SAIC removes three executives in fraud probe

October 24, 2011

McLean-based Science Applications International said it has removed three of its top executives and begun an internal review following a fraud investigation into work the company did for New York City.

The work involved a contract to manage an employment timekeeping system called CityTime. The U.S. Attorney’s Office for the Southern District of New York has alleged that “a massive and elaborate scheme to defraud the city” corrupted the program, and it charged Gerard Denault, SAIC’s lead project manager on the program, with receiving at least $5 million in illegal kickbacks.

Carl Bell, a chief systems engineer for SAIC, pleaded guilty to multiple charges related to the scheme and receiving millions in kickbacks.

Earlier this year, New York Mayor Michael R. Bloomberg called on SAIC to reimburse the city for the entire amount it has paid over an 11-year period — more than $600 million — and to pay the costs of the investigation.

Walter P. Havenstein, SAIC’s chief executive, said in a memo to employees Monday that Deborah Alderson, president of the company’s defense solutions group; John Lord, her deputy; and Peter Dube, general manager of the enterprise and mission solutions business, have been removed from their positions and are no longer with the company.

None of the three has been charged with wrongdoing. The three either did not return calls seeking comment or could not be located.

“While we are aware of no evidence that these individuals had any personal involvement in the fraud uncovered in the CityTime program . . . we must maintain the highest standards for all of our employees and for our industry, beginning with our management team,” Havenstein wrote.

SAIC has hired the law firm Gibson Dunn to review its internal policies and practices and Guidepost Solutions to review its response to the controversy.

“These are extraordinary actions, but they are necessary to make SAIC the strongest company it can be,” wrote Havenstein, who announced this month that he will retire from SAIC next year, citing personal reasons.

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