Jessica Karmasek Aug. 27, 2015, 10:23am


NEW YORK (Legal Newsline) - A company that was tasked with monitoring the overhaul of New York City’s timekeeping system has requested that a whistleblower’s lawsuit filed against it over two former employees’ alleged fraud be transferred to a New York federal court.

Defendant SFN Group Inc., formerly known as Spherion Corp., filed its notice of removal to the U.S. District Court for the Southern District of New York last week.

Plaintiff Vinrod Khurana brought his original complaint on behalf of the State of New York and City of New York in March 2011. The lawsuit, filed under seal, named a group of defendants, including SFN.

The company argues that the lawsuit belongs in federal court because it is a qui tam action, with neither the state or city being a party.

In addition, SFN notes that the case is an action under the New York State False Claims Act for damages allegedly sustained by the city and Khurana.

Specifically, Khurana alleges that SFN billed the City of New York an estimated $48 million in connection with the CityTime project. He also alleges that “any claims for payment that [SFN Group] made to the city between 2004 and 2010.. were false claims subject to treble damages and pre-claim penalties pursuant to the New York State False Claims Act.”

Khurana also seeks two times back-pay from the date of his alleged termination of his employment in 2007 through the conclusion of the CityTime project in 2010, plus special damages including his attorneys’ fees and litigation expenses.

“The total amount of damages sought in the Second Amended Complaint therefore exceeds $75,000,” SFN wrote in its seven-page notice, filed Aug. 20.

Khurana, a San Francisco resident, is a former employee of Spherion.

In July 2004, Spherion hired Khurana, who has more than 20 years of experience as a computer systems analyst, as a consultant/load tester on the CityTime project.

According to court documents, starting in late 2010, New York City’s attempted overhaul of its timekeeping system ground to a halt amid the discovery of “rampant, pervasive” fraud that tainted “nearly every corner” of the project.

Over the next three years, New York City investigators -- and the public -- would come to find out that a small group of individuals had turned the CityTime project into their own personal bank account, creating a network of shell corporations to deceive the city about the development of the software while kicking back tens of millions of dollars into their own pockets.

At the heart of the fraud were two men -- Mark Mazer and Scott Berger -- who, according to court documents, were largely responsible for developing and implementing what has been deemed “one of the worst, if not the worst, financial crimes against the city.”

Mazer and Berger, according to Khurana’s complaints, became involved in the project as the direct result of Spherion, the contractor tasked with monitoring the development of the software.

Spherion treated Mazer and Berger as its employees. According to Khurana’s complaints, they were considered by those on the job site to be the “face” of Spherion.

Khurana worked for Spherion, on the project, until being terminated -- without any explanation, he alleges -- in May 2007.

He contends his termination followed his “many attempts” to warn his superiors about the poor testing results of the CityTime software and that the project could not function.

According to Khurana’s complaints, Spherion fired him immediately after he alleged to his colleagues that Mazer and Berger were engaged in wrongdoing related to the operation of the project.

Khurana, in his second amended complaint filed in New York Supreme Court in July, contends Spherion should be held responsible for its “undeniable and critical role” in the damage caused by the two men.

“By hiring Mazer and Berger, Spherion assumed responsibility for their conduct on the contract -- both by basic tenants of respondeat superior and by the specific obligations set forth in the contract between Spherion and the City of New York Office of Payroll Administration,” he wrote.

“Spherion submitted claims and collected millions of dollars from New York City on behalf of Mark Mazer and Scott Berger alone. Yet, while Mazer and several of his co-conspirators are serving lengthy prison sentences for their abhorrent and unapologetic fraud, Spherion Corp. so far has escaped liability.”

Khurana continued, “Had Spherion exercised proper authority and oversight over its employees, had it put in place any safeguards to monitor for fraud by its own employees, and had it not turned a blind eye when confronted with suspicions of Mazer and Berger’s conduct, the massive fraud perpetrated on the City of New York could have been avoided completely or at least stopped years earlier than it ultimately was.”

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

Organizations in this Story

State of New York
Albany, NY, United States
Albany, NY

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New York, NY 10007

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