CityTime Fiasco: Biggest Theft in History, NYC's Taxpayers Screwed

Federal prosecutors and the city Department of Investigation unveiled a new indictment today that alleges that more than $40 million was stolen by consultants working on the project to automate the city's payroll system.

"We have developed evidence that the corruption on the CityTime project was epic in duration, magnitude. and scope," U.S. Attorney Preet Bharara says. "CityTime served as a vehicle for unprecedented fraud."

The indictment charges four new individuals with various fraud counts in connection with the scam. Among those newly charged is Carl Bell, a chief systems engineer with Science Applications International Corp. (SAIC), the main contractor on the project.

Bell pleaded guilty to receiving at least $5 million in kickbacks. Another SAIC official, Gerard Denault, got $9 million in kickbacks. Mark Mazer, a contractor who supposedly oversaw the project for the city, received a staggering $25 million in kickbacks.

The indictment also charges Reddy and Padma Allen, top officials with a subcontractor called Technodyne, which paid kickbacks to Bell, Denault, and Mazer. Technodyne got $400 million in payments from the city.

Not only did the conspirators allegedly bill for time not worked, they hired consultants at inflated rates, hired much more staff than necessary, created shell companies to funnel cash and kickbacks to other conspirators, in some cases, through India and Latvia, and then lied to investigators about it.

In 2005 and 2006, Mazer and Denault convinced the city, in a colossal blunder, to amend the contract from a fixed price, under which SAIC was responsible for cost overruns, to a more open-ended arrangement that made the city responsible for cost overruns.

The indictment also discloses that as early as 2005, SAIC had gotten an internal whistleblower complaint about corruption and kickbacks, but the firm apparently did nothing about it.

CityTime was originally budgeted at $63 million, and is now expected to cost close to $800 million. More than $600 million has already been paid to SAIC.

Comptroller John Liu says the indictment "shed more light on just how flawed the management of the CityTime project was." "Virtually the entirety of the more than $600 million that was paid to SAIC was tainted directly or indirectly by fraud," he added.

As for the Bloomberg administration, which was supposedly overseeing the project, they are so far mum on the scandal.