Last week in these pages, The Post ran a profile of John Jumper, the straight arrow former Air Force general who was brought in as chief executive of local contracting giant SAIC in the wake of an embarrassing overbilling scandal involving bribery, kickbacks, foreign shell corporations and a safe deposit box stuffed with $850,000 in cash.
A year ago company officials were publicly denying that there were any problems at all with its contract to build a new timecard system for New York City, which by then was so late and so over budget that “CityTime” had become a frequent target for the New York tabloids and political embarrassment for Mayor Michael Bloomberg.
Steven Pearlstein is a Pulitzer Prize-winning business and economics columnist at The Washington Post.
SAIC over the years
It was just last June that SAIC executives and directors first informed shareholders that there might be a little $2.5 million overbilling problem with the contract and that federal prosecutors had brought criminal charges against six employees of an SAIC subcontractor. Shareholders had to read deep into Note 9 of that quarterly report to learn that there might be “a reasonable possibility of additional exposure to loss that is not currently estimable” that “could have a material adverse impact” on the company’s finances.
It was just six months ago that SAIC got around to firing the three executives who were supposed to oversee the New York operations and letting shareholders know that the board of directors had formed a special committee and hired a couple of law firms to get to the bottom of things.
And it was a month ago that SAIC, acknowledging its responsibility in failing to detect a bribery and kickback conspiracy going on right under its corporate nose, agreed to repay the city $500 million of the $635 million it had received for the completed CityTime system. The settlement will allow SAIC to avoid criminal prosecution and the almost certain debarment from government contracting work that would follow.
Now with the appointment of a new chief executive, SAIC wants to assure everyone that the problems have been fixed and that the company has regained its “entrepreneurial spirit” and returned to its “core values.”
Imagine that: In less than a year, SAIC has gone from having no problem at all with its CityTime contract, to having its entire business put in legal jeopardy, to putting everything right and putting it all behind them. The speed of these corporate cultural transformations is truly remarkable.
This familiar narrative, of course, comes straight out of the Official Corporate Scandal Handbook that they must pass out to all executives when they are first ushered into the C-suite. Ignore. Deny. Obfuscate. Fire a few bad apples. Hire expensive outside counsel. And in a final flurry, acknowledge that mistakes were made but assure that it’s all behind us. The only thing left is for SAIC to quietly settle the inevitable shareholder class-action lawsuit to guarantee that the full story of who knew what and when will never see the light of day.
What is fascinating about the CityTime debacle is how many times SAIC was warned about irregularities and potential fraud without ever doing anything about it.