Tuesday, December 21, 2010

See No Evil

Richard Valcich's Letter

Blew Whistle on Payrolls,

But What Was Follow-Up?

The indictment of six people last week by the U.S. Attorney, with the assistance of the City Department of Investigation, broke open the CityTime scandal, which has not yet been denominated as a "-gate". Suggestions are invited; we will honor the winner and thank everyone else. Payrollgate (?) dwarfs many other thefts from the City of New York. This case is a biggie; it deserves a name of its own.

A previous low point in municipal depredation was reached in the construction of the New York County Courthouse under Boss Tweed. That building, at 52 Chambers Street, cost over $13 million in 1867 dollars to build, almost twice the price ($7.2 mil) the United States, guided by a New Yorker, Secretary of State William H. Seward, paid Russia to buy Alaska, whose islands are, on a clear day, visible from Siberia, and vice versa.

There are a number of differences, however, between Tweed's era and the current decade. Because he dominated the political machinery in his day, Tweed and the ring he controlled had the power to steal, whether people liked it or not. In today's ostsensibly more transparent times, the frauds could not have been carried out if the public were aware of what was going on. One issue that will presumably be examined by investigators over the next months is: Who, if anyone, was responsible for concealing from the people to whom OPA reported (The mayor and the comptroller) the massive ongoing fraud, which continued for six years. Did the higher-ups, or their staff members, know what was happening?

An early warning of serious problems with the contracts is laid out in a very specific six-page letter, written in February 2003, signed by Richard Valcich, who at the time was director of the Office of Payroll Administration, which was in charge of the project. You can click here to read the Valcich letter. The entire situation is laid out in an excellent article by David Chen, published across the top of pA28 of today's Times. You must read, at least the lede, to understand what is known so far about the issue.

"Last week, federal prosecutors sketched out what they said was an $80 million scheme to defraud a giant information technology project to automate the payroll system for New York City employees. The participants in the fraud essentially stole the money for their own enrichment, billing the city for work they did not do, the prosecutors charged.

"But some city officials had huge concerns as far back as 2003 about the integrity of the project, whose costs have ballooned by hundreds of millions of dollars.

"In a scathing letter made available on Monday through a state Freedom of Information Law request, the city official in charge of overseeing the project, known as CityTime, accused the company that designed CityTime, SAIC, of repeatedly delaying the project in order to get paid more, failing to hew to basic industry standards and rewriting contracts on its own. The official even predicted, sarcastically, that SAIC would try, in a year's time, to charge the city '8,000 hours' for shoddy work.

"The letter, dated Feb. 19, 2003, offers a devastating critique of the company, and raises questions about the city monitors of the project - the mayor's and comptroller's offices. And the consultants hired to ensure quality control, it appears, were doing very little of it.

"In the letter, Richard R. Valcich, executive director of the city's Office of Payroll Administration, assailed SAIC, a giant engineering company based in McLean, Va., for conducting numerous reviews without approval from the city, other than to 'further delay the project and, of course, increase SAIC's costs.' Mr. Valcich also said 'a certain level of professionalism and compliance with acceptable industry standard practices is expected of a contractor for the execution of a $100 million-plus project.'

"The cost of the project is now more than $600 million, and counting.

"Stating that SAIC's 'commitment to quality is almost nonexistent,' Mr. Valcich also described a document outlining SAIC's plans to finish the project as a 'straw man' and said 'the cost in ill will, damage to SAIC's credibility and reputation within the city, and reduction of expectations within SAIC's team are a high price to pay for this document.'"

The Daily News, which was on the story first, ran today's Juan Gonzalez column on p3, the lead news page. The letter by Valcich was made available in response tor a FOIL (freedom of information law) request made by the News. Their reporter and columnist, Gonzalez, has been writing about the scandal for over a year. Several of his articles were published in the News over at least a year. Apparently, however, they were ignored by the authorities with the power to correct the situation. The headline of Gonzalez' column today: 'CRACKS' GOT BIGGER: Ex-Payroll Boss Blew Whistle on CityTime in 2003 and Nothing Was Done.

Today's Post has a brief item by Sally Goldenberg on p16: MIKE LAUNCHES CONTRACT REVIEW.

"Mayor Bloomberg yesterday ordered all major city technology contracts to undergo another layer of review in the wake of the mammoth CityTime scandal that erupted last week.

"He said Deputy Mayor Stephen Goldsmith will review large 'subcontracting, consulting, billing and record-keeping practices.'

"The biggest scandal of Bloomberg's tenure came to light last week when federal authorities discovered contractors working on an electronic city-payroll system stole $80 million over five years without anyone realizing."

As a result of today's revelations, a dozen new questions come to mind. We know it is easier to ask questions than to answer them, but the City pays millions of dollars to supervise these activities, in order to save the hundreds of millions that may be wasted because of failure to control a gang of thieves, not to mention the contract not being fulfilled.

  1. Did Valcich send copies of his 2003 letter to anyone else besides the contractor?
  2. Whom did he report to in the Mayor's Office and the Comptroller's Office?
  3. Were they informed of the situation?
  4. Did SAIC respond to Valcich's letter in any way? If so, how?
  5. Did Valcich have any relationship with any contractor after he retired in 2004?
  6. Did he write anything at the time of his departure to indicate any concerns about the project?
  7. What, if any, was his relationship with his successor, Joel Bondy? Did he recommend Bondy for the job?
  8. How were Valcich and Bondy appointed to the OPA position in the first place? How long did Valcich serve? (The earliest reference on the web to his time at OPA is an article from March 1997.)
  9. During his tenure, did Valcich ever have contact with oversight agencies, or city investigators, over the situation that was developing with SAIC?
  10. Which staff member, if any, actually wrote the letter that Valcich signed? Are the employees who worked on this matter still with OPA?
  11. What was the role of Comptroller William Thompson's office in all this? He had leadership responsibility for OPA from 2002 until he left office in December 2009. Did he ever say or do anything about the ballooning costs? Was he aware of the problem? Did someone represent him in dealing with these matters?
  12. Who in the mayor's office had responsibility for OPA? Did Valcich and Bondy submit regular written reports dealing with the situation? If they did, who read the reports and what did they do about them? If they did not submit reports, who failed to demand them? If they submitted false reports, did anyone check them?

We ask today, what agencies, if any, are trying to find the answers to all the issues in this case, of which we have simply enumerated the first ten questions? It will take some time to completely solve this massive case. We would hope there would be reports, from time to time, as facts are discovered by the probers.

The fraud here endured for six years. The investigation must not be as protracted as the wrongdoing. Although at first it appears like a case of: Who left the barn door open, and why, it may turn out that there were more serious derelictions on the part of individuals with responsibility to oversee the contracts.

By the way, what ever happened to the payroll reporting system SAIC and others were supposed to produce?

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