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New York Gets a Dose of Payroll Fraud – Fortune 500 Style
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Science Applications International Corp, a Fortune 500 company has recently agreed to pay a historic $500 million to the city to avoid prosecution following discovery of its system created to defraud and overcharge the city administration.

During a hearing on Thursday at a New York federal court, the grand settlement with SAIC was announced by prosecutors and city officials. The SAIC settlement is of the nature of deferred prosecution and pending further investigation, the judge settled the date of next hearing for January 14.

The case has eight defendants who have been charged with criminal fraud over corrupted conduct in a New York City payroll project on behalf of SAIC, a major computer contractor.

  
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SAIC, has more than 41, 000 employees and was the primary contractor for the project, ironically named CityTime. According to the amount of documents that have already poured in, nothing can prevent them from doing time behind city bars.

Prosecutors said that since SAIC was hired to do payroll work for the city in 2000 by using an automated payroll system it began methodical abuse of the trust of the city placed in a Fortune 500 company. Bills began to grow and went out of control reaching $692 million over the years. The abominably high bills caught attention of city investigators who probed the case and found that payments were being routed through shell companies and the city was being bilked.

In total, eleven persons have been charged in the case including the eight belonging to SAIC. Out of the eleven, one passed away during pending investigation, two pleaded guilty, and eight would go to trial.

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U.S. District Judge George Daniels said the sheer volume of evidence was staggering and there were between nine to ten million documents to review before trial.

Possibly another Fortune 500 company would not be hired to review the documents, as the work alone could generate the jobs of many full time employees. Critics have already stated publicly that the work done by SAIC using automated systems could be done much cheaper manually by city employees.



U.S. prosecutors have already seized at least $52 million worth of assets belonging to the eight defendants, including the assets of a subcontractor, Technodyne, who is also a criminal defendant.

The case is USA v. Mazer et al in U.S. District Court for the Southern District of New York, No. 11-00121



 

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