Thursday, January 6, 2011

Feds Begin Probe of Disastrous CityTime Project

By Eric Yun

CityTime was already in hot water as the $63 million project ballooned to more than $700 million, and that was before federal prosecutors charged four men working on the project with stealing $80 million from the city.

The Office of Payroll Administration (OPA) began CityTime in 1998 to develop an automated timekeeping system. City officials said the new system would ensure employees would get paid more accurately, efficiently and securely.

As early as 2004, the expected completion year, there were concerns about the rising cost of the program. In 2008, Councilman, Joe Addabbo, now a state Senator, held hearings on the project. Also, Daily News’ reporter Juan Gonzalez revealed that a whistleblower sent a letter describing possible fraud to the city Department of Investigation (DOI), but the whistleblower claimed the letter was ignored.

In 2010, investigators from the Manhattan U.S. Attorney’s office and DOI found evidence of foul play. Working from a position of authority, prosecutors said Mark Mazer, hired as a consultant to conduct quality assurance on the CityTime project in 2001, approved contracts for consulting firms run by Dmitry Aronshtein, who prosecutors believe is related to Mazer, and Victor Natanzon.

The two firms were paid over $75 million, and prosecutors say at least $24.5 million was kicked back to shell companies linked to Mazer.

He also allegedly developed a scheme to hide his illicit dealings, including routing funds to shell companies and corporations controlled by family members, submitting false vendex forms to the city and telling others in the project that he discovered the firms run by Aronshtein and Natanzon through casual conversations.

Prosecutors also said the three men and a fourth conspirator, Scott Berger, generated and approved fraudulent timesheets for consultants at the suspect firms. The falsified timesheets are estimated to have cost the city over $200,000.

The four men were charged with conspiring to commit wire fraud, which carries a maximum sentence of 20 years in prison and a fine of $250,000. Mazer, Aronshtein and Natanzon were also charged with conspiring to launder the proceeds of the fraud conspiracy, which carries a maximum sentence of 20 years in prison and a fine of $500,000 or twice the value of the laundered funds. Mazer’s wife, Svetlana Mazer, and his mother, Larisa Medzon, also face the second charge.

“Mark Mazer and his cohorts allegedly used the city as their own personal cash cow,” said Manhattan U.S. Attorney Preet Bharara. “In an ironic twist, funding for CityTime, a project intended to prevent payroll waste, fraud and abuse, was itself al- legedly bilked in part by fraudulent timekeeping.”

Since the allegations surfaced on December 15, the fallout has been swift. Joel Bondy, OPA’s Executive Director, resigned on December 23 after Mayor Michael Bloomberg suspended him without pay.

Federal prosecutors also subpoenaed the records of Science Applications International Corporation (SAIC), the lead contractor on the project, which subcontracted the fraudulent consulting firms. Federal prosecutors have not charged SAIC with wrongdoing but want to investigate if large sums of money could be stolen without notice, according to the New York Daily News.

Bloomberg, who supported the CityTime project as expenses continued to rise, finally admitted the program was a “disaster” in March. In response to the criminal allegations, he said, “Any vi- olation of the public’s trust is categorically unacceptable and we are implementing a series of changes to reform oversight of the CityTime project.”

Reforms include appointing Deputy Mayor Stephen Goldsmith and Comptroller John Liu to direct oversight of the project. The Mayor also promised he would work with federal investigators to conduct a thorough audit to recoup the taxpayer dollars that were stolen.

Still, CityTime comes as a blow for Bloomberg, who for years campaigned as a strong fiscal and business leader. On his weekly radio show he said that the $80 million simply “slipped through the cracks.”

Politicians were not pleased that Bloomberg was asleep at the wheel.

“I wonder what we could have done with the millions of dollars wasted if the Mayor’s administration had only realized it back in 2005, when we first raised the issue about CityTime, and possibly could have prevented hurting employees, making education cuts and closing firehouses,” said Addabbo.

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