NEW YORK, March 14 (Reuters) - Computer contractor
SAIC will pay New York City more than $500 million under a deal
to resolve its role in a fraudulent scheme that overcharged the
city for a payroll time-keeping system, officials said on
"This resolution is - as far as our office is aware - the
largest in history for any city or state fraud," Preet Bharara,
the U.S. attorney for the Southern District of New York, said at
a news conference with Mayor Michael Bloomberg. "The city will
be made whole," Bharara added.
Science Applications International Corp, a Fortune 500
company with 41,000 employees, was hired in 2000 as the primary
contractor for New York's CityTime project, which automated
time-keeping for city employees.
Critics say city employees could have done the work far less
expensively. Bills spiraled out of control over the years,
hitting $692 million, and city investigators brought federal
prosecutors into the probe after uncovering payments routed
through shell companies.
"If you attempt to defraud the public, you will be found and
you will regret it and you will face justice," said Bloomberg,
who took office in 2002.
SAIC agreed to pay $370.4 million in restitution to the
city, as well as a penalty of $130 million, according to a
deferred prosecution agreement made public on Wednesday. The
city will get $96 million of the penalty, with the rest going to
the federal government.
In addition, New York City will not have to pay about $40
million of the bills it was charged.
SAIC, which gets 93 percent of its business from government
contracts, also consented to the filing of a charge accusing it
of conspiring to commit wire fraud.
Federal prosecutors have also seized or placed liens on $52
million of assets from eight criminal defendants. If prosecutors
win their cases against these individuals, the total recovery
could approach $600 million, Bharara said. A subcontractor,
called Technodyne, also is a criminal defendant.
FRAUDSTERS' FIELD DAY
SAIC, which agreed to new whistleblower protections and
other ethics safeguards, had expected to make a profit of about
$60 million from CityTime, Bharara said.
The company "placed profit ahead of principle time and time
again ... that is why we insisted that the company pay from its
own pocket every penny," said Bharara.
Investigators "uncovered ... a fraudsters' field day that
lasted seven years," he said.
Bloomberg said New York did get a money-saving,
"functioning" time-keeping system that is now used by about
160,000 employees, which is a little over half of the city work
CityTime's final cost will range from $134 million to $186
million, depending whether the frozen bank accounts and
properties of the eight criminal defendants become part of any
SAIC agreed to continue to cooperate in the probe for
another three years or the end of the legal process, including
any prosecutions or appeals. The company's legal challenges are
not yet over as the prosecutors can still probe SAIC for
criminal tax violations.
"The company avoided outright indictment only because of its
full cooperation with the investigation, its lack of history of
similar conduct, and its commitment to making things right
and making sure nothing like this ever happens again at SAIC,"
(Reporting by Joan Gralla and Jonathan Stempel)
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