Largest Known Financial Recovery in a State or Municipal Contract Fraud Case

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that more than $466 million that was forfeited to the United States in connection with the Office’s investigation into fraud and kickbacks on the CityTime information technology project, was paid today to the City of New York (the “City”) to compensate it for its losses in connection with the fraud.  The money was forfeited by Science Applications International Corporation (“SAIC”), a Fortune 500 scientific, engineering and technology applications company that served as the lead contractor on the CityTime project, as part of a Deferred Prosecution Agreement (“DPA”) in which it entered with the Office. The payment is the largest such recovery in the City’s history, and is also the largest known financial recovery in a state or municipal contract fraud case in U.S. history. 

Manhattan U.S. Attorney Preet Bharara said: “With today’s deposit of $466 million into New York’s City’s bank account, the City and its residents have now been made whole after being victimized by a colossal fraud.  We are extremely gratified by this result, and it should serve as a reminder to public contractors who think they can fleece the city through bribes and kickbacks that they are sorely mistaken.  We will continue working closely with Commissioner Rose Gill Hearn and her excellent staff at DOI to deploy all available resources to hold them to account and recover and return their ill-gotten gains.”

New York City Mayor Michael R. Bloomberg said: “Our Administration has zero tolerance for corruption and since day one we have focused on rooting out corruption and preventing it from occurring in the first place.  As a result, we have run the cleanest administration in New York City’s history.  I want to thank U.S. Attorney Preet Bharara, Commissioner of Investigation Rose Gill Hearn and their teams for aggressively pursuing this case and returning this money to City taxpayers.”

New York City Department of Investigation (“DOI”) Commissioner Rose Gill Hearn said: “The $466 million collected today from SAIC on the CityTime project compensates the City for money taken through a massive and complex fraud.  This is an extraordinary result for the City and its eight million residents.  I am grateful to the U.S. Department of Justice for the transfer of these funds today, which the City will put toward its budget shortfall benefiting taxpayers.  This restoration of City funds by the prime vendor delivers the clear message that a contractor will not be allowed to profit or walk away from the consequences of fraud in its dealings with New York City.  DOI and the U.S. Attorney's Office for the Southern District of New York continue to work hand-in-hand in pursuing this extensive and ongoing investigation.  I thank U.S. Attorney Preet Bharara and his staff for their hard work in bringing about this great result."

On March 14, 2012, the Office entered into the DPA with SAIC, which required SAIC to forfeit a total of $500,392,977 to the Department of Justice, and to forgive more than $40 million still owed by the City to SAIC in connection with the CityTime project.  On May 17, 2012, U.S. District Judge Barbara S. Jones granted the Government’s application for default judgment over the funds forfeited by SAIC. 

The Department of Justice Asset Forfeiture and Money Laundering Section (“AFMLS”) is responsible for reviewing applications by crime victims seeking to be compensated through funds that have been forfeited to the United States.  Based on the recommendation of U.S. Attorney Bharara, AFMLS granted the City’s application to be paid a total of $466,093,333.53 as compensation for its losses on the CityTime project.  That number represents the difference between the $114,617,045 value of the City’s contract with SAIC at the time the kickback and fraud schemes alleged in the Superseding Indictment in United States v. Mark Mazer et al. (the “Mazer Indictment”) began in 2003, and the $580,710,378.53 that the City ultimately paid SAIC over the course of the project.   As part of the DPA, SAIC agreed to cancel the $40 million that remained in receivables due from the City, so the total financial benefit to the City of the DPA is over $500 million.

In addition to the funds forfeited by SAIC, the Office has seized or frozen more than 140 bank accounts containing over $40 million tied to the scheme alleged in the Indictment, and restrained 15 properties worth an estimated $12.5 million.

Since January of this year, the Office has returned nearly $1.3 billion of forfeited funds to crime victims.

Mr. Bharara praised DOI for its outstanding work investigating this case, which is ongoing.

The case is being handled by the Office’s Public Corruption and Asset Forfeiture Units.  Assistant U.S. Attorneys Howard S. Master and Andrew D. Goldstein are in charge of the investigation.

 

 

 

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