A few years later came another flurry of complaints from SAIC employees who ignored Denault’s threats and went to his superiors to raise their concerns about irregularities with the CityTime contract. Their pleas were met with skepticism and they were told no further action would be taken unless they could deliver some proof of wrongdoing.
What is it about the corporate mentality that, when presented with repeated complaints from line workers that something is not right, the first instinct is invariably to treat them like disgruntled employees who don’t see the full picture and are focused on minutiae rather than getting the job done and making a profit?
How many Enrons have to go out of business, how many billion-dollar settlements with the Justice Department do there have to be, before corporate managers and executives finally learn to treat whistleblowers with the respect they deserve?
In the CityTime case, it took the power of the government subpoena and threat of prosecution to finally crack what turned out to be an elaborate kickback conspiracy. The key players were: Mark Mazer, a consultant hired by the city to help manage the contract; from SAIC, Denault, the project director, and Carl Bell, the chief engineer; and Reddy and Padma Allen, owners of TechnoDyne, a small subcontracting firm in Teaneck, N.J.
According to the Justice Department, the conspirators were able to overcharge the city by hiring consultants that were not needed, inflating their hours and their hourly rates. Then dummy corporations and bank accounts were set up here and in India to launder the inflated payments and recycle the kickbacks to the conspirators.
Even without uncovering the details of the kickback scheme, however, there were plenty of warning signs for anyone with even a passing familiarity with the government contracting business, which includes almost everyone at SAIC.
Mazer and Denault were widely known to be longtime friends and associates who had most recently worked for the same consulting firm — not exactly the sort of relationship you want between a government contract officer and the lead contractor.
Shortly after SAIC took over the contract, the two arranged for it to be changed from a “fixed-price” contract that was losing money to a “fixed-price level of effort” contract that allowed the project’s ever-escalating costs to be passed on to the city — an odd concession from the city, which got nothing in return.
Most significantly, the vast majority of the work on the CityTime project was done not by SAIC employees but by employees and consultants at TechnoDyne under a no-bid, single-source subcontract that violated SAIC’s procedures, doubled the number of people working on the project and generated billing rates that ran as high as $160 an hour.
The $450 million it received from SAIC between 2003 and 2010 constituted almost all of TechnoDyne’s revenue, with a significant portion of that sub-subcontracted to firms with little or no other revenue.
In a “statement of responsibility” explaining its see-no-evil attitude, SAIC said its “failures resulted, in part, from an overemphasis on the financial and operational success of the CityTime project.” Ah! So that’s it.
Although the Allens, Reddy and Padma, are facing criminal prosecution stemming from the CityTime work, the TechnoDyne Web site still boasts SAIC as one of its satisfied clients. Among the company’s other accolades: the 2010 Entrepreneur of the Year award for New Jersey from the accounting firm of Ernst & Young. Way to go, audit team!
What I’d still love to know is the name of that original whistleblower who figured out early about Denault and his kickback scheme. Neither the company nor the prosecutors would tell me the name of the employee, or even whether he or she is still working at the company. There will be a second column, and a dinner on me at Komi, whenever this hero is ready to tell his or her story.
Who knows, maybe Gen. Jumper will join us?