News & Notes from NYC Comptroller John C. Liu

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NYC COMPTROLLER JOHN C. LIU ON CITYTIME

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Comptroller John C. Liu issued the following statement today:

“My office’s review of the CityTime project, which defrauded taxpayers of millions of dollars, has not interfered with the ongoing criminal investigation, nor have we been informed that it has. We applaud the U.S. Attorney for charging seven people and recovering $28 million to date. We are committed to working cooperatively with all law enforcement agencies.”

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COMPTROLLER LIU STATEMENT ON EDC LIVING WAGE STUDY

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City Comptroller John C. Liu stated the following in response to questions about a recently completed study commissioned by the NYCEDC, “The Economic Impacts on New York City of Proposed Living Wage Mandate.”

“The EDC’s claim that a living wage kills jobs shows just how distorted the agency’s operations have become. The proposed living wage would be a requirement on new projects that are heavily subsidized by taxpayers. It may curtail the number of new minimum wage jobs, with the hope that these new jobs would then pay a decent wage. The claim of job losses is rhetoric at its worst.

New York City Comptroller John C. Liu Statement on Theft Charges Against DOE Consultant

New York City Comptroller John C. Liu stated the following in response to questions about today's announcement by the Office of the U.S. Attorney for the Southern District of New York levying charges against a private DOE consultant for stealing $3.6 million:

“Federal charges once again, that a consultant has stolen millions from the taxpayers are infuriating enough. Even more disconcerting, however, are indications that corporations with billions of dollars in City business have aided and abetted and profited from the scam. As with the CityTime scandal, oversight of subcontracting is acutely needed right now.”

Comptroller Liu has directed a review of contracts with vendors implicated by Special Commissioner of Investigation for the New York City School District, Richard Condon. The Comptroller’s Office is currently auditing a number of technology projects also involving some of the same vendors, including ARIS, Future Technology Associates, iZone, and E911.

NYC's Computer-System Cash-Dump Disaster By Graham Rayman - Village Voice

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Photo-Illustration by Andrea Levy

In January 2009, a tantalizing and disturbing comment materialized on an Internet bulletin board about an expensive and controversial Bloomberg administration project to automate the city's payroll system, known as CityTime.


The anonymous author alleged that the project was hopelessly corrupt and out of control and had been for years. The writer, who claimed to have been employed on the project, went on to name three people he alleged were responsible for that corruption.


The commenter accused a consultant, Mark Mazer, of being "the most crooked person on the team," and said consultant Scott Berger was building a home in Florida at city expense.


"Mark Mazer and Scott had ONLY one main intent . . . to pocket the $/hr for themselves for as long as possible @ taxpayer expense," the commenter wrote. Referring to the former consultant later appointed to oversee the project, the commenter added, "The project in its 5th year was a failure and should have been canned, but Joel Bondy for some reason or another decided it must go on for another 5 yrs."


The comment went on to lay out in more or less clear terms exactly what was taking place in the CityTime project.


That posting appears to have disappeared into the depths of the Internet, but it turned out to be prescient.


Berger, who worked for a CityTime consultant called Spherion, Mazer, and four other people were indicted last month for defrauding the city of $80 million—a theft that made the Mafia's $6 million Lufthansa heist in 1978 look like a bodega stickup job.


Supposedly acting as "quality assurance" consultants, Mazer, Berger, and their accomplices are instead accused of falsifying payments to shell companies, pocketing the proceeds, and making up phony time cards for work they never performed. The defendants have pleaded not guilty.


Bondy, meanwhile, was suspended without pay following the indictments and forced to resign as the head of Bloomberg's Office of Payroll Administration. He could face indictment as well. Bondy, it emerged, not only was a former CityTime consultant, but had also worked with Mazer in the past, yet he didn't disclose those ties until years later.


Originally slated in 1998 to cost $63 million over five years, CityTime has cost the city more than $760 million over its 12 beleaguered years of existence. Despite all that expense, the system is operating in only about a third of all city agencies.


The cost overruns were caused by the vast complexity of the project and changes to the plans, claim Bloomberg officials and the company responsible for building the system, Virginia-based Science Applications International Corp.


Nonsense, says a union official who represents city architects and engineers, and has closely tracked the project.


"There's no way that any problems or changes they had could justify a cost increase of more than 10 times," says Local 375 vice president Jon Forster, who believes SAIC should face criminal investigation. "In 12 years, we haven't changed the number of agencies or the number of employees. My sense is that someone saw a gravy train here, and they said, 'Let's go for it.' "


Last week, federal prosecutors issued subpoenas to SAIC for documents related to the project—presumably to determine just what happened to all that money. There are, records show, a couple hundred other consultants on the project, and you have to wonder what they were doing.


But even after a year of revelations about CityTime, a lot of questions remain unanswered: How much money was wasted or stolen? How did this happen, in spite of red flags dating back to at least early 2003? And how did the city miss it for so long?


Mayor Bloomberg's comments on the scandal have been less than satisfying. Over the years, for one, his administration lowballed the true total cost of the project. And so far he has yet to offer a coherent explanation of how CityTime went bad. It didn't happen by accident, as the mayor appeared to suggest in some of his comments, especially when he called it a "disaster."


The definition of "disaster" generally includes a component of misfortune—as if the project was beset with bad luck. But in this case, there was intent. The indictment makes that clear enough.


In saying he wished he spent more time with the project, Bloomberg appeared out of touch, which is fairly disturbing for a man who cloaks himself as a great manager and technology expert.


He also suggested that the city's trust had been "misplaced." It was almost as if he was characterizing city government as a lover shocked to find out his spouse had cheated on him. The credo "Trust, but verify" comes to mind.


In December, once again seeking to minimize the scandal, he said, "Nothing goes without some problems, whether it's in your family, your company, your government, [or] the world."


Moreover, throughout his administration, Bloomberg repeatedly cut agencies, shrunk city staff, and recited this mantra: "We have to do more with less." But on the CityTime project, he or his aides appeared to have decided it was OK to do less with more.


And for that matter, what does it say about the city comptroller's office, which also had an oversight role on the payroll agency?


In fairness, the current comptroller, John Liu, has aggressively raised questions about CityTime. He was the one who persuaded Mayor Bloomberg to stop the open-ended payments to SAIC, and forced them to agree to a real deadline.


That decision magically accelerated the pace of the project. By last September, just 73,000 employees were on the system. By December, the number had shot up to 100,000 employees, proving that there's nothing like a little work incentive to get things done.


But Liu's success only makes one wonder why questions weren't raised much sooner by his predecessor, William Thompson.


Records indicate that along with the mayor's office, the comptroller's office approved all of the contract increases, but didn't audit CityTime until this year. 


That audit found, among other things, that the project was plagued by "poor management decisions." It was so bad, in fact, that there was no way to figure out just how many dollars were wasted, the audit said.


Forster, the Local 375 official, tells the Voice that his people approached Thompson's office in 2007 to request an inquiry on CityTime, but were politely rebuffed.


"It just seemed like they had too much on their plate at the time to take on something so massive," Forster says. "And then there was the election and that was sort of it."


Moreover, an SAIC competitor told the New York Post that he had been raising red flags for years, saying he spoke to both Comptroller Thompson's office and the mayor's office about his concerns.


Comptroller spokeswoman Sharon Lee said she couldn't comment on the Thompson era.


And what does the scandal say about the Department of Investigation?


DOI commissioner Rose Gill Hearn has been aggressive in pursuing CityTime this past year. According to the federal indictment, the investigation began in June 2010, when a former consultant told DOI he was being paid by a company that hadn't been approved to work on the project. The federal case appears to rely heavily on the DOI investigation.


But you have to wonder what, if anything, was done before then. It's hard to believe that not one person approached DOI between 1998 and 2010 to complain about the internal workings of the project.


In fact, in 2007, the Voice has learned, DOI did investigate CityTime, including interviewing several CityTime consultants and a few payroll affairs people.


In addition, the probe examined a Department of Defense Inspector General investigation into a number of former SAIC employees who had formally complained that after they blew the whistle on improper billing practices, SAIC retaliated against them by firing them, records show.


What DOI did with the information that was gathered remains unclear.


DOI spokeswoman Diane Struzzi declined to comment on any specifics because of the current, ongoing investigation into CityTime. "There have been a series of allegations going back several years—some have borne fruit and some have not," she said. "There is not a single complaint that came into this department that laid out the kickbacks, the money laundering, or the shell companies. DOI uncovered those crimes."


And, of course, there's the January 2009 anonymous Internet posting, which should have piqued someone's curiosity. It wasn't all that hard to stumble across it.


And then there's the City Council—the supposed check on the mayor's spending habits. While some Council members—like Letitia James and Joseph Addabbo—have sought answers, where was the council in the years when the project grew out of control? Isn't the council supposed to approve big contract increases?


While the council voted to approve the initial contract, James says that it did not get a chance to approve or disapprove the subsequent and sharp cost increases. In essence, she claims, the Bloomberg administration was able to do an end run around on the council's oversight role. Can it really be true that the council had no idea what was happening in the project?


Jamie McShane, a spokesman for Council Speaker Christine Quinn, did not respond to Voice questions.


In many respects, the local media was also behind the curve. Part of the reason was that the Bloomberg administration kept the true cost of the project under wraps. As a result, there was confusion in the press about just what the project cost. A New York Times article in January 2007, for example, set the project cost at $180 million, when, by then, the true expense was already much higher.


It wasn't until Daily News columnist Juan Gonzalez began in late 2009 what would become a series of probing columns that the story began to emerge from the shadows.


Of course, CityTime isn't the first high-tech city project to go horribly awry—just the most expensive and allegedly the most corrupt.


City Comptroller Liu said in May that there were a series of high-tech city projects with cost overruns, missed deadlines, and incomplete or ineffective systems. A city personnel tracking system, for example, mushroomed from $66 million to $155 million.


Just last week, Liu said that a project to create two new 911 emergency systems for the police and fire departments had swelled from $380 million in 2005 to $666 million with no major alterations of the project plans. The project is one year overdue, and has been troubled by poor management and oversight by the contractor, his office said.


He rejected a new $286 million contract request from the Bloomberg administration and demanded a review. The central issue, he charged, was that, similar to CityTime, the project allows a kind of open-ended spending.


"This type of vague budgeting formula allows outside consultants to bill on an hourly basis and collect exorbitant fees, as in the case of the CityTime project," Liu said. "The program was troubled by findings of poor management and less than satisfactory oversight by the original vendor."


The history of CityTime goes back to 1996 and the Giuliani administration. The goal was to computerize the city's payroll system, which covers close to 160,000 workers. After another bidder dropped out, the contract was awarded to MCI Systemhouse. After two years, Systemhouse came up with a thick, heavily detailed, and comprehensive technical plan, or "scope of work," for the project, and estimated that it would cost $63 million and take five years.


In other words, it wasn't like someone just came up with the $63 million budget on a cocktail napkin. A great deal of thought and work went into it.


The proposal contained detailed deadlines that made clear the contractor felt it was possible to complete the job in five years, plus lists of thousands of pieces of high-tech equipment that needed to be purchased and dozens of deadlines listed in 30-day increments.


Even at $63 million, the contract provided fairly lavish pay rates for the contractors: more than $300 an hour for top managers, more than $200 per hour for mid-level people. Even the word processors would get $80 an hour. (A percentage is, of course, kicked to the company.)


Even taking the cost of inflation into account, if the project took 10 years, the finished product still should have cost only about $84.5 million.


Moreover, the contract contained a key provision that levied money damages for missed deadlines—a standard incentive that was irresponsibly eliminated a few years later.


But Systemhouse was bought by WorldCom and dropped the project, transferring its CityTime unit to a new firm, Paradigm 4.


In 2000, the city decided to add new elements to the plan, chiefly switching to a system with one central Internet server, rather than a separate server in each agency. The second of a dozen contract amendments increased the budget to $73 million.


The following year, the city hired Mazer's firm, Spherion, to do something called "quality assurance"—essentially to keep an eye on the project. That contract started at a cost of $3.4 million. Since then, it has been changed a dozen times and has ballooned to $51 million. As the Mazer indictment suggests, not only were they not watching the contractor, no one was watching the watchers.


For some reason, the contract was changed after five months to drop a requirement that Spherion examine and approve each piece of the project. As a result, the last record of such a review dates back to 2001, the comptroller's audit says.


Spherion was also supposed to supply regular summaries of the project's progress. The comptroller could not find any such summaries after 2001.


About a year later, the role of project manager was added to Spherion's contract. That meant that the auditor was now also involved in managing the project, according to the 2010 comptroller's audit—a clear conflict of interest.


By the time Mayor Bloomberg was elected, Paradigm 4 was out of the picture and SAIC had taken over the project. When the contractors changed, critics have said, the council should have had a chance to review it. There was no such review. SAIC was selected without competitive bidding.


And in a critical, and ultimately unfortunate, move, the contract was changed from one that levied penalties for failure to hit milestones to a more open-ended method of monthly payments based on hours worked. Ironically, the move was supposed to "streamline" the process. It caused the opposite effect, giving the contractor no incentive to make deadlines.


SAIC has won many millions in government contracts over the years, but it has also racked up its share of fines. In 1995, the company paid a $2.5 million fine for defrauding the government over a computer system for jet fighters. In 1998, the company paid a $1.1 million fine to the Defense Department.


A group of former employees accused the firm of retaliating against them for complaining about questionable billing practices on another job.


In January 2002, perhaps true to form, SAIC officials had the brilliant idea of trying to hire the city official overseeing them, Richard Valcich. In a letter uncovered from the city comptroller's office, Valcich expressed his dismay at the overture, published reports said.


Valcich said he was sorry "if I seemed rude and abruptly shortened your discussion on a future post city-employment position with SAIC." He added: "It is inappropriate to discuss any post employment with a company that I do business with."


By November 2002, another amendment made more changes to the project, and the approved cost rose again from $115 million.


Meanwhile, things between Valcich and SAIC weren't going so well. In what should have been an enormous red flag to the comptroller and the mayor, Valcich slammed SAIC's job performance in a February 19, 2003, letter released by the comptroller's office.


Valcich accused the company of cutting the city out of the project, creating needless delays, and wasting time and money. He said key personnel weren't showing up at meetings and records weren't being updated. He said the company repeatedly stopped work to "review" progress. He even questioned SAIC's credibility.


"SAIC's commitment to quality is almost nonexistent and is reflected from the top down," Valcich wrote. "This lack of commitment to quality permeates matters both great and small."


He added, "It appears to the city that SAIC seems to think [it] could take as long as possible to finish an activity. . . . The city of New York has spent approximately $35 million on CityTime and does not have a tangible system to show for it."


Despite the almost angry tone of the letter—written by the city's point man on the sprawling project, the man who had been shepherding the project since 1995—it did not appear to have any impact. No one from either the mayor's or comptroller's offices appeared to have jumped in to light a fire under SAIC.


The system kept becoming more complex, and at some point SAIC began to resist going forward. SAIC hired a consultant, Ariel Partners, who warned that the technology the city had paid for couldn't handle all the things the city wanted it to.


SAIC finally said it would go forward, but only if it was paid on an hourly basis, rather than a flat rate per piece of the element. The city agreed, which meant SAIC now had a kind of green light to spend whatever it wanted to make the system happen.


By 2004, Valcich had retired from the payroll post, to be replaced by Joel Bondy, a former consultant with Spherion, the company supposedly vetting the project for the city. Bondy had also worked with Mazer, the recently indicted Spherion consultant, at the city's foster-care agency.


The effort to redesign the system took two more years. An SAIC spokeswoman was now saying the two sides were "working well together, and approved our personnel, approach, and overall architecture."


In 2005, with the redesign complete, the city had a chance to walk away from the project. The city instead turned to Spherion for advice, and, of course, the conflicted firm said, "Let's keep going," the comptroller's audit said.


With a rough squiggle, Bondy signed off on a contract extension that gave SAIC another three to six years to finish the project. The amendment justified the extension only by saying it was needed because of unspecified "delays."


By February 2006, the official contract cost was now at least $225 million, triple the original project cost. This time the increase was blamed on "a major increase in the cost of deployment."


Meanwhile, the alleged fraud involving the Spherion consultants had already begun, the indictment said.


Mazer awarded big-money contracts to friends, who then kicked back $25 million to him. They billed the city for phantom work and squirreled the money away in shell companies. He and his accomplices allegedly pursued this fraud for the next five years, eventually stealing some $80 million.


Meanwhile, the public focus was on the effect of the payroll system on city employees. From 2006 through 2009, unions mounted a campaign to limit the system, especially palm scanners, which were seen as potential health hazards. They also charged that the system violated civil rights, and imposed unfair demands on employees. They held demonstrations, testified at City Council hearings, and spoke to the media. Forster's union filed an unfair labor complaint.


Also in 2007, a former SAIC employee on a federal contract alleged that he and several colleagues were fired for going to the feds to complain about improper billing practices by the company.


A city Vendex form indicated that in June 2007, the Department of Defense Inspector General began investigating SAIC based on those allegations.


Did that disclosure, now more than three years old, trigger any concern about SAIC in city government? It is unclear.


In May 2008, Bondy testified before the City Council. In his written remarks, tellingly, he expended not a word on the cost of the project. Not one word.


But behind the scenes, he repeatedly gave project contractors high performance evaluations in 2008 and 2009, The New York Times reported.


Over the objections of unions and some council members, Bloomberg kept the project going.


In January 2009, the anonymous letter floated onto that CNN bulletin board. In September 2009, Bloomberg added another $140 million to the CityTime budget—bringing the total to more than $700 million.


And then, columnist Juan Gonzalez started writing articles about the project, reporting on December 4, 2009, that Spherion consultant Mitchell Goldstein made $490,000 that year. The top 11 consultants, he wrote, made an average of $307,000 a year through 2012.

Living the good life: CityTime’s former overseer, Joel Bondy

On December 17, he reported that Bondy convinced Spherion to hire Goldstein—a possible conflict of interest because the two men had been business partners.


Gonzalez quoted a former consultant who said he hardly did any real work, but got paid $120,000 for it. "The unwritten rule was to keep billing for the hours you showed up, not the work you did," this consultant told Gonzalez.


And even after the disclosure that Bondy had close ties to the people he was supposed to be overseeing, Bloomberg left him in office for another year.


In January of last year, Gonzalez reported that a tech consultant who used to work for the city got millions from CityTime while running a full-time lobbying firm.


Public pressure began to take hold, and the story started to move forward rapidly.


In February, Liu rejected an $8 million Spherion contract, and launched an audit of CityTime. The budget was now $722 million. He called on the mayor to freeze all contracts, calling it a "money pit."


In March, Bloomberg made his admission that the project was a "disaster," but insisted such projects were rarely successful. A few days later, he said he wished he had "focused on it more."


On March 26, Gonzalez reported that the CityTime project manager made $650,000 in 2009, and there were 39 other people making at least $500,000 a year. He noted that the city laid off 510 public school aides to save $12 million, while earmarking $24 million to pay CityTime consultants.


"How can anyone justify firing $18,000-a-year school aides while hiring half-a-million-dollar computer geeks who can't even deliver a good product?" Gonzalez wondered.


But Bloomberg's people continued to defend the need for the project and granted it an extension through September.


In June, the DOI investigation began, with that complaint from the consultant paid by a company not approved to work on the project.


By last August, Bloomberg and Liu were sparring over the contract. Liu didn't want to approve another $176 million in spending; Bloomberg was threatening to withhold paychecks.


The city Independent Budget Office reported then that $641 million in capital funds were either spent or planned, along with $232 million in spent and planned operating funds. That added up to more than $873 million.


Last September, Liu refused to pay $32 million to SAIC until next June unless the company finished the project by then. Finally, there was a penalty attached to missing a deadline: $3 million per month.


The indictments came down on December 15. The six defendants were released on bail. Authorities seized some $850,000 from safety deposit boxes.


Bondy was suspended the following day and resigned three days before Christmas. The Spherion contract was suspended. The Department of Education suspended a separate Spherion contract. Bloomberg ordered a review of technology projects.


The state comptroller jumped on the bandwagon, rejecting an SAIC contract. 


And now, with the federal and city investigations still ongoing, more indictments could be coming. But taxpayers have already paid for everyone else's mistakes, inattention, and misbehavior.


grayman@villagevoice.com

Hiram Monserrate Wants Taxpayers to Cover His "Slush Fund" Defense by Bruce Golding - NYPOST.com

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Poor Hiram!

In a move that almost redefines "chutzpah," disgraced ex-pol Hiram Monserrate wants taxpayers to fund his defense against charges he misused $109,000 in "slush fund" cash while he was a city councilman.

The Queens Democrat -- who got booted from the state Senate for assaulting his girlfriend -- filed court papers yesterday saying he's unemployed and has just $100 to his name.

Monserrate says he has racked up $128,000 in debt.

Defense lawyer Joseph Tacopina, who represented Monserrate in the assault case, said in the Manhattan federal-court filing that his firm contacted Monserrate in October after learning from the feds that he'd been indicted on fraud charges.

"In response, Mr. Monserrate assured us that he would have the funds available to retain us," Tacopina wrote.

But Monserrate hasn't coughed up a dime since then, and recently revealed he lacks the means to do so.

Citing the "complexity of the this case" and the "voluminous amount" of evidence, Tacopina said it would be an "undue hardship" for his firm to continue working without pay.

He asked Judge Colleen McMahon to name him Monserrate's court-appointed lawyer under terms of the federal Criminal Justice Act, which authorizes payments of $125 a hour, up to a $9,700 maximum, for felony cases.

The Manhattan U.S. Attorney's Office declined comment.

bruce.golding@nypost.com

Millions In School Contracts Also With Company At Center Of CityTime Scandal by Andrew Hawkins - City Hall News

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Back in February, Comptroller John Liu rejected an $8 million contract with the consulting firm Spherion for its connection with CityTime, the payroll and timekeeping system.

Since then, the scandal has ballooned into a full-on financial black hole, with over $80 million alleged to have been embezzled by contractors over five years, and hundreds of millions more in over cost. U.S. Attorney Preet Bharara’s office is pursuing charges, with more action expected against Office of Payroll Administration executive director Joel Bondy expected this week.

CityTime was not the only Spherion contract. The company was paid almost $20 million from the Department of Education for “systems development for high school admission,” school officials said. The New York City School Construction Authority also has paid hundreds of thousands to Spherion for audio/video equipment procurement, according to city records.

Spherion was tasked with monitoring how the city spent its money on CityTime. Liu moved to freeze all contracts with Spherion after the head of the city Office of Payroll Administration was suspended without pay last week.

Michael Loughran, a Liu spokesperson, said that there were currently two active contracts with Spherion: a $2.75 million contract for consultant hiring with the Financial Information Services Agency, which oversees various streams of the city’s financial data, and a $284,000 contract with the Department of Education for system integration training. To date, the city paid Spherion $419,305 combined on just those two contracts, both of which were frozen in the wake of the CityTime revelations. The School Construction Authority’s contracts with Spherion were not, though, Loughran said, because they are not overseen by the comptroller’s office.

“The pay freeze implemented by Comptroller Liu relates to these contracts and any further request for contractual related payments of any kind,” Loughran said.

Spherion is described on its website as a “leading recruiting and staffing provider that specializes in placing administrative, clerical, customer service and light industrial candidates in temporary and full-time opportunities.”

DOE saw the firm as a “body shop,” placing administrative and support staff at hundreds of schools. The money paid to Spherion--$17.3 million over nine years—is a drop in the bucket, in relation to the agency’s yearly $20 billion budget, officials argue.

Barbara Morgan, a spokesperson for DOE, said that Spherion’s contract has been suspended in light of recent news.

“We have stopped payments to Spherion and will be conducting an expedited investigation into their contracts with the DOE to ensure that city funds were used in a lawful manner,” Morgan said.

Marli McCleary, a spokesperson for Spherion, did not return a request for comment.

Spherion School Contracts

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

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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.

This Woman is Trouble - Scandal Follows Dem Aide by Isabel Vincent and Melissa Klein - NYPOST.com

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She is the Zelig of Queens political scandals.

Lawyer and Democratic political operative Joan Flowers keeps popping up in misdeeds tied to Queens politicians and community leaders.

Flowers, already under federal scrutiny for her role in a shady Queens charity, represented the Rev. Floyd Flake and others in a deal to turn a nonprofit housing development owned by Flake's church into a for-profit venture, according to recent reports. Questions have been raised about the structure of the deal, and Flake's take.

Flowers filed paperwork in the deal in 2006 with then-Attorney General Eliot Spitzer. At the same time, she worked as a consultant to his successful campaign for governor.

Flowers has long been tied to, and done work for, prominent Democratic politicians, including Gov. Paterson, US Rep. Gregory Meeks and state Sen. Malcolm Smith.

A party activist described her as "an earnest, decent person that a lot of people have trusted over the years."

But he said she was often too eager to please and that "it hasn't served her well."

"I think that she's been coerced into doing questionable things by her so-called friends because she's such a nice person," he said.

Flowers, 62, a Jamaican immigrant, went to law school as an adult earning a degree from St. John's University in 1988.

In 1990, she teamed up with developer Darryl Greene, forming a company called Greene and Flowers.

The venture was described in 1994 by one of its partners, then-Assemblyman Clarence Norman Jr., as a commercial law firm and consultant. Norman was convicted in 2005 of falsifying business records and violating state election law and sent to prison.

Greene, too, got into trouble and pleaded guilty to defrauding city agencies of $500,000. It was through Greene that Flowers became associated with Smith, according to the Queens Democratic activist.

She was involved with Smith in a deal to develop land in Cambria Heights that is currently under federal probe. A couple sued Smith in 1998, claiming he took their deposit and they never got their promised home.

In 2000, Flowers drew up incorporation papers for the nonprofit New Direction Local Development Corp. It was started with the help of Smith and Meeks and for years its address was the same as Flower's law office.

The charity is under federal investigation after The Post revealed how its Hurricane Katrina relief fund failed to distribute most of the donations it took in to victims.

Flowers, who lives in Jamaica, Queens, did not return calls seeking comment.

US Rep. Gregory Meeks

Represents southeast Queens. Helped found New Direction Local Development Corp., which was incorporated by Flowers. Hired Flowers as campaign treasurer from 2001 to 2007. Board member with Flowers on Merrick Academy Charter School.

State Sen. Malcolm Smith

Represents southeast Queens. Helped to found the New Direction Local Development Corp., which was incorporated by Flowers in 2000. Officer with Flowers in 230th Street Associates development company. Hired Flowers as a campaign consultant. Put Flowers on the Senate payroll in 2009. Board member with Flowers on Merrick Academy Charter School.

Clarence Norman Jr.

Former state Assemblyman and partner in Greene and Flowers. Convicted in 2005 of falsifying business records and violating state election law and sent to prison.

Gov. David Paterson

Flowers was his campaign treasurer from 2006 to 2010.

Eliot Spitzer

Former governor for whom Flowers served as a consultant in the 2006 campaign.

The Rev. Floyd Flake

Former congressman and pastor of the Greater Allen AME Cathedral, where Flowers is a member. Flowers filed papers to turn a church nonprofit housing development into a for-profit entity.

Darryl Greene

Queens developer and business partner. Formed Greene and Flowers Associates PC in 1990. Board member with Flowers on Merrick Academy Charter School.

Congressman Gregory Meeks Failed to Disclose Hidden Loans; Queens Pol Borrowed More Then $50G by Benjamin Lesser and Greg B. Smith - NY Daily News

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Queens Rep. Gregory Meeks (b.) took loans worth $55,000. A source said the loans were related to construction and renovations on the pol's home. Farriella for News

Congressman Gregory Meeks has received tens of thousands of dollarsdos in personal loans that he didn't report publicly, the Daily News has learned.

Meeks (D-Queens) admitted to The News late Friday that in the past three years, he has obtained two loans totaling $55,000 that he did not reveal on the financial disclosure forms he's required to file with the U.S. House clerk.

He says he obtained one loan with an initial principal of $40,000 in 2007 and says he since has paid it back. Meeks says he got a second personal loan in 2008 with an initial principal of $15,000 that he's still paying back.

The congressman said that on Friday he filed amended financial disclosure statements that reflect the existence of the two loans.

His office, though, failed to respond to repeated requests for copies of the amended reports.

Meeks refused to disclose the purpose of either loan, but a source familiar with the situation said they were related to construction and renovation of his ornate, $830,000 home in Jamaica.

He also refused to explain why he'd suddenly confirmed the existence of the two loans. In previous filings, he'd revealed other minor items that weren't listed on his disclosure forms, records show.

The existence of the loans emerged Friday, shortly after The News questioned him about another loan he, for the first time, had disclosed.

Released Friday, the form stated that sometime last year, Meeks got a "personal loan" of $50,000 to $100,000 from a Queens businessman named Ed Ahmad.

One of Ahmad's businesses sells construction supplies and kitchen and bathroom appliances for homes. Saturday, an employee at Ahmad's real estate office said he was in a meeting and couldn't come to the phone to discuss the loan to Meeks. He did not return subsequent calls.

In 2001, Ahmad testified before a state task force on reapportionment of political districts, identifying himself as president of the New York New Concept Democratic Club. In his testimony, he noted that he had received a citation from Meeks for his charitable work.

Meeks' statement to The News implied he paid interest on at least one of the loans, but he refused to disclose the interest rate, whether the loans required any collateral or their due date.

Under House rules, members of Congress must obtain special permission from the Ethics Commission for personal loans and provide documentation setting forth the terms.

Meeks purchased his massive, 109th Road home from developer Richard Dennis, who built it for him, obtaining mortgages totaling $701,922 for a sale listed at $830,000.

Federal prosecutors in Manhattan have subpoenaed documents from Meeks and several other Queens politicians, including Meeks' ally, state Senate President Malcolm Smith, in an ongoing corruption probe.

In April, Meeks turned over documents related to his house, as well as records related to his sponsorship of taxpayer dollars for various nonprofit organizations based in Queens.

Senator Gillibrand Wants BP Held Criminally Responsible for Oil Spill by Mark Scott - WBFO

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Senator Kirsten Gillibrand of New York is one of a number of US Senators who want BP Oil to be held criminally responsible for the Gulf of Mexico oil spill.

Senator Gillibrand was among a handful of senators who signed a letter to Attorney General Eric Holder, expressing concerns "about the truthfulness and accuracy of statements submitted by BP." Late Tuesday, Attorney General Eric Holder says federal authorities have opened criminal and civil investigations. He's not saying which companies or individuals might be the targets of the probe. Holder says federal clean air and pollution laws give him the power to open the investigations.

But during an appearance in Buffalo late last week, Gillibrand said BP needs to be held accountable.

"BP needs to pay for the entire clean-up," Gillibrand said. "There is no reason why the taxpayer should be soaked by this bill."

Going forward, Gillibrand says better protections are needed to hold oil companies doing such drilling far more accountable. She fears the damage will last generations.

Gillibrand said President Obama is doing the best he can in response to the disaster.

City Contests Appointment of Morgenthau in Discrimination Case by A.G. Sulzberger- City Room Blog - NYTimes.com

More on Morgy vs. Bloomie...What's the Mayor Got to Hide..? II

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Citing “a public and well-reported dispute” between Robert M. Morgenthau and Mayor Michael R. Bloomberg, the city asked a federal judge on Friday to reconsider the appointment of Mr. Morgenthau to oversee the city’s efforts to increase the number of black and Hispanic firefighters in a response to a long-running discrimination suit.

The request came two days after Judge Nicholas G. Garaufis of United States District Court in Brooklyn made the surprise appointment of Mr. Morgenthau as a special master just six months after his 35-year tenure as Manhattan district attorney came to an end.

“Given Mr. Morgenthau’s prior pronouncements concerning the mayor, as well as the conflict between Mr. Morgenthau and the city’s chief legal officer and his efforts to criminally charge the city and current high-ranking members of the Fire Department, a reasonable person, knowing all the facts, would conclude that Mr. Morgenthau’s impartiality could be questioned,” the city wrote in a letter to the court, signed by Georgia Pestana, an assistant corporation counsel.

The city attached copies of newspaper articles about the conflict, highlighting disparaging comments that “suggest Mr. Morgenthau considers the mayor as egomaniacal.” In addition the city said it would file a declaration by its corporation counsel, Michael A. Cardozo, describing other comments Mr. Morgenthau had made about the mayor and the city’s law office “that further reflect the tensions.”

Judge Garaufis declined the city’s request for a hearing on the matter and asked the city to submit a formal motion for disqualification.

“Under the circumstances outlined in our letter, we think it would be inappropriate for Mr. Morgenthau to serve as the special master,” Kate O’Brien Ahlers, a Law Department spokeswoman, said in a statement. (The city noted in its letter that “Mr. Morgenthau has had a long and unquestionably distinguished career as one of the great prosecutors of this country.”)

Mr. Morgenthau, who now works at Wachtell, Lipton, Rosen & Katz, the law firm, responded forcefully:
“I was asked by the judge to assist by helping the parties meet his ordered relief. My record and independence in my role as district attorney are no secret and I wouldn’t have accepted the position if I didn’t think I could be impartial. Nonetheless of course I will do what is in the best interest of moving this important matter forward.”

The Justice Department, which brought the lawsuit against the city following a federal complaint by an organization of black firefighters, declined comment.

“I don’t know whether this is a legitimate concern because there have been some differences with Morgenthau or if it’s just another attempt to slow down the process,” said Richard A. Levy, a lawyer for the Vulcan Society, an organization of black firefighters. “It strikes me that he’s a person of integrity. He may have had a dispute with someone in the administration, but that doesn’t mean he can’t answer questions about how to get a process moving to develop a new firefighter test.”

In January, Judge Garaufis found that the city knew that the entrance exam it used from 1999 to 2002 was disproportionately weeding out black and Hispanic applicants, who represented less than 10 percent of the Fire Department. He ordered the city to give 300 of those applicants priority hiring status and retroactive seniority, and to financially compensate 7,400 more who had taken the test. He called the problem “a persistent stain on the Fire Department’s record.”

Since then he has expressed growing frustration with the city’s handling of the case, threatening sanctions before settling on enlisting a special master to oversee the implementation of reforms. Though Judge Garaufis did not note Mr. Morgenthau’s recent history of conflict with city leaders in his order announcing the appointment, the move was widely seen as an effort to enlist someone with the stature to force the city to implement changes to hiring practices.

“I can’t imagine that the judge didn’t know about all these articles when he vetted Mr. Morgenthau,” said Darius Charney, of the Center for Constitutional Rights, one of the lawyers for the plaintiffs. “Personally I don’t think it’s a conflict of interest, but it’s obviously not up to me, it’s up to the judge.”

The central issue in the dispute between Mr. Morgenthau and Mr. Bloomberg appears to be an escalating conflict that began with a disagreement over how money the district attorney’s office obtained in a major financial settlement would be divided between the city and the state. That grew into a heated dispute over secret bank accounts that burst into public view last winter.

The letter from the city said that United States Code required the disqualification of a special master “in any proceeding in which his impartiality might reasonably be questioned.”

“With this history,” the letter states, “even if Mr. Morgenthau is not in fact biased against the city and other defendants, the immediate media reports concerning his appointment make evident that a perception of bias exists in the general population.”

In addition the city questioned whether Mr. Morgenthau was qualified to serve as special master in this particular case, noting that candidates proposed by the parties in the lawsuit all had experience in mediation or employment litigation.

“Mr. Morgenthau is not known as an expert in or knowledgeable of the intricacies of the employment examination design process,” the letter said. “However, what is indisputable is Mr. Morgenthau’s known distaste for the current city administration, including, in particular, the mayor, the Fire Department and the corporation counsel.”