Authorities: Nearly all of NYC’s $600M-plus payments on payroll project tainted by fraud

The Washington Post 06/20/2011 18:40

A city payroll technology project that has cost taxpayers more than $600 million was “corrupted to its core,” with nearly the entire sum tainted by an epic fraud that involved hundreds of contractors, systemic overbilling and an international money-laundering conspiracy, federal prosecutors said Monday.

The indictment unsealed Monday alleges that the cost of the project, known as CityTime, ballooned tenfold as multiple layers of contractors and subcontractors conspired to hire consultants the city didn’t need, inflate the prices the city was charged and multiply the hours for which the city was billed.

“The corruption on CityTime was epic in duration, magnitude and scope,” U.S. Attorney Preet Bharara said as he detailed the new charges. “Today we allege what many have long feared. The CityTime project was corrupted to its core by one of the largest and most brazen frauds ever committed against the city of New York.”

One company and eleven people have now been charged in the case, which prosecutors laid out in detail Monday as they spelled out how a project that began with a $63 million price tag in 1998 had grown into what they said was an international conspiracy with lead contractors earning a set dollar amount in kickbacks for each hour worked by consultants — an incentive to hire unneeded staff and falsely inflate the number of hours billed to the city.

In two earlier court filings authorities had said the fraud involved some $85 million, but Monday’s indictment said the ongoing investigation had uncovered a deceit that reached much further. “Virtually the entirety of the well over $600 million that the city paid ... on the CityTime project was tainted, directly or indirectly, by fraud,” the court papers said.