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

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Well, it's summer in the big city, and the CityTime fiasco just keeps getting worse. It may now be the biggest theft of all time.

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.

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Some guy got two tickets for walking between subway cars with his hands in his pockets. One for walking between cars the other for having his hands in his pockets. The cop was transferred, promoted and put in charge of the 81st precinct. Don't worry. They'll make up for the loss.


This story is not unique to NYC.  It's endemic to the whole outsourcing issue, where the skilled IT guys, who've been doing this work for decades get fired, and replaced by young, cheap who cycle through and never get any institutional knowledge of the issues.  It's a recipe for disaster that is repeated all over the country.

For twenty years, we've been reading that the solution to complex IT problems is to outsource it to someone else.  One of the problems with that approach is that you then have budget analysts and bureaucrats managing projects about which they have not a clue. 

These outsourcing companies make billions of dollars with no disclosure. We need to have all these contracts available for examination. 

These people were stupidly greedy.  Most companies are just happy to charge the government $125/hour and pay their workers, here on a work visa and can't complain, a pittance, and pocket the hundreds of millions in profit, legally.

Larry Littlefield
Larry Littlefield

Actually the scandal is not getting worse.  They are getting caught.

Don't discourage them from going after people.  This should have happened long ago.

It's the scandals that aren't in the news that are getting worse.


Of course Bloomberg is mum about the scandal, as are some of his media buddies. It's the old deflect the blame game. Mr. Bloomberg, you need to fire yourself for gross incompetence.

Roy Lawson
Roy Lawson

Just last week Mayor Bloomberg said that we need to raise the H-1b cap and allow companies like TechDyne to import more temporary foreign workers.  According to data provided by the Department of Labor TechDyne sponsored over 130 workers from India, and many of these workers were paid low wages - far below market wages in New York City.  Meanwhile other New Yorkers seek employment in a tight job market:

I must ask the question - had this contract had more American workers who weren't afraid to speak out (H-1b workers can be deported the day their sponsoring company fires them) would this fraud had been discovered much sooner?

Mayor Bloomberg has allowed not only a fraud to be perpetrated on the people of New York City, he has supported the very corporate sponsored immigration programs that made it all possible.  Just four days ago he asked for an unlimited supply of corporate sponsored guest workers: http://articles.economictimes.....

No mayor in this economy can afford to lose any money to fraud, much less over half a billion dollars!  Citizens in this tight labor market should also not be forced to compete with guest workers that the mayor himself has requested!  

If there were ever a case for impeachment or recall (and if that is legal in NYC) this is it.  Mayor Bloomberg has allowed serious crimes to be committed against New Yorkers on his watch and this failure to spot such massive fraud is a gross negligence on the part of the Mayor and his office.

I would also point out how sparse the news coverage of this fraud is.  It's amazing what owning a media empire can do for you.  Time to kick the bum out!

Sick of Bloomberg
Sick of Bloomberg

So, if I understand this correctly:1) One of the biggest scandals in the history of NYC occured on one of Bloomberg's pet projects.2) The money that is missng is just about the ampunt necessary to preventteacher layoffs.

That sound about right???


Sadly he is both.

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