Four consultants to the city's problem-plagued payroll system were busted today on charges of ripping off more than $80 million in an elaborate fraud and kickback scheme.
The wife and mother of alleged ringleader Mark Mazer -- who has been paid $4.4 million to help oversee the costly CityTime project -- were also accused of helping launder proceeds of the five-year flimflam.
According to a complaint filed in Manhattan federal court, Mazer steered more than $76 million worth of bogus contracts to firms run by Dmitry Aronshtein, who is believed to be a relative, and Victor Natanzon.
To cover up the fraud, the three of them, along with co-defendant Scott Berger, allegedly cooked up phony timesheets intended to justify the spending.
Aronshtein and Natanzon then kicked back more than $24.5 million to a series of shell companies controlled by Mazer's wife, Svetlana, and his mother, Larisa Medzon, the complaint says.
The Mazers allegedly used more than $3 million of their crooked cash to buy and renovate two homes, and also splurged on six late-model cars over the past two years.
Department of Investigations Commissioner Rose Gill Hearn -- whose office uncovered the massive scam -- called it a shame that "supposed experts hired and paid well to protect the city's interests were exposed as the fox guarding the hen house."
Manhattan U.S. Attorney Preet Bharara noted the irony of how "a project intended to prevent payroll waste, fraud, and abuse, was itself allegedly bilked in part by fraudulent timekeeping."
Mayor Bloomberg called it a "major fraud perpetrated on city taxpayers" over the past few years.
"As you know we have zero tolerance for any waste, fraud or abuse and there are no sacred cows in city government," he said.
Bloomberg said he directed Deputy Mayor Stephen Goldsmith to take direct oversight of CityTime.
"We have no tolerance for this whatsoever," he said. "And you can rest assured that we will do everything possible to insure that we get that money back and that the perpetrators are prosecuted to the fullest extent of the law."
City Councilman Letitia James (D-Brooklyn), one of the chief critics of the City Time contract, charged that the administration was asleep at the switch.
"I am shocked," she said. "Eighty million just disappeared and no one from the administration raised a question."
James pointed out that the stolen $80 million could have been used to prevent cuts to child care, senior services and firehouses.
She called on the MTA not to go forward with its $10 million contract with the main City Time consultant, SAIC.
James also said she's worried that other major city contractors aren't being scrutinized.
"This happened on the watch of the Bloomberg Administration," she said. "I am certain there are other consultant contracts that need to be monitored."
The chief official who should have paid closer attention is Joel Bondy, executive director of the Office of Payroll Administration, which was overseeing the contract.
Bonday had previously been employed by Spherion -- which happened to be the quality assurance consultant on the City Time project. Spherion already had the City Time contract before Bondy moved to the city payroll.
Bloomberg didn't answer a direct question about whether Bondy would still have his job when this is over, saying the investigation is continuing.
The City Time scandal provided ammunition for DC 37, the city's largest municipal union, to hammer home its claim that the city is wasting millions on private contractors at the expense of its members.
Callers to DC 37 hear a taped message saying: "Urge the city to cut private contractors, not city services."
City Comptroller John Liu called for an emergency meeting of the directors of the city Office of Payroll Administration.
"These charges will be another stain on the checkered history of the CityTime project. This further underscores the need to more closely monitor expensive outside consultant contracts," Liu said.
Earlier this year, Mayor Bloomberg called CityTime -- which is supposed to save money by consolidating and automating records of the hours clocked by city workers -- a "disaster."
The project was initially budgeted at $63 million when it was launched in 1998, but ballooning cost overruns have pushed its anticipated price tag to $722 million.
Meanwhile, only 35 percent of city workers are actually using it.
Mark Mazer, Aronshtein, Natazon and Berger each face 20 years in the slammer if convicted of wire fraud conspiracy.
In addition, everyone but Berger is charged with money laundering conspiracy, which also carries a maximum 20-year sentence.
All six defendants are expected in Manhattan federal court later today.
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