Outsourcing Company to Pay Record $500 Million Settlement in CityTime Investigation

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[author: Steve Semerdjian]
Science Applications International Corp (SAIC) has agreed to pay more than $500 million in fines and penalties to settle federal charges alleging that the outsourcing company overcharged the city of New York for work and ignored kickbacks on its CityTime project, an employee time-management system that ran more than $500 million over budget. Most of the money will be returned as restitution to the city.

The CityTime project was launched in 2000 with an original price of $73 million, but eventually cost the city more than $600 million. Among the allegations in the investigation by the Manhattan U.S. Attorney’s Office, which was prompted by a whistleblower complaint, are that at least two SAIC project managers conspired to accept kickbacks from subcontractors and that SAIC failed in its obligation to monitor its subcontractors. The excess cost to the city is alleged to be largely the result of the actions by one of those subcontractors, Technodyne, which prosecutors assert engaged in a scheme of overbilling and kickbacks, including that Technodyne principals facilitated kickbacks to SAIC employees.

As a condition of the settlement, SAIC also agreed to have its business monitored by an appointee of the U.S. Attorney's office for three years. Under a deferred prosecution agreement, as long as SAIC commits no further violations during the three-year period, pending criminal fraud changes will be dropped.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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