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CityTime Fraud Tab Now $600 Million

July 18, 2011
By Public Employee Press – DC 37 AFSCME

The arrests keep coming, and it’s not just a few “bad apples” at CityTime.

Virtually all of the $600 million the city paid the primary contractor on the automated payroll project is “tainted, directly or indirectly, by fraud,” Manhattan U.S. Attorney Preet Bharara said June 20 as he announced charges against four more executives on the contracted-out operation.

”This vast scale of inefficiency and corruption would be unimaginable with projects run by civil service workers,” DC 37 Executive Director Lillian Roberts said.

On June 14, Bharara announced that Carl Bell, the chief systems engineer of the project’s primary contractor, Science Applications International Corp., pled guilty to taking $5 million in kickbacks. On June 20 the federal prosecutor charged that top execs Reddy and Padma Allen of Technodyne, the primary subcontractor, got $5 million apiece to steer work to other contractors.

A conduit for millions of dollars in kickbacks, Technodyne was charged with money-laundering conspiracy. The company received $400 million for its work on CityTime, whose cost ballooned from $63 million in 1998 to more than $720 million today.

The scandal has ruined Mayor Michael R. Bloomberg’s image as a manager with an ethos of businesslike efficiency.

”CityTime shows the risk of doling out our tax dollars without adequate oversight,” Roberts said.

According to City Comptroller John C. Liu, the charges show “how flawed the management of the CityTime project was.” A few months ago, Liu worked out an agreement with Mayor Bloomberg to phase out SAIC and give the work to city employees.

The initial arrests in the case occurred in December as four consultants and two others were charged with an $80 million fraudulent scheme. The prosecutor identified consultant Mark Mazer as the ringleader. Representing the city Office of Payroll Administration, Mazer allegedly approved time sheets for other consultants who were on leave, who had been fired and who worked less time than reported.

The CityTime consultant staff grew from 150 in 2005 to 300 in 2007, and the city was billed $150 an hour, or more than $300,000 a year, for many of them.

In May, the Manhattan district attorney charged SAIC executive Gerald Denault – the program manager for CityTime – with accepting $5.6 million in kickbacks.

Victor Natanzon, owner of the sub-subcontractor Prime View Inc., pled guilty in February to paying millions of dollars in bribes and kickbacks and is now cooperating with the district attorney.

For Mazer, the corrupt enterprise was a family affair. He routed funds to shell companies controlled by his mother, Larisa Medzon, and his wife, Svetlana Mazer, who were charged in December in the scheme. Also charged were Mazer’s now deceased uncle, Dmitry Aronshtein, who owned a firm that allegedly got $55 million in consulting fees, and his cousin, Anna Makovetskaya Mazer, who was charged in February with involvement in the fraud.

“The wave of CityTime arrests is a clear signal that this nonsense has to stop, and the work needs to be brought in-house,” said DC 37 Associate Director Henry Garrido, who heads the union’s ongoing investigation of the city’s $10.5 billion annual spending on over 17,000 outside contracts.

So far, U.S. Attorney Bharara has recovered $38 million from the crooked contractors.

Padma Allen, Reddy Allen and Technodyne allegedly concealed the kickbacks they were paying Denault and Bell by wiring funds to a bank account in India.

The Allens, naturalized U.S citizens, are missing, and prosecutors believe they have fled to India.

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