Over a period of five years, supposed information-technology consultants allegedly looted the coffers of the Office of Payroll Administration with inflated invoices and doctored timesheets, all under the watch of Bloomberg appointee Joel Bondy, according to the criminal case filed in Manhattan federal court.
Fallout from the scandal continued yesterday.
Spherion, the IT consulting firm that used accused fraudster Mark Mazer and crew as a subcontractor on the CityTime project, suffered another blow when the city Department of Education suspended a separate contract for tech services.
"In light of recent developments, we have stopped payments to Spherion and will be conducting an expedited investigation into their contracts with the DOE to ensure that city funds were used in a lawful manner," said DOE spokeswoman Barbara Morgan.
The Florida-based company, which was not charged with any wrongdoing, received $17.3 million in fees from the Department of Education since 2003, records show.
The firm has collected tens of millions of dollars in fees from the city over the past five years, including $40 million from the Department of Information Technology and Telecommunications.
How the $80 million scam worked, according to federal charges:
1. Joel Bondy, head of Office of Payroll Administration, hires Mark Mazer as a “quality assurance” consultant for the CityTime payroll system. Mazer is granted a large budget to hire subcontractors and issue work orders.
2. Mazer awards “sub-subcontracts” worth $55 million to DA Solutions, the company of his uncle, Dmitry Aronshtein; $20 million to friend Victor Natazon’s Prime View; and $1.4 million to friend Scott Berger’s SRB Consulting.
3. Each man funnels one-third of his fees back to Mazer through shell companies created by Mazer’s wife, Svetlana, and mother, Larisa Aronshtein Medzon (Aronshtein’s sister, bottom right). Berger, Natazon and Aronshtein wire Mazer $24.5 million into various bank accounts connected to the shell companies.
4. Meanwhile, Aronshtein and Natazon pay workers $20 to $40 per hour while billing OPA up to $150 per hour. Timesheets are submitted for contract workers who had been terminated or were on vacation.
The problem here is that Bloomberg likes to outsource EVERYTHING to outside consultants.
And he likes to outsource the oversight of outside consultants to other outside consultants:
City Councilwoman Leticia James, who held hearings on the system last year, said it's time to scrap the project. She proposes that the city modernize its payroll system using in-house employees, instead of outside contractors. "The reality is is that we should look at all of these private consultant contracts in the city of New York. We should not privatize municipal work, particularly at these challenging times. We should better use municipal workers and employees and avert all of the layoffs," she said.
Carol Kellerman, the head of the Citizens Budget Commission, said the problems came when the city began to hire outside contractors to oversee other outside contractors. "You definitely need people inside the government to monitor the contracts to assure that basic performance metrics are being met, that there are benchmarks of performance, and to really kind of go out there and watch what's happening," she said. She said it's akin to taking your car to a mechanic you don't know.
Bloomberg continues to displace blame for this onto others and play victim, claiming he trusted Joel Bondy, the Director of Payroll Administration, and Bondy betrayed that trust.
The warning signs of a project that was supposed to cost $63 million and should have been finished years ago but was still not even half complete and was now costing over $700 million were giant red flags waving in the wind saying "Do Some Oversight On This, Please!!!"
Bloomberg screwed this up big time.
And now he wants to avoid any accountability for it.
But he MUST be held accountable.
First, he must be made to explain why he took no action on the CityTime account long after the City Council, John Liu and Juan Gonzalez had pointed out problems with the system.
Next, ALL outside consulting contracts and no-bid contracts started by the Bloomberg administration must be scrutinized.
The Spherion contracts with the NYCDOE need to be looked at very closely.
They subcontracted the payroll project out to crooks.
Wanna make a bet they've subcontracted some DOE business out to crooks too?