NYC employee timekeeping project used to funnel $80 million in bogus billings to consultants

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In what appears to be a combination of rampant fraud, and a gross failure to monitor a city-managed accounting project, the cost of a new automated employee timekeeping system has soared to over $700 million from its initial estimate of $63 million, and is at least six months behind schedule.

Earlier this year, Mayor Michael Bloomberg, called the CityTime program, which was supposed to save money by automating and consolidating employee time records, a “disaster.” Now it’s clear why the project was spinning out of control.

On Wednesday, federal prosecutors in New York filed criminal charges against the consultants involved in overseeing the project, claiming they used the CityTime project to steal $80 million in a long-running fraud and kickback scheme.

The alleged ringleader of the operation, Mark Mazer, was accused of funneling $76 million of contract monies to Dmitry Aronshtein, said to be a relative, and Victor Natanzon. Together with another co-conspirator, Scott Berger, the group submitted phony timesheets and contracts supporting the bogus payments.

Prosecutors say the fraud was initiated by Mazer who was hired by the city to supervise quality assurance on the project. Mazer was paid $4.4 million by the city to help coordinate the project. Mazer’s wife, Svetlana, and his mother, Larisa Medzon, received kickbacks from Aronshtein and Natanzon totaling $24.5 million, through a series of shell companies that were set up to look like legitimate vendors.

The fraud started to unravel when the city’s Department of Investigation learned in June that a CityTime consultant was being paid by an unauthorized company, DA Solutions, instead of the prime contractor, Science Applications International, according to court papers. DA Solutions was traced back to Aronshtein.

Another unauthorized company, Prime View, owned by Natanzon, was found to have also paid a number of consultants. Both Prime View and DA Solutions were hired by Mazer.  Even though Mazer was a subcontractor, he had substantial authority in the city’s department handling the project and was able to approve contracts and billings of consultants.

U.S. Attorney Preet Bharara pointed out the irony that “a project intended to prevent payroll waste, fraud and abuse was allegedly bilked in part by fraudulent timekeeping.”

The city official responsible for overseeing the project is Joel Bondy, executive director of the city’s Office of Payroll Administration. Before coming to work for the city in 2004, Bondy worked for Spherion, the company that hired Mazer and Berger on the project.

At a City Council meeting last year, Bondy praised the two men saying they “have proven themselves in the past and currently to be highly capable and competent in their jobs. The reason they are working in these positions is because of that competency.”

Bondy did not respond to requests for comments after news of the arrests were made.

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