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Monday, May 27, 2024 | Back issues
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High Court Hits Pause on Review of $500M NYC Scandal

The Supreme Court agreed to put a pin Tuesday in its consideration of a class action over what has been called “the single largest fraud ever perpetrated on the city of New York.”

WASHINGTON (CN) – The Supreme Court agreed to put a pin Tuesday in its consideration of a class action over what has been called “the single largest fraud ever perpetrated on the city of New York.”

CityTime was a massive boondoggle that rocked the New York at the end of the Bloomberg administration in 2011, with investigators finding that crooked vendors had been lining their pockets with money meant to automate the city’s byzantine payroll system.

Bloated with inflated contracts and kickback agreements, the project initially slated to cost $63 million when it began in 2003 ended up costing the city $760 million.

CityTime ultimately faced a $500 million bill for restitution and penalties, and indictments swept up top executives for the project’s lead contractor, SAIC, short for Science Applications International Corp.

Six retirement and pension funds led by the Indiana Public Retirement System that had invested in SAIC brought the underlying complaint to show that New York taxpayers were not the only victims of the con.

They claimed that SAIC and five of its executives misled investors about the corporation’s liabilities for employee fraud, but a federal judge denied the funds’ motions for relief on judgment.

SAIC, which is now known as Leidos, asked the Supreme Court to intervene after the Second Circuit said in a 2016 partial reversal that two of SAIC’s filings may have been misleading.

On Tuesday, seven months after taking up the case, the Supreme Court granted a joint motion by the parties “to remove the case from the argument calendar and hold in abeyance any further proceedings.”

The order offers no explanation for the motion. Docket records show that the class is represented by Douglas Wilens, an attorney with Robbins Geller Rudman & Dowd in Boca Raton, Florida.

Leidos is represented by Andrew Tulumello of the Washington firm Gibson Dunn & Crutcher.

A spokeswoman for the law firm noted previously that Leidos has cooperated fully in the Justice Department’s investigation and “implemented a first-rate compliance program.”

Citing recent Leidos accomplishments, the spokeswoman noted that it was one of two companies to win the Pentagon’s $9 billion health care modernization contract, as well as several Air Force contracts. Leidos also received more money than any other single information-technology vendor on three of the five key IT contracts within the Defense Health Agency.

The Securities Industry and Financial Markets Association is represented by Goodwin Procter attorney William Jay, also of Washington. The National Association of Manufacturers is represented by Edward Joseph Fuhr of the Richmond, Virginia, firm Hunton & Williams.

In 2015, the Second Circuit affirmed 20-year sentences for three CityTime fraudsters: Mark Mazer, Dimitry Aronshtein and Gerard Denault.

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Categories / Appeals, Business, Securities

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