A former contractor with the Department of Education was arrested today on charges that he stole $3.6 million dollars from the city through contractor kickbacks, giving new Chancellor Dennis Walcott his first big scandal to deal with (even if the contractor was fired in 2008). Computer consultant Willard Lanham is accused of using his ill gotten gains to buy $600,000 worth of luxury cars (including a Corvette, Porsche and Cadillac Escalade) as well as to build three houses on a Long Island property, where he managed to have the street named after his wife Laura.

Lanham's scam was simple. While working on the school's much heralded (and expensive) computer programs he would hire contractors at a low rate, convince subcontractors to bill the city at a much higher one, and pocket the difference. Two of the vendors who looked the other way while this was going on were no less than IBM and Verizon.

According to Richard Condon, special commissioner of investigation for city schools, IBM moved consultants between subcontractors to keep the DOE unaware of the scam, and Verizon covered up a deal where they received millions in contracts through Lanham, after agreeing to use a Landham-approved subcontractor. Both companies have said in statements they have fully participated in investigations into the scam, which first started to come to light in 2006 and really started to unravel in 2008.

So how is new Chancellor Walcott handling this latest mess? Here's the statement he put out: “We are entrusted with the public’s money, and should have been more vigilant in our oversight of this project. Since we severed ties with this contractor and reported his criminal activity in 2008, the Department of Education has established new safeguards to ensure that no contractor has oversight over his own projects.”

But what are those safeguards? Manhattan Beep Scott Stringer sure would like to know. He sent out his own statement praising Walcott but pointing out that "the fact remains—the Department of Education remains the most opaque bureaucracy in the city. A truly transparent budgeting process would have prevented this fiasco from happening in the first place. The public deserves to know what the plan is to prevent this kind of abuse from happening again."

On the plus side? In the age of CityTime $3.5 million almost seems like small potatoes. Almost.