Three Defendants Plead Guilty In Manhattan Federal Court To Charges Related To Their Roles In The CityTime Fraud Scheme
Defendants Also Agree To Forfeit Their Interests In More Than $31 Million In Cash And Property Tied To The Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, announced that LARISA MEDZON, ANNA MAKOVETSKAYA, and SVETLANA MAZER pled guilty today to various felony offenses in connection with their roles in facilitating a fraud, kickback, and money laundering scheme that targeted the City of New York’s CityTime information technology project. In connection with their pleas, the defendants agreed to forfeit their interests in over $27 million in cash held in 91 bank accounts and five safe deposit boxes, as well as four real properties worth over $4 million, all of which constitute crime proceeds. MEDZON, MAKOVETSKAYA, and SVETLANA MAZER pled guilty in Manhattan federal court before U.S. District Judge George B. Daniels.
Manhattan U.S. Attorney Preet Bharara said: “Through lies and subversion, each of these three defendants served as highly paid enablers of an epic fraud against the City of New York. And with their pleas today and multi-million dollar forfeitures, they will be stripped of their ill-gotten gains and potentially their liberty. Thanks to the efforts of prosecutors from this Office and our partners at the Department of Investigation, the City recouped more than $500 million that was lost to the CityTime fraud, and we continue to hold the perpetrators of this brazen scheme to account.”
According to the criminal Informations filed earlier today in Manhattan federal court, and as alleged in the Superseding Indictment in United States v. Mark Mazer et al., (the “Mazer Indictment”), and other public filings in the case:
The CityTime project was a City initiative intended to modernize timekeeping and payroll systems across City agencies. In 2000, Science Applications International Corporation (“SAIC”) became the lead contractor on CityTime. Beginning in 2003, SAIC appointed Gerard Denault as Program Manager for CityTime. At Denault’s behest, SAIC hired Technodyne LLC (“Technodyne”) as a “single source” subcontractor on the CityTime project. In exchange for agreeing to steer work to Technodyne, Denault and Carl Bell, SAIC’s Chief Systems Engineer in the New York office of SAIC, began receiving kickbacks from Technodyne via its principals, Reddy Allen and Padma Allen, which were laundered through affiliates of Technodyne located in India.
Beginning in 2005, Mark Mazer, who had been retained by the City to help manage the CityTime project, began demanding and obtaining a separate kickback stream via two subcontractors of Technodyne to which he steered work: D.A. Solutions, run by Mark Mazer’s uncle, Dimitry Aronshtein, and Prime View, run by Victor Natanzon. As a result of the scheme, Denault and Bell obtained approximately $15 million in kickbacks and Mark Mazer obtained approximately $30 million in kickbacks. Technodyne also obtained over $325 million in revenue from the scheme. Denault, Mark Mazer, Padma Allen, Reddy Allen, and the Allens’ company, Technodyne, among others, worked together to defraud the City by causing it to overpay for the CityTime project in order to increase their illicit profits from the scheme. The fraudulent scheme helped cause the cost of the CityTime project to balloon from under $100 million to a final cost of close to $700 million.
Mark Mazer and Aronshtein, among others, helped launder millions of dollars in proceeds of the fraud and kickback scheme by routing the funds through shell companies controlled by Mark Mazer’s relatives MEDZON, MAKOVETSKAYA, and SVETLANA MAZER, and by causing millions of dollars in proceeds to be routed through other companies and offshore accounts located in Latvia, among other means. MEDZON, Mark Mazer’s mother, withdrew over $200,000 in cash derived from the scheme through hundreds of ATM transactions that were designed to evade currency transaction reporting requirements, while MAKOVETSKAYA, Mark Mazer’s cousin, lied to employees of a federally-insured bank so that the bank would agree to open up accounts in the name of a shell company that was used to facilitate the scheme. SVETLANA MAZER, Mark Mazer’s wife, also attempted to obstruct the Government’s investigation of the CityTime scheme by omitting her role in controlling shell companies used to facilitate the scheme from sworn disclosures she submitted to the City.
MEDZON, 68, of Forest Hills, New York, pled guilty to intentionally structuring cash transactions to avoid currency reporting requirements, which carries a maximum potential penalty of five years in prison. MAKOVETSKAYA, 42, of Forest Hills, New York, pled guilty to conspiracy to make false statements to a bank, which carries a maximum potential penalty of five years in prison. SVETLANA MAZER, 47, of Manhasset, New York, pled guilty to obstruction of justice, which carries a maximum potential penalty of 20 years in prison. In connection with their pleas, the defendants agreed to entry of preliminary orders of forfeiture forfeiting their interests in a total of over $27 million in cash held in 91 bank accounts and five safe deposit boxes, and in four real properties worth more than $4 million, derived from the scheme.
Today’s pleas follow several other developments in the case, including: (1) guilty pleas by Carl Bell and Victor Natanzon, who are cooperating with the Government’s investigation; (2) the Office’s entry into a deferred prosecution agreement with SAIC, in which SAIC agreed to forfeit over $500 million, cooperate with the Government’s investigation, and accept responsibility for illegal conduct by its employees on the CityTime project; (3) the Office’s forfeiture of several million dollars in cash and property seized from Padma Allen and Reddy Allen after they fled the country to avoid prosecution; and (4) the return of approximately $500 million in forfeited funds to the City and its agencies.
Mr. Bharara praised the New York City Department of Investigation (“DOI”) for its outstanding work in this investigation, specifically the efforts of Commissioner Rose Gill Hearn and teams led by Chief of Investigations John Kantor, Deputy Commissioner for Legal Affairs Marjorie Landa, and Associate Commissioner Yuval Hibshoosh.
The charges against the remaining defendants in the Mazer Indictment, including Denault, Mark Mazer, Aronshtein, Padma Allen, Reddy Allen, and Technodyne, are merely allegations, and they are presumed innocent unless and until proven guilty.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Howard S. Master and Andrew D. Goldstein are in charge of the investigation.