NYC Comptroller John C. Liu's Remarks on City Time Scandal

Below are remarks by New York City Comptroller John C. Liu at a news conference on Wednesday, May 25, 4:30 p.m. regarding the CityTime project:

“Earlier this afternoon, my office was provided with a letter written to the Executive Director of the Financial Information Services Agency (FISA) by Science Applications International Corporation (SAIC), the prime contractor on the CityTime project. We were informed that SAIC had terminated their senior project manager who led the CityTime project.

“The name of that employee is Gerard Denault.

“SAIC has determined that Mr. Denault violated SAIC’s policies and standards with respect to timekeeping practices while working on CityTime. He routinely billed hours to the CityTime project that he did not in fact work.

“By their own admission, this latest development now implicates, for the first time in this scandal, SAIC. The very company entrusted by our City to build a timekeeping system for NYC employees has grossly mismanaged their own time keeping, and in the process over charged the city for sums of money – still to be determined.

“SAIC now says they will now refund $2,470,522 to the city coffers for the time Mr. Denault billed to hard working NYC taxpayers.

“A few moments ago I sent a letter to the Mayor because I believe we need to work together.

“I am asking him to join me in calling on the Department of Investigation along with all other relevant authorities to conduct a comprehensive review of other possible violations by SAIC, and I am proposing that the City withhold any future payments to SAIC pending the outcome of the investigations.

“This is a sad day for the New York City taxpayer.

“With the proposed budget cuts looming, we at least need to tightly manage expensive outside consultants.

“The public’s trust in government must be bolstered, and I am committed to working with the Mayor to do just that.”

Below is the full text of the letter sent to Mayor Bloomberg on May 25, 2011.

---

May 25, 2011

Honorable Michael R. Bloomberg

Mayor

City Hall

New York, NY 10007

Re: Science Application International Corporation (SAIC)

Dear Mayor Bloomberg:

Today, we were informed by SAIC that they have terminated their project manager for CityTime. SAIC cited the project manager’s violation of SAIC’s policies and standards, specifically with regard to his time billed to the City of New York. Because SAIC cannot accurately calculate the amount that should have been billed to the City, SAIC will reimburse the City for this individual’s billed services. This repayment amounts to $2,470,522.

To date, the alleged fraud relating to CityTime has only involved subcontractors. This latest development now implicates the prime contractor and compels a comprehensive review of SAIC’s billings to the City, in particular, SAIC employees whose time was billed to the CityTime project.

I am directing my representative on the OPA board to introduce a resolution on the points below, and ask that your representative support the resolution:

• The Department of Investigation, along with all other relevant authorities, conduct a comprehensive review of other possible timekeeping violations; and
• The City withholds any outstanding payments to SAIC pending the outcome of the investigations.

I believe the above actions are necessary and as always, I am available to discuss any of these issues with you. Thank you.

Sincerely,

John C. Liu

View letter from SAIC to FISA: http://www.comptroller.nyc.gov/press/pdfs/SAIC-FISA-5-2011.pdf

Troubled Company Denied $100(M) Contract by State Comptroller - Rejected MTA Contract with SAIC - Mocker Blog – WPIX-TV

Read original and watch video...

NY State Comptroller [Tom DiNapoli] rejects MTA contract for subway radio upgrades based on current controversy between city and company. State asks MTA to provide an explanation of company's role, if any, in current city payroll system problem.

What happens next? Info and video below: click here

MTA has some homework before the contract could be resubmitted. Here's theletter from the NY State Comptroller to NYCTransit:

http://www.osc.state.ny.us/press/releases/dec10/Schaffner122110.pdf

This has to be the most reviewed contract in MTA history. MTA says it did several reviews. NYC Comptroller John Liu urged caution and several NY Council Members, including Letitia James [and Joe Addabbo].

Here's the MTA's statement to me tonight:

"We share the Comptroller's concerns, and in light of the gravity of recent developments it is essential that we pursue additional review before proceeding with this contract."

Six Charged in $80M 'CityTime' Rip-Off By Bruce Golding and David Seifman - NYPOST.com

Read original...

Four consultants to the city's problem-plagued payroll system were busted today on charges of ripping off more than $80 million in an elaborate fraud and kickback scheme.

The wife and mother of alleged ringleader Mark Mazer -- who has been paid $4.4 million to help oversee the costly CityTime project -- were also accused of helping launder proceeds of the five-year flimflam.

According to a complaint filed in Manhattan federal court, Mazer steered more than $76 million worth of bogus contracts to firms run by Dmitry Aronshtein, who is believed to be a relative, and Victor Natanzon.

Aronshtein and Natanzon then kicked back more than $24.5 million to a series of shell companies controlled by Mazer's wife, Svetlana, and his mother, Larisa Medzon, the complaint says.To cover up the fraud, the three of them, along with co-defendant Scott Berger, allegedly cooked up phony timesheets intended to justify the spending.

The Mazers allegedly used more than $3 million of their crooked cash to buy and renovate two homes, and also splurged on six late-model cars over the past two years.

Department of Investigations Commissioner Rose Gill Hearn -- whose office uncovered the massive scam -- called it a shame that "supposed experts hired and paid well to protect the city's interests were exposed as the fox guarding the hen house."

Manhattan U.S. Attorney Preet Bharara noted the irony of how "a project intended to prevent payroll waste, fraud, and abuse, was itself allegedly bilked in part by fraudulent timekeeping."

Mayor Bloomberg called it a "major fraud perpetrated on city taxpayers" over the past few years.

"As you know we have zero tolerance for any waste, fraud or abuse and there are no sacred cows in city government," he said.

Bloomberg said he directed Deputy Mayor Stephen Goldsmith to take direct oversight of CityTime.

"We have no tolerance for this whatsoever," he said. "And you can rest assured that we will do everything possible to insure that we get that money back and that the perpetrators are prosecuted to the fullest extent of the law."

City Councilman Letitia James (D-Brooklyn), one of the chief critics of the City Time contract, charged that the administration was asleep at the switch.

"I am shocked," she said. "Eighty million just disappeared and no one from the administration raised a question."

James pointed out that the stolen $80 million could have been used to prevent cuts to child care, senior services and firehouses.

She called on the MTA not to go forward with its $10 million contract with the main City Time consultant, SAIC.

James also said she's worried that other major city contractors aren't being scrutinized.

"This happened on the watch of the Bloomberg Administration," she said. "I am certain there are other consultant contracts that need to be monitored."

The chief official who should have paid closer attention is Joel Bondy, executive director of the Office of Payroll Administration, which was overseeing the contract.

Bonday had previously been employed by Spherion -- which happened to be the quality assurance consultant on the City Time project. Spherion already had the City Time contract before Bondy moved to the city payroll.

Bloomberg didn't answer a direct question about whether Bondy would still have his job when this is over, saying the investigation is continuing.

The City Time scandal provided ammunition for DC 37, the city's largest municipal union, to hammer home its claim that the city is wasting millions on private contractors at the expense of its members.

Callers to DC 37 hear a taped message saying: "Urge the city to cut private contractors, not city services."

City Comptroller John Liu called for an emergency meeting of the directors of the city Office of Payroll Administration.

"These charges will be another stain on the checkered history of the CityTime project. This further underscores the need to more closely monitor expensive outside consultant contracts," Liu said.

Earlier this year, Mayor Bloomberg called CityTime -- which is supposed to save money by consolidating and automating records of the hours clocked by city workers -- a "disaster."

The project was initially budgeted at $63 million when it was launched in 1998, but ballooning cost overruns have pushed its anticipated price tag to $722 million.

Meanwhile, only 35 percent of city workers are actually using it.

Mark Mazer, Aronshtein, Natazon and Berger each face 20 years in the slammer if convicted of wire fraud conspiracy.

In addition, everyone but Berger is charged with money laundering conspiracy, which also carries a maximum 20-year sentence.

All six defendants are expected in Manhattan federal court later today.