Henry Stern on City Time Bloomberg Scandal

The Six-Year Swindle:

How Did a Rogue Agency

Escape Detection So Long?

By Henry J. Stern
December 17, 2010

Swift action followed yesterday's report of the indictment of six people accused of an $80 million fraud against the City of New York. You can read the U.S. Attorney's office and Department of Investigation's joint press release on the federal indictment here. To get the full indictment, call either telephone number at the top of the release.
The Daily News, which has been reporting for over a year on CityTime and its derelictions, ran a story on p5 today, written by Greg B. Smith, Juan Gonzalez and Adam Lisberg, City Hall bureau chief. The headline: CITY EXEC IN CHARGE OF OVERSEEING PROJECT IS SUSPENDED. The lede:
"Investigators probing the massive CityTime payroll scandal seized $850,000 in cash yesterday from safe deposit boxes linked to consultants accused of stealing $80 million.
"One of the six defendants even showed up at a Long Island bank with a large duffel bag but was turned away, a source told the Daily News."
The Times reported on City Hall's response to the indictments in a story today by David W. Chen and John Eligon, spread across the top of A30, the first page of metropolitan news. Their lede:
"The official in charge of the New York City agency at the heart of the $80 million information technology fraud scheme was suspended on Thursday without pay by Mayor Michael R. Bloomberg and Comptroller John C. Liu.
"The official, Joel Bondy, was chosen by Mr. Bloomberg to be the executive director of the Office of Payroll Administration in April 2004. But the payroll agency has been repeatedly criticized for its handling of the CityTime project, an automated system designed to streamline employee timekeeping, which has been dogged by delays and enormous cost overruns.
"On Wednesday, Federal prosecutors accused several CityTime consultants - at least one of them a longtime associate of Mr. Bondy - of being involved in a scheme that manipulated the city into steering expensive contracts to businesses that they controlled and of redirecting some of that money for their own enrichment. But the scandal has become one of the most serious that the Bloomberg administration has faced. And by casting a pall over an initiative that the mayor had championed as a hallmark of efficient, computerized management, the case also shines a harsh light on the administration�s outsourcing practices."
The Post covered the bank incident in an article on p10: 'TIME BANDIT' BEAT TO BANK: Payroll-Scam Probers get to $850G First, by David Seifman and Chuck Bennett. The Post's lede:
"Now that's timing.
"A defendant in the $80 million CityTime payroll office scandal arrived at a bank with a large duffel bag yesterday to clear out money allegedly stolen from city taxpayers - but investigators got to it first, officials said.
"Department of Investigation officers seized $850,000 in cash stored in secret safety-deposit boxes just before one of the defendants in the criminal-fraud case sought to cash out, said DOI spokeswoman Diane Struzzi. ...
"Joel Bondy, the hapless bureaucrat in charge of the CityTime fiasco, was suspended yesterday while the city abruptly halted payments to embattled contractor Spherion - Bondy's old employer.
"His suspension without pay is a first step to termination, sources said.
"Bondy, the $205,180-a-year executive director of the Office of Payroll Administration, was seemingly asleep as allegedly corrupt 'quality assurance' contractors brazenly looted taxpayer coffers with sham corporations.
"'Any violation of the public's trust is categorically unacceptable, and we are implementing a series of changes to reform oversight of the CityTime project,' said Mayor Bloomberg."
The Post ran a harsh editorial on p32, IT'S MIKE'S MESS. The Post is generally supportive of the mayor, but this editorial alludes to grievances that may have accumulated over time.
One thing overlooked on Day One was the significant role of the City's Department of Investigation in exposing the fraud. US Attorney Preet Shahara said: "I want to praise Commissioner Rose Gill Hearn and her DOI team for their exceptionally quick and diligent work in this matter. Working with our partners, we will continue to ferret out public corruption and prosecute those responsible to the full extent of the law."
Commissioner Hearn said: "The shame is that a project to save time and money on the City payroll fell prey in part to the accused swindlers who cost the taxpayers a stunning $80 million and counting. The supposed experts hired and paid well to protect the city's interests were exposed as the fox guarding the hen house, secretly pocketing millions and purchasing expensive homes and cars, it is charged. Ironically, when CityTime's hand scanners got in their way, they even resorted to fudging paper timesheets, according to the Complaint.
"DOI investigators methodically followed the money to reveal the deception and end the shell game. DOI and the US Attorney's Office for the Southern District of New York continue to investigate this brazen scheme and are committed to pursuing this case to its just conclusion."
One person who deserves great credit for his work on this case is Juan Gonzalez of the Daily News. A sad aspect of this case is how long his repeated warnings, published in the News, were not acted upon. Councilmember Letitia James of Brooklyn held hearings on the subject, but her complaints may or may not have reached Speaker Christine Quinn, the public official to whom the administration is most likely to be responsive.
There should be an inquiry into the city's handling of this fraud during the six-year period over which the conspiracy is said to have operated. Also, why did not other employees of OPA complain about what was happening around them? No inquiry, however, should disrupt or delay the vigorous prosecution of the alleged perpetrators.
We should also remember that this not the first time that honest people have been duped by unprincipled swindlers. What is unusual here is the period of years over which the fraud occurred, its magnitude, and the apparent complete lack of oversight over Joel Bondy and the OPA. Similar events have occurred in prior administrations, where honest mayors are betrayed by corrupt subordinates, of whose very existence they were barely aware.
Part of the problem here may be that since OPA was a two-headed agency, responsible to both the Mayor and the Comptroller, neither provided the close supervision that now appears to have been badly needed. Another aspect of the case is that since the project itself was opposed by the unions who had no interest in accurate timekeeping, critics of the contract may have been dismissed as naysayers, even though they were right about the contract.
We also learn the lesson again that it doesn't matter how many oversight agencies exist, the system often relies on individuals being honest and doing their jobs responsibly. When people lack integrity, the cost can exceed even the $80 million which is reportedly missing. As an individual and a taxpayer, I would want those convicted to remain in prison until all the money is returned. They stole from all of us.
The perpetrators should receive plenty of time to make the acquaintance of Mr. Madoff, with whom they could trade notes. Their enablers should consider less demanding employment.