SAIC To Pay $500 Million In New York CityTime Fraud Scandal


SAIC, the giant federal integrator which was involved in implementing New York City's trouble-plagued CityTime payroll project, has agreed to pay $500 million in restitution and penalties.

McClean, Va.-based SAIC, known more formally as Science Applications International Corporation, on Wednesday also said it agreed to having an independent monitor appointed by the U.S. Attorney's Office for three years to review some of the company's policies and practices.

The Federal government charged SAIC with one count of criminal conduct related to CityTime. However, SAIC said, the government has agreed to defer prosecution because of the company's cooperation and acceptance of responsibility, and that the criminal count could be dismissed in three years if SAIC complies with a deferred prosecution agreement.

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The deal stems from SAIC's implementation of CityTime, a payroll management project which serves 163,000 New York City employees.

The United States Attorney's Office for the Southern District of New York, in a statement issued Wednesday, called the deal with SAIC the "largest known single recovery in a state or municipal contract fraud case."

The deal between the government and SAIC calls for SAIC to forfeit a total of $500,392,977 to the Department of Justice. That includes $370,392,977 in restitution to the City as a victim of the fraud and a $130 million fine payable to the United States.

SAIC will also forgive over $40 million it is still owed by the City in connection with the CityTime project, the U.S. Attorney's Office said.

SAIC in 2000 became the lead contractor for CityTime, a projected aimed at modernizing New York City's timekeeping and payroll systems which at the time had a contract value of about $73 million. According to the U.S. Attorney's Office, SAIC in 2003 appointed Gerard Denault as CityTime program manager, who then helped SAID hire Technodyne as a single-source subcontractor on the project.

However, the U.S. Attorney's Office said, Technodyne, through its principals Reddy Allen and Padma Allen, agreed to pay kickbacks to Denault and others in connection with the project as well as defraud the City into overpaying for the project. SAIC failed to perceive or ignored irregularities with its Technodyne relationship, and some of its managers disregarded warning signs of possible corruption, the U.S. Attorney's Office said.

"Consequently, SAIC failed to take actions that might have detected, disrupted or curtailed the charged conduct, thereby allowing the City to be victimized repeatedly and systematically for more than seven years," the U.S. Attorney's Office said.

Reddy Allen, CEO of Technodyne, and his wife Padma Allen, Technodyne CFO, in June fled the U.S. after being subpoenaed to appear before a grand jury in the case.

The U.S. Attorney's Office said that SAIC accepted responsibility for the illegal conduct of its former employees, has cooperated fully the Government's investigation, and has "voluntarily implemented institutional reforms and terminated the employment of managers who directly supervised Denault and CityTime."

John Jumper, SAIC CEO, said in a statement that his company welcomes the settlement as part of an effort to build a company dedicated to high standards of ethics and performance for customers.

"We have implemented strong improvements to our compliance program and have new leadership in place. Our financial position is solid, with a strong balance sheet and strong, predictable cash flow. ... Today's SAIC remains dedicated to the highest level of business ethics, and is better able to compete for business, attract great talent, and generate shareholder value for our investors," Jumper said in the statement.