Cites Company’s ‘Possible Corruption’ in Letter Urging Mayor to Sue
In a letter Wednesday to Mayor Bloomberg, City Comptroller John C. Liu
warned that his office may reject future contracts with Hewlett-Packard
(“HP,” NYSE: HPQ) if the company fails to reimburse taxpayers for
the up to $163 million it owes the City. That bite would hurt HP:
City agencies have spent almost a quarter-billion dollars on HP’s products and services over the past three years.
“Doing business with the City of New York is a privilege, not a
lifetime guarantee,” Liu wrote. “Let’s be clear: HP is not the only
vendor the City can use to purchase printers, laptops, and servers. It’s
about time we teach companies that
their attempts to cheat New York City taxpayers will have serious
consequences.”
HP owes the City the money for overbilling as a contractor on NYC’s 911 call center project, known as the
Emergency Communications Transformation Program (ECTP),
which
is nearly eight years behind schedule and more than $1 billion over
budget. A May 2012 audit by the Comptroller’s office found that HP’s
work on the 911 call
center was so poorly
monitored and rife with billing and other errors that Liu referred the
matter to the Manhattan District Attorney’s Office for further review. A
new three-month analysis Comptroller Liu’s Audit team
conducted of HP’s time and material billings for May 2007, October 2008,
and September 2010 found serious billing errors similar to those noted
in the 2012 audit report, as well
as further instances of improper practices.
Liu urged Bloomberg to sue HP to recover the taxpayer funds lost because of HP’s overbilling, and stated that
the
Comptroller’s Office “will carefully review any HP contract submitted
to this office for registration for possible rejection under Section
328(c) of the City Charter on
grounds of ‘possible corruption in the letting of the contract or that
the proposed contractor is involved in corrupt activity.’”
Bloomberg’s
office has repeatedly dismissed the audit’s findings as inaccurate, but
its claims that the project came in under budget are false and
misleading. The original
scope of the call center contract always included a project known as
PSAC 2, which later had to be contracted out separately, resulting in
millions of dollars of added costs for the City.
“City
Hall can’t turn back the clock and undo the gross mismanagement of this
project, but it must pursue the consultant to refund our taxpayers for
sham billings,”
Liu said. “And both the Mayor’s office and the consultant must stop
their duplicitous claims that the project came in under budget when in
fact it was only half-completed.”
The City desperately needs the money to address next year’s budget challenges.
“Last
year’s budget was balanced in large part because of the
half-billion-dollar settlement with Science Applications International
Corporation for its mismanagement and fraud connected with the CityTime
project,” Liu wrote. “The nearly $163 million HP owes would help
restore the 20 fire companies, more than 30,000 childcare slots, and
nearly 1,000 school teachers that face elimination
in the upcoming year’s budget.”
Background:
·
City agencies have spent an average of more than $80 million per year on HP products and services over the past three years.
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·
May, 30, 2012, audit report on HP 911 call center project expenditures:
http://www.comptroller.nyc.
_________________________
Text of the letter from Comptroller Liu to Mayor Bloomberg:
February 20, 2013
Hon. Michael R. Bloomberg
Mayor
The City of New York
City Hall
New York, N.Y. 10007
Re:
Hewlett-Packard’s Emergency Communications Transformation Program Overbilling
Dear Mayor Bloomberg,
I write regarding our May 30, 2012 audit of
Hewlett Packard’s wrongful overbilling of the City and deficient work on its
System Integration Contract for the Emergency
Communications Transformation Program (ECTP). As we found in our audit,
HP used unscrupulous billing and other practices to inflate its charges
to the City by up to $163 million. At the
time, your spokesman dismissed those findings.
My
audit staff recently uncovered new information about HP’s unscrupulous
practices that could strengthen the City’s efforts to
obtain the maximum recovery from HP. Our new three-month analysis of
HP’s time and material billings for May 2007, October 2008, and
September 2010 found serious billing errors similar to those noted in
the 2012 audit report, as well as further instances of
improper practices.
Our office met with the Law Department and apprised it of these findings, which underscore the fact that HP’s wrongful
business practices pervaded its contract and reflect not merely gross error, but possibly willful misconduct.
I
therefore strongly urge your office and the Corporation Counsel to
intensify and accelerate the City’s efforts, through litigation and
otherwise,
to recover taxpayer funds lost as a result. The Law Department should
immediately reflect the results of our post-audit review in its claims
and potential litigation against HP, as well as the issues raised in the
2012 audit report. Prompt and aggressive action
by the City is needed to recover all of the money HP owes the City and
its taxpayers.
The
City should immediately review all other agreements it may have or is
considering with HP, because the facts call into serious question
whether HP qualifies as a responsible vendor with the requisite
integrity to receive taxpayer dollars.
In
this regard, please be advised that my office will carefully review any
HP contract submitted to this office for registration for possible
rejection under Section 328(c) of the City Charter on grounds of
“possible corruption in the letting of the contract or that the proposed
contractor is involved in corrupt activity.” Moreover, in light of our
audit findings, this office intends to freeze future
ECTP-related payments to HP.
We must not permit HP to exploit New York City’s taxpayers.
Doing business with the City of New York is a privilege, not a
lifetime guarantee. Let’s be clear: HP is not the only vendor the City
can use to purchase printers, laptops, and servers. It’s about time we
teach companies that their attempts
to cheat New York City’s taxpayers will have serious consequences.
My audit staff remains available to provide the Law Department with support in our common efforts to substantiate the strongest
possible case against HP in order to enable the maximum recovery for the City.
As
you well know, last year’s budget was balanced in large part because of
the half-billion-dollar settlement with Science
Applications International Corporation for its mismanagement and fraud
connected with the CityTime project. The nearly $163 million HP owes
would help restore the 20 fire companies, more than 30,000 childcare
slots, and nearly 1,000 school teachers that face
elimination in the upcoming year’s budget.
While we appreciate the actions your office has taken since to look into HP’s egregious conduct, the clock is ticking.
Let’s join forces and work together to recoup these funds.
Sincerely,
John C. Liu
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