Five years after the CityTime scandal surfaced, “weaknesses” in hiring and oversight continue to pose threats to the city’s big-ticket technology contracts, a Department of Investigation analysis has found. The DOI reviewed how the city handles large-scale computer contracts in light of CityTime — the fraud-plagued project to modernize the city’s payroll system that was projected to cost $63 million but ballooned to more than $700 million and led to prison time for three computer consultants….
DOI Issues Report From Its CityTime Investigation On Lessons Learned And Recommendations To Improve Management Of Large Information Technology Contracts
Source: The City of New York, Department of Investigation, Press Release, Release #13-2014, July 25, 2014
…Specifically, the Report found the City did not implement proper internal controls and other management safeguards to prevent substantial cost overruns and delays in connection with CityTime, and failed to detect the enormous fraud against the City and its tax payers. The deficiencies exposed include:
∙ inadequate executive oversight of the project by City officials;
∙ failure to appoint an integrity monitor;
∙ failure to control the expansion of the scope and cost of the project
∙ failure to hold contractors accountable for their inability to provide deliverables on schedule, and within budget;
∙ failure to properly vet contractors and subcontractors for conflicts of interest and potential fraud; and
∙ failure to plan for future City control over management and maintenance of the completed projects….
Three sentenced for $100 million fraud in botched automated payroll project in New York City
Source: Gregory N. Heires, New Crossroads, April 30, 2014
The conviction of three consultants charged in a $100 million fraudulent scheme involving a project to modernize the payroll system in New York City offers yet another lesson of the perils of contracting out. On Monday, the three defendants each received sentences of 20 years in prison for their role in implementing the automated payroll system known as CityTime, whose cost mushroomed from an initial budget of $63 million to more than $700 million over more than 10 years.
Three men involved in $100M CityTime fraud sentenced to 20 years in prison
Source: Daniel Beekman, New York Daily News, April 28, 2014
Gerard Denault, Mark Mazer and Dmitry Aronshtein were found guilty in November of siphoning away nearly $100 million associated with CityTime in a kickback and money laundering scheme. A Manhattan federal judge gave the men the maximum sentence for each count Monday, but will allow the sentences to be served concurrently, meaning each will spend about 20 years behind bars.
Three Contractors Sentenced to 20 Years in CityTime Corruption Case
Source: Benjamin Weiser, New York Times, April 28, 2014
A federal judge in Manhattan on Monday sentenced three men to 20 years in prison for their roles in the scandal-ridden payroll modernization project known as CityTime, and he also sharply criticized New York City’s contracting procedures for what he called a lack of “adequate and effective oversight.” The sentences fell far short of what federal prosecutors originally sought, but they were substantially more than others imposed in public corruption cases in the city and state. Originally budgeted to cost the city $63 million, the project skyrocketed in cost to $700 million by 2011, a federal indictment charged. Almost all of the more than $600 million that the city paid to its prime contractor, Science Applications International Corporation, “was tainted, directly or indirectly, by fraud,” the indictment said….
CityTime Trial Begins: Ripoff by Consultants Or ‘American Dream’?
Source: Mark Toor, The Chief, October 21, 2013
Three men accused of theft, money-laundering and bribery in the CityTime case bilked the city of millions of dollars, stuffing safe-deposit box after safe-deposit box full of bills and shipping some of the money “all the way around the world and back again,” a prosecutor said in opening arguments Oct. 16. Assistant U.S. Attorney Howard Master listed what he said were the defendants’ ill-gotten gains: “Mark Mazer, 30 million dollars. Gerard Denault, nine million dollars. Dmitry Aronshtein, five million dollars. That’s how much money these three men pocketed.” The defendants were paid hundreds of thousands of dollars a year each, he said, “but their legitimate earnings did not satisfy their greed.” Mr. Mazer and Mr. Denault overbilled the city for independent contractors they hired to do computer programming for the project, he said, and Mr. Aronshtein paid bribes to Mr. Mazer for a piece of the lucrative contracting business….
…The money at issue flowed from fees the city paid for the hiring of independent contractors. Mr. Shargel gave an example of how the staffing situation worked. The city agreed that it would pay $129.10 per hour to SAIC for each Specialist 1 hired. SAIC would pay Technodyne, the contractor in charge of staffing, $110.30 per hour. Technodyne would parcel the requests out among staffing companies, which would get $102.53 per hour. Mr. Shargel gave examples of four consultants hired by the staffing companies who would earn $47 to $52 per hour….
Mayoral candidate Bill Thompson failed repeatedly as controller to intervene as payroll system CityTime ballooned in costs
Source: Greg B. Smith, New York Daily News, July 1, 2013
Bill Thompson signed off on seven authorizations to increase money for CityTime. Federal prosecutors called it a “fraudsters’ field day that lasted seven years.” The effort to modernize the city’s payroll system — a project called CityTime — began with high hopes: a promise of huge savings by bringing the pen-and-paper timekeeping systems for city workers into the 21st century. But from an initial price of $73 million, city spending ballooned to more than $700 million. Some $500 million of that money disappeared into a vast network of overseas bank accounts. Ten people would be indicted. ….
SAIC sacks 3 execs in wake of CityTime scandal probe
Source: David Hubler, Washington Technology, October 25, 2012
CityTime scandal hits SAIC’s bottom line
Source: David Hubler, Washington Technology, March 21, 2012
Contractor Strikes $500 Million Deal in City Payroll Scandal
Source: Michael M. Grynbaum, New York Times, March 14, 2012
SAIC still haunted by CityTime scandal
Source: David Hubler, Washington Technology, December 07, 2011
New York’s $600 Million Fraud Shows Privatization Doesn’t Pay
Source: Mischa Gaus, Labor Notes, July 27, 2011
City Payroll Project Was Riddled With Fraud, U.S. Says
Source: David W. Chen and William K. Rashbaum, New York Times, June 20, 2011
Company Involved in Payroll Project Shuts Down
Source: David W. Chen, New York Times, June 1, 2011
A New Jersey technology company that had been a major contractor on the Bloomberg administration’s troubled CityTime payroll project has abruptly halted operations and terminated its employees’ contracts amid a widening federal investigation, according to a company memo sent out late Tuesday night. The top two executives of the company, TechnoDyne L.L.C., have also left the country and returned to their native India….The United States attorney’s office in Manhattan and the New York City Department of Investigation have accused several employees of CityTime contractors of defrauding the city in an $80 million scheme that began in 2005. But even before the accusations, the automated payroll project had become a liability for Mayor Michael R. Bloomberg because of its costs, which have climbed to about $700 million after an initial estimate of $63 million. On Friday, investigators charged the project’s senior manager, Gerard Denault, with receiving over $5 million in kickbacks, as well as wire fraud conspiracy and money laundering. Mr. Denault urged his employer, Science Applications International Corporation, to hire TechnoDyne as the project’s main information technology subcontractor. TechnoDyne, based here, received $464 million out of $628 million that was paid to Science Applications International. According to the complaint, TechnoDyne funneled $5.6 million to a sham consulting company owned by Mr. Denault via three companies affiliated with TechnoDyne, including one owned by Padma Allen’s mother, and two others in India….
NYC’s Computer-System Cash-Dump Disaster / New York City threw away a mountain of cash over a new computer system. Now, finally, someone is going to pay.
Source: Graham Rayman, Village Voice, January 12, 2011
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… 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.'”
Six charged in $80M ‘CityTime’ rip-off
Source: Bruce Golding and David Seifman, New York Post, December 15, 2010
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. 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. 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. 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.
Fraud Charges in New York’s Payroll Overhaul
Source: John Eligon, New York Times, December 15, 2010
Computer Scamsters Took Mayor Mike to Cleaners for $80M
Source: Tom Robbins, Village Voice, December 15, 2010
Controller John Liu orders firm to fix disastrous CityTime payroll system – or ELSE!
Source: Juan Gonzalez – NY Daily News, September 29, 2010
City Controller John Liu has won a huge victory for New Yorkers by finally shutting down the out-of-control CityTime spigot. Liu successfully rebuffed pressure from Mayor Bloomberg to sign off on another $130 million, three-year contract extension for defense giant SAIC to complete the computerized timekeeping and payroll system that is already years behind schedule and more than 10 times over budget. At the same time, Liu has halted the city’s use of biometric hand scanners – a sore point with city unions.
Audit Report on the Office of Payroll Administration’s Monitoring of the Oversight of the CityTime Project By Spherion Atlantic Enterprises LLC
Source: New York City Comptroller’s Office, Bureau of Audit, FM10-135A, September 28, 2010
See also: Audit brief
City Hall’s Budgetary Exuberance May Soon Fade Away
Source: by Glenn Pasanen, Gotham Gazette (NY), July 13, 2010
….. The CityTime computerized payroll project, significantly over budget, is “a prime example” of mismanagement, according to the comptroller. Juan Gonzales in a June 4 Daily News column pointed out that this system has already cost $700 million, 10 times its original estimated cost. It is not near completion, and the mayor is spending another $100 million on it this year. Earlier in the year the Daily News found that 230 private CityTime consultants received an average of $400,000 each this year. (City computer technicians cost an average $77,000 a year.) At a June 16 labor rally outside City Hall, Lillian Roberts, executive director of the city’s largest union, District Council 37, argued that a 15 percent reduction in city consultant contracts would save over $316 million and thus eliminate all service cuts and preserve city jobs.
‘Consultants’ getting $722M from city for doomed CityTime computer project
Source: Juan Gonzalez, Daily News (NY) Friday, March 26th 2010
The city is paying some 230 “consultants” an average salary of $400,000 a year for a computer project that is seven years behind schedule and vastly over budget. The payments continue despite Mayor Bloomberg’s admission the computerized timekeeping and payroll system – called CityTime – is “a disaster.” Eleven CityTime consultants rake in more than $600,000 annually, with three of them making as much as $676,000, city records obtained under a Freedom of Information request show….
Citytime contract: 1,000% over budget
Source: Diane S. Williams, Public Employee Press (NY), February 2010
DC 37 leaders blasted a 1,000 percent cost overrun on a computer contract — still unfinished after 12 years — that the city gave to former Giuliani officials with ties to the Bloomberg administration. They testified Dec. 18 before the City Council Contracts Committee, which is investigating how the $63 million Citytime deal ballooned to $700 million as the city budget went into the red and the mayor laid off employees….