Contractor to pay city $500M restitution

A technology giant and federal contractor in charge of the city's scandal-plagued CityTime payroll project agreed Wednesday to pay more than $500 million in restitution and penalties to avoid prosecution.

The agreement, which prosecutors said they believed was the largest of its kind ever made, recoups for the city the bulk of the $652 million it spent on a project that began as a $63 million attempt to automate employee timekeeping.

The project ballooned tenfold into what authorities say was an epic fraud involving kickbacks, systemic overbilling and an international money laundering conspiracy.

"The investigation revealed that SAIC managers responsible for CityTime placed profit ahead of principle, time and time again," Manhattan U.S. Attorney Preet Bharara said.

In the deal, entered by an attorney for Science Applications International Corp. before a federal judge in Manhattan, the multibillion-dollar contractor acknowledged it had failed to properly investigate a 2005 whistle-blower complaint and had employed managers who disregarded employee concerns and missed or ignored warning signs.

The project's senior manager, Gerard Denault, has pleaded not guilty to criminal charges. The SAIC said that Denault's managers had missed or ignored his creation of an atmosphere of fear in the office that discouraged subordinates from coming forward.

The city stands to receive $466 million of the settlement money, and the company is forgiving another $40 million the city had owed.

The company, which is facing a shareholder lawsuit over the case, continues to receive contracts worth hundreds of millions of dollars from the federal government.