New York City's $720 Million CityTime Project a Vehicle for Unprecedented Fraud Says US Prosecutor

".. virtually all of the $600 million that the City paid to SAIC for CityTime was tainted, directly or indirectly, by fraud."

So states a line in the Manhattan US Attorney Preet Bharara's press release (PDF) announcing the charges against four more defendants involved in the alleged defrauding of New York City in the development of its CityTime payroll and time keeping system.

According to the press release, the:

"Alleged criminal scheme extended across virtually every level of [the] CityTime Project; Contractors and subcontractors systematically inflated costs, overbilled for consultants’ time, and artificially extended [the] completion date."

I guess that helps explain why the project grew from $63 million to over $720 million. When an IT project is that out of whack, it is too bad to be true.

The press release also said that a chief systems engineer in the New York office of Science Applications International Corporation (SAIC) from 2003 to 2011 by the name of Carl Bell pleaded guilty to multiple criminal charges for his part in the scheme.

SAIC, the CityTime Project prime contractor, has had no comment on the scandal in which it has made tens of millions of dollars in profit. SAIC, which touts "constant and deliberate commitment to ethical performance and integrity" certainly has a lot of explaining to do about how and why it let this project spin completely out of control. Where has its corporate oversight and management of the project been over the past decade?

Just from an IT project management and development perspective - which again SAIC touts itself as one of the best in the business - it leaves one to wonder whether the huge profits rolling in every month form the CityTime Project trumped good sense.

I can hardly wait to see how the SAIC tries to spin this fiasco to investors in its next SEC 10-K report. At the very least, SAIC should immediately return any project management fees it received on the CityTime project, if not most of the money New York City paid the company over the past decade while the alleged fraud was active.

I can also hardy wait to see how Mayor Michael Bloomberg spins this news as well. Back in May, Mayor Bloomberg said the city had done "a pretty good job here, in retrospect" in regard to the CityTime project. If CityTime's management by the City of New York is defined as a "pretty good job" - especially months after the scandal broke - I hate to see what the Mayor considers a poor job to be.

The US Attorney's press release went on to say that:

"...  the corruption on the CityTime project was epic in duration, magnitude, and scope. As alleged, CityTime served as a vehicle for an unprecedented fraud, which appears to have metastasized over time."

The press release quotes New York City Department of Investigation Commissioner Rose Gill Hearn as saying:

"The top consultants on the project stand indicted, the scope of the fraud has been further revealed, and $38 million and counting has been seized or frozen. IT contracts that involve hundreds of millions of dollars and multiple layers of consultants are a new frontier for fraud..."

You can read more of Commissioner Hearn's comments on the shenanigans on the CityTime project here (PDF).

Two of the indicted are Reddy and Padma Allen, the two top executives of TechnoDyne L.L.C., the company alleged to be at the heart of the fraud and which received $400 million in CityTime subcontracts from SAIC. TechnoDyne itself was indicted as well.  According to this article at the New York Times, the Allens are:

"... a married couple who are naturalized American citizens from India. Padma Allen, at least, was a businesswoman of some standing: a medical doctor by training, she attended a White House briefing in December on minority business issues, and she was named one of Ernst & Young’s entrepreneurs of the year in New Jersey in 2010. "

However, the New York Times said, the couple has apparently fled to India as the fraud was being uncovered "and their whereabouts are unknown to federal authorities."

I won't bother going into the details of the fraud, which are complex, and which will make for a good book for someone to write someday on how to easily loot a city government via an IT project. You can read the press release (PDF) that gives a summary of the 43-page indictment outlining how the alleged fraud took place, the Times article above, or this story at the Wall Street Journal.

I will not be surprised to read in the future that every SAIC IT project done for New York City and the State of New York in the past decade receives some additional scrutiny by both auditors and law enforcement.