Public Employee Press

Three CityTime crooks get 20 years each
How DC 37 helped smash a $700 million contracting scheme

By GREGORY N. HEIRES

THE RECENT JAILING of three Bloomberg administration consultants in a $100 million fraud scheme involving the CityTime automated timekeeping system highlighted DC 37's success in blowing the whistle on the contracted-out project.

CityTime - whose cost soared from $63 million to over $700 million - was the centerpiece of DC 37 ­Executive Director Lillian Roberts's initially lonely decade-long crusade against the waste and corruption of ex-Mayor Michael Bloomberg's outsourcing policy.

What began with a rank-and-file workers' protest against clocking in on palm scanners was transformed under the leadership of Roberts and DC 37 Associate Director Henry Garrido into a powerful campaign that led to City Council hearings, audits by former city Comptroller John Liu, union studies and publications on contracting out, media outreach, greater controls over the city's $10 billion annual spending on contractors and consultants, a special meeting of the city's Congress members at DC 37 and ultimately a criminal probe by U.S. Attorney Preet Bharara.

"CityTime is probably the greatest municipal corruption scandal in New York City's history," said Roberts. "It is a case study of the problems with contracting out: cronyism, theft, inefficiency, union busting, undermining civil service and the lack of accountability to taxpayers and the public. We are proud to have played an important role in exposing the malfeasance."

An agreement that Liu forced on Bloomberg brought the work in-house after the lead contractor, Science Applications International Corp., agreed to return about $500 million to the city to avoid further prosecution. Now about 200 members of Electronic Data Processing Employees Local 2627 run the CityTime payroll system.

Fighting for good government

The scandal was a major political embarrassment for Bloomberg, who had pledged to bring business-like efficiency and the latest technological know-how to the city.

"As a union representing public service workers, we fight to protect our members' jobs and we believe as much of the public's work as possible should be done by city employees," said Garrido, who leads the union's white paper project on contracting out and uncollected revenue. "But beyond our narrow interests, CityTime was a matter of fighting for good government, protecting taxpayers' dollars and demanding justice."

Local leaders and activists have helped in the anti-contracting-out campaign. The core group that has worked closely with Garrido to investigate CityTime and other contractors and consultants includes former Local 375 1st Vice President Jon Forster, Local 2627 President Robert Ajaye, 2nd Vice President Gene Olmstead and former President Edward W. Hysyk, now secretary of the DC 37 Retirees Association.

The three defendants were convicted in 2013 and sentenced April 28 to 20 years in prison for their role in CityTime. The corrupt contractors lined their pockets with millions of dollars as they inflated bills, took kickbacks, funneled millions into shell companies, hid stolen money in overseas accounts, and maintained a payroll bloated with excessively paid employees.

Convicted crook Gerald Denault, 52, was project manager for prime contractor SAIC, a Fortune 500 company that gets over 90 percent of its business from government contracts. Under a 2012 agreement with the federal prosecutor, SAIC paid back $466 million to the city.

Also sentenced were Mark Mazer, 50, a former consultant to the city's Office of Payroll Administration, and his uncle, Dmitry Aronshtein, 53, who worked for a subcontractor. Three more convicted CityTime crooks are to be sentenced in June. Reddy and Padma Allen, the principals of contractor Technodyne LLC, fled to India to escape prosecution on fraud and money laundering charges, according to the U.S. Attorney. Former city Office of Payroll Administration Director Joel Bondy, who had been a business partner of a CityTime consultant who was paid $490,000 a year, resigned.

A battle from the beginning

Union activists denounced CityTime from the beginning. Concerned about their privacy, Local 375 members protested the timekeeping system's use of hand scanners for clocking in.

"Most of our members never had to clock in before CityTime," said Forster, who coordinated the local's grassroots, fight-back campaign beginning in 2006. "Local 375 represents professional workers who often work on multi-million-dollar projects with considerable autonomy, so this wasn't just a philosophical objection to control by ‘Big Brother' but also a practical concern about our dignity on the job."

"We soon began to smell a rat," said Forster, who represents the local on the District Council 37 Executive Board and worked closely with DC 37 on the campaign. The effort involved organizing demonstrations at agencies as they rolled out the new electronic payroll system. Forster was honored by the Civil Service Merit Council for his work exposing CityTime.

Under pressure from DC 37, the city agreed to give workers the option of using a computer-based timekeeping system. More highly paid workers were generally allowed to use a computerized weekly system after local leaders and top DC 37 officials held several meetings with the city Office of Labor Relations.

Daily News columnist Juan Gonzalez exposed the project with hard-hitting investigative reports. Local 375 helped him by passing along thousands of documents obtained through a legal investigation that included a freedom of information request.

To focus attention on CityTime's cost overruns and cronyism, DC 37 reached out to the City Council Contracts Committee, chaired by Joseph P. Addabbo Jr. and later by Public Advocate Letitia James, who became a leader in the battle to rein in Bloomberg's excessive contracting out.

"This contract is dangerous," James charged at a hearing in 2009. "The contractors have an incestuous relationship."

As he handed down the sentences, U.S. District Judge George Daniels called CityTime "a classic tale of greed and corruption" and sharply criticized the city's contracting process, which he said "lacks adequate and effective oversight" and "is an invitation for not just waste, but corruption and fraud."

Bloomberg defended the project and seemed unconcerned about its outrageous cost. When one local leader informed the billionaire ex-mayor that some CityTime contractors were getting up to $1,000 a day, Bloomberg said he felt private-sector workers are generally paid what they deserve.

As the Bloomberg administration came under heavy political criticism because of CityTime and other contracting scandals - such as the late, over-budget emergency 911 fiasco - DC 37 lobbied to strengthen the local law that regulates contracting.

Bloomberg vetoed the changes, but the City Council overrode him in December 2011 and enacted amendments that improve civil servants' protection against being displaced by contracting out and expand the kinds of contracts covered. In a move applauded by the union earlier this year, city Comptroller Scott Stringer tightened his office's oversight of information technology contracts.

More than 350 subcontractors and consultants were each getting $300,000 a year for working on CityTime.

"It's all about greed," said Local 2627 President Robert Ajaye. With average salaries of $74,000, Local 2627 members could have handled the project at a substantially lower cost than the contractor, he said, reporting that members were outraged at working alongside outsiders who were paid up to five times the civil service pay. The consultants were more interested in filling their pockets with taxpayers' money and stealing than improving the city government's efficiency, Ajaye said.

"In the case of CityTime, the city did not listen to its front-line, unionized staff. That resulted in vast waste," said Civil Service Technical Guild Local 375 President Claude Fort.

911 upgrade: over-budget and overdue

Just weeks after the three CityTime honchos went to jail, Mayor Bill de Blasio halted work on another contracted-out technology mess left behind by the Bloomberg administration, the upgrade of the city's emergency 911 system, which is $700 million over budget and years behind schedule.

The cost of the project, which DC 37 has monitored and criticized, climbed from $1.3 billion in 2005 to over $2 billion. When it went online last year, the new system was plagued by problems, which management tried to blame on employees. The union warned of the project's dangers to public safety and its cost overruns, missed deadlines, understaffing and excessive overtime.

"CityTime shows how vulnerable the city and the taxpayers can be when there is no proper oversight. It is encouraging to see that the new administration and other elected officials, such as Comptroller Stringer and City Council members, are taking a serious look at the problems of contracting out," Roberts said.

"We've always believed CityTime was just the tip of the iceberg," Roberts added.