non-geographical district for the city’s neediest special education pupils. It also says the city “knowingly employed a billing system which resulted in its submission of false claims” and did not check against attendance records, submitting claims for all pupils in District 75 who were Medicaid eligible, “regardless of what services it had actually provided.”

The U.S. Attorney’s office is seeking over $2 million from the city in damages and penalties. The city’s law department says it hasn’t yet received the complaint.

“However, the Department of Education takes counseling services for special needs students very seriously and cooperated with the U.S. Attorney’s investigation,” said Thomas Crane, chief of the general litigation division, in a statement to reporters. “We disagree with any assertion that the D.O.E. engaged in misconduct and will respond appropriately to the complaint.”

In a separate case, the city was forced to return hundreds of millions of dollars in Medicaid reimbursements it couldn’t properly document after a federal audit several years ago. New rules were imposed and since then, the city has been slow to recover tens of millions of dollars in Medicaid reimbursements for services to children with special needs.