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SAIC Agrees to Forfeit $500 Million for CityTime Project Debacle

Company says it will be more watchful next time (with a little help from an outside monitor)

3 min read
SAIC Agrees to Forfeit $500 Million for CityTime Project Debacle

Yesterday, in what Preet Bharara, the United States Attorney for the Southern District of New York, and Rose Gill Hearn, the Commissioner of the New York City Department of Investigation (DOI) called (pdf) the "largest known single recovery in a state or municipal contract fraud case," Science Applications International Corporation (SAIC) agreed to "forfeit a total of $500,392,977 to the Department of Justice, and forgive more than $40 million still owed by the City to SAIC in connection with the CityTime project."

New York City will get $466 million of the $500 million as compensation (Mayor Bloomberg had originally demanded $600 million). It also states that the New York paid SAIC $589 million since 2000.

As you may recall, the CityTime project was the effort to develop a secure, web-based time and attendance system for the 80 Mayoral and other agencies of the City of New York that was originally estimated to cost some $63 million and ended up "costing" $720 million. Last year, Bharara declared the project a "vehicle for unprecedented fraud" in a press release announcing charges against several project participants.
SAIC's press release this week to its employees put an interesting spin on the whole CityTime affair and its part in it. The release starts out saying that the settlement allows the company to "move forward as a better, stronger company dedicated to the highest standards of ethics and customer performance." Of course, to make sure that it keeps up its dedication, an independent outside monitor will be appointed to watch over its every move for the next three years.

The press release goes on to claim that SAIC was "victimized" too, by some very bad actors. What the release doesn't say, however, is that those nasty managers (both its own as well as its sub-contractors) were the very ones over which it failed to provide any oversight, even after the company was warned back in 2005 that something was seriously amiss in the project. Perhaps it was because those very managers were pulling boatloads of cash into SAIC's coffers?

And in the press release's ultimate "break out the violin" moment, SAIC complains that the company isn't getting any kudos for the great IT system that it produced.

"Frequently overlooked in this case is the fact that SAIC developed and delivered a world class workforce management system for New York City. The system covers 163 000 city workers and has increased the effectiveness and efficiency of the city's administrative processes. In the end the capabilities of our magnificent solution have been obscured by the self serving, unethical behavior of people we assumed were loyal members of our team. We must dedicate ourselves to never letting this happen again."

The press release continues to blather on about how this experience will, in the future, make it a better corporate citizen, it promises from now on to do the right thing, and so on.

Mayor Bloomberg's own press release on the settlement weirdly parallels SAIC's. With righteous indignation, His Honor trumpets that:

"Today’s settlement is a major victory for taxpayers, and just as importantly, it is a major a victory for justice and public integrity. Our Administration has zero tolerance for corruption and since day one we have focused on rooting out corruption and preventing it from occurring in the first place."

Okay, but maybe the Mayor can explain further exactly which day he's counting from. Even after the scandal  morphed from outrageous cost overrun to outright fraud, Bloomberg sought to play down the CityTime problems as just being a natural result of building big, complex IT systems in which the city "actually did a pretty good job," even in retrospect.

Like SAIC, the Mayor conveniently forgot to mention in his press release the city's lack of oversight of its own managers who—through colossal incompetence and overlooked conflicts of interest, at least one of which featured actual criminal intent (pdf)—allowed the fraud to flourish for seven years before being "discovered."

Maybe sometime the billionaire businessman-mayor will explain how that level of risk mismanagement was allowed to happen on his watch.


Photo: iStockphoto

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