Osarenkhoe "truly betrayed the trust of ACS," Rose Gill Hearn, commissioner of the city's Department of Investigation, said at a news conference.
Federal prosecutors in Brooklyn also announced charges on Wednesday against another ACS employee in a separate case involving stolen checks.
Their arrests come a day after Judith Leekin, 63, was sentenced in a separate case to nearly 11 years in prison. Leekin, of Port St. Lucie, Fla., stole more than $1.6 million by making false claims that allowed her to adopt disabled 11 children in New York since 1988. She denies allegations in an ongoing Florida prosecution that she badly mistreated those children after moving to that state.
In the wake of the Leekin case, the city decided to examine ACS's adoption practices, and Osarenkhoe was assigned to help, Hearn said.
Investigators were shocked to find out that he "used his access to create phantom adoptions - adoptions created in the system using aliases that triggered a flow of adoption subsidies to made to him," she said. "We have now turned that spigot off. He truly betrayed the trust of ACS."
Hearn also said a yearlong probe of the city agency that distributes $74 million a month in adoption subsidies and payments to not-for-profit foster care agencies revealed a "hornet's nest" of problems, beginning with poor financial accountability.
The flaws attracted some people who liked the "proximity and access to the great river of money that flows through ACS and the opportunity to help themselves to it illegally," she said.
U.S. Attorney Michael Garcia said the four people arrested in the latest case were involved in two schemes.
In one, co-conspirators falsely posed as adoptive parents to receive subsidies, Garcia said. In the other, they faked an ACS bill for computer services and then authorized its payment.
Two of the defendants were arrested Tuesday when they brazenly went to pick up a $711,420 payment from the other ACS official, Lethem Duncan, who by then had agreed to cooperate with DOI, Garcia said. The payment was for a fictitious computer supplies invoice.
Garcia said the defendants were "driven by greed, and they placed their own self-interest ahead of the children."
Osarenkhoe was charged with mail fraud conspiracy. He and two others charged with mail fraud conspiracy, embezzlement conspiracy and money laundering were released on $250,000 bond each.
At a hearing Wednesday, Osarenkhoe's attorney told the judge his client was a pastor who needed to attend a church conference this weekend in Minnesota. The judge granted permission for the trip over the objections of prosecutors, who alleged that he funneled some of the ACS funds to his congregants.
Afterward, defense attorney John Rodriguez said Osarenkhoe "looks forward to his day in court."
Duncan, who since 1998 has served as a deputy director at ACS, was charged with conspiracy to commit mail fraud, mail fraud, conspiracy to commit embezzlement, embezzlement, money laundering and accepting illegal gratuities.
Duncan appeared in court on Tuesday and was released without bail, prosecutors said. His attorney did not immediately respond to a telephone message seeking comment Wednesday.
In the Brooklyn case, ACS administrative associate Daryl Estinval was accused stealing checks made out to agency vendors, then altering or duplicating them so they were payable to himself and others. Prosecutors allege the scheme netted about $500,000, with half going to the defendant.
Estinval was ordered held without bail. There was no immediate response to a message left with her attorney Wednesday.
