SAIC agrees to pay $540 million, accepts deferred prosecution agreement and corporate monitor in New York CityTime case

by Ben Vernia | March 15th, 2012

On March 14, the U.S. Attorney’s Office for the Southern District of New York announced the settlement of criminal charges with Science Applications International Corp. arising from alleged fraud in SAIC’s handling of New York City’s massive CityTime payroll and timekeeping system contract. According to the U.S. Attorney’s press release:

Preet Bharara, the United States Attorney for the Southern District of New York, and Rose Gill Hearn, the Commissioner of the New York City Department of Investigation (“DOI”), announced today that the Office has entered into a deferred prosecution agreement (“DPA”) with Science Applications International Corporation (“SAIC”), a Fortune 500 scientific, engineering and technology applications company with approximately 41,000 employees worldwide. SAIC is publicly traded on the New York Stock Exchange and 93% of its business is generated by government contracts. The DPA resolves the Government’s investigation of SAIC’s conduct relating to the CityTime project, a timekeeping and payroll system modernization project undertaken by the City of New York (the “City”) for which SAIC served as the lead contractor. The Government’s investigation of conduct by others continues. Under the agreement, SAIC will forfeit a total of $500,392,977 to the Department of Justice, and forgive more than $40 million still owed by the City to SAIC in connection with the CityTime project. In a Statement of Responsibility (the “Statement”) that was part of the agreement, SAIC acknowledged that it failed to properly investigate a 2005 ethics complaint filed by a whistleblower alleging, among other things, that the project’s Program Manager, Gerard Denault, had to be receiving kickbacks on the project from the single source subcontractor he had hired to perform the work. SAIC also accepted responsibility for the illegal conduct alleged against Denault and admitted to by Carl Bell, who served as Chief Systems Engineer in SAIC’s New York office.

SAIC settled an unrelated False Claims Act suit in September 2011, which alleged that the company had conspired with Lockheed Martin and others to obtain non-public information concerning an information technology contract.

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