Federal prosecutors Monday announced new charges in their ever-widening fraud case against outside contractors hired by the Bloomberg administration to build a new timekeeping system.
CityTime has taken more than 12 years and $700 million to complete, but delays and cost overruns have proved to be just the beginning of the story. Authorities on Monday revealed that the primary contractor's chief systems engineer, Carl Bell, pleaded guilty to fraud and kickback charges and is cooperating with the investigation. Prosecutors also handed down fraud charges against two New Jersey executives who ran Technodyne, the staffing firm that was the main subcontractor on the CityTime project.
Authorities believe that Reddy and Pema Allen, who along with their company were named as defendants in Monday's indictment, have fled to their native India. The husband-and-wife team abruptly ceased the operations of Technodyne after they were named in court papers last month when a prime contractor was arrested on charges that he received kickbacks for steering business to the company.
Mr. Bell, meanwhile, worked for Virginia-based Science Applications International Corp., the city's lead contractor on CityTime. He pleaded guilty to several counts of wire fraud for receiving kickbacks.
Monday's superseding indictment listed nine defendants in the expansive probe. Among the list is Gerard Denault, who managed the project for Science Applications International and was among the project's most public and adamant defenders. Mr. Denault pleaded not guilty last month.
Mr. Bell's was the second guilty plea. A tenth defendant died earlier this year from a heart attack. Preet Bharara, U.S. attorney for the Southern District of New York, said the investigation would likely ensnare others. Calling the problems systemic, authorities said in the indictment that the $600 million the city paid on the project from 2003 through 2010 was “tainted, directly or indirectly, with fraud.”
“The corruption in CityTime was epic in duration, magnitude and scope,” Mr. Bharara told reporters during a press conference announcing the charges. “The CityTime project was corrupted to its core by one of the most brazen frauds ever committed against the city of New York.”
Authorities alleged that contractors manipulated city officials to expand the breadth and cost of their work. They were able to persuade city officials to change the project from a fixed-price to a fixed-level of service, putting the city—not the contractors—on the hook for cost overruns.
Mr. Denault is alleged to have received $9 million and Mr. Bell $5 million in kickbacks. Another defendant, Mark Mazer, allegedly took $25 million as a payment to steer contracts to cronies Dmitri Aronshtein and Victor Natanzon, who pleaded guilty in February.
The city Department of Investigation, which is also working on the case, said the fraud has forced the city to more tightly manage outside contracts. One of the changes: fewer outside contractors.
Okay, let's repeat the meat of this story today.
First, the US Attorney says the CityTime project was "corrupted to its core."
He says the fraud was "epic in magnitude, duration and scope."
He says $600 million dollars the city paid for the project was either directly or indirectly tainted by the criminality.
And he calls this crime one of the "most brazen frauds ever committed against New York City."
And this happened on Bloomberg's watch - the self-proclaimed genius of corporate management and fiscal prudence.
This is coming to light even as Bloomberg goes ahead with $900 million in technology spending in the DOE next year for tech upgrades while he threatens to lay off thousands of teachers to save $377 million.
Given the track record the mayor has on oversight of these hundred million dollar projects, the tech spending at the DOE must be halted IMMEDIATELY until an independent auditor can go through it with a comb and see just where then money is going.
Next, Bloomberg must PUBLICLY answer how "one of the most brazen frauds ever committed against New York City" happened on his watch.
He likes to talk about accountability and performance at the DOE.
Okay, great - how about he takes some personal responsibility for how well he performed oversight of the CityTime mess?
This scandal is now WORSE than the Koch scandals.
Sure, we don't have high level politicians in the Bloomberg administration trying to kill themselves in Queens parking lots, but we do have the US Attorney calling this one of the worst frauds ever perpetrated against the city.
Can't wait to hear how he announces teacher layoffs at the end of this week even as the news of this scandal grows worse and worse and the enormity of the crime and the mayor's own failures grow larger and larger.