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Democrats hit Havenstein for tenure at company charged with fraud

Former defense contractor and Republican, Walt Havenstein, center, talks with supporters after announcing that he is running for governor of New Hampshire, Wednesday April 16, 2014, in Concord, N.H. Havenstein hopes to unseat Democrat Maggie Hassan. (AP Photo/Jim Cole)

Former defense contractor and Republican, Walt Havenstein, center, talks with supporters after announcing that he is running for governor of New Hampshire, Wednesday April 16, 2014, in Concord, N.H. Havenstein hopes to unseat Democrat Maggie Hassan. (AP Photo/Jim Cole)

Republican gubernatorial candidate Walt Havenstein’s tenure as chief executive of Virginia-based Science Applications International Corp. is at the center of a new attack campaign by the state’s Democratic Party, which is alleging Havenstein mismanaged the company and failed to stop employees from defrauding taxpayers.

“His disastrous tenure as CEO took his company in the wrong direction, just like he would take New Hampshire in the wrong direction,” Democratic Party Chairman Ray Buckley said yesterday in a release that included a link to a website and video dedicated to critiquing Havenstein’s time at SAIC.

Havenstein’s campaign, however, says he joined SAIC well after the fraud began and was instrumental in taking action against it.

“By the end of Walt’s tenure at CEO, all those found responsible had been held accountable and arrangements had been put in place so that all harmed parties were to be made whole,” said Henry Goodwin, his press secretary.

The attack campaign revolves around a massive fraud scandal within SAIC, which contracts with governments for IT work, that broke while Havenstein was CEO. In 2010, federal prosecutors announced evidence of money laundering through SAIC’s work on CityTime, an automated payroll system for employees of New York City, which defrauded taxpayers out of millions of dollars. In 2012, SAIC agreed to pay $500 million in penalties and restitution in order to avoid federal prosecution. In April of this year, one of the SAIC employees involved was sentenced to 20 years in prison in what a federal district court judge called the “largest city corruption scandal in decades,” the New York Times reported.

Democrats are laying blame directly at Havenstein’s feet, saying he should have acted sooner to fire those responsible for the fraud. But Havenstein’s campaign is pushing back against the claims, saying the timeline provided by Democrats leaves out crucial elements of Havenstein’s tenure at the company. According to reports, the contract with CityTime began in 2001 and a whistle-blower filed a complaint in 2005, well before Havenstein joined the company. Havenstein became the CEO in fall 2009, and in summer 2010 hired a new general counselor and requested an internal investigation. Because SAIC is a private company, meeting minutes for its board of directors are not readily available online to verify this.

“As soon as I became aware of problems with the CityTime contract, I initiated an internal investigation and informed the Board of Directors,” Havenstein said in a statement.

Federal prosecutors made their first charges of fraud and money laundering, which involved a few SAIC employees, in December 2010. Havenstein put one of the chief perpetrators of the fraud on administrative leave and fired him in May 2011, a move Democrats say didn’t come quickly enough. Havenstein’s camp, however, says the firing process took longer because all employees are guaranteed due process.

When the company’s internal investigation concluded in 2011, Havenstein fired three additional people, according to his campaign. He then retired March 1, 2012, weeks before SAIC agreed to pay the $500 million settlement. After the firings, Havenstein sent a memo to all employees saying the actions of those involved in the scheme were “appalling.”

“The kind of behavior we have seen in CityTime is criminal and is an affront to everything SAIC stands for as a company,” it said.

Havenstein, his campaign stresses, was never implicated in the federal criminal investigation. Shareholders did bring three class-action lawsuits against the board and Havenstein, but the U.S. District Court dismissed the case, a decision that was upheld by a federal appeals court. When Havenstein retired from SAIC in March 2012, he left with a lump sum payment of $920,000, the Washington Post reported.

The state Democratic Party says that Havenstein “either turned a blind eye or failed to ask the right questions” until the company was charged with fraud, more than a year after he joined. Aside from the fraud scandal, Democrats say Havenstein’s approach to running SAIC resulted in falling stocks and lost jobs. Reports show the company’s stock fell 32 percent during Havenstein’s tenure.

The Democrats’ strategy is to define Havenstein before he has a chance to define himself, said Fergus Cullen, former chairman of the state Republican Party. Havenstein has never held elected office, and his campaign so far has revolved around his business experience.

“Part of the idea is that you’re trying to go at a candidate’s perceived strengths,” Cullen said. “Havenstein is obviously going to run on his executive experience, so if you can dent that, you’re going at their area of presumed strength.”

Havenstein’s campaign has yet to release a television ad that could build a narrative with a widespread audience. After the Democrats’ SAIC memo went out yesterday, however, the Havenstein campaign released a biographical web video highlighting Havenstein’s career in the military and as a business executive.

Havenstein will face Andrew Hemingway in the Sept. 9 primary for the right to challenge Gov. Maggie Hassan, a Democrat.

(Kathleen Ronayne can be reached at 369-3309 or kronayne@cmonitor.com or on Twitter @kronayne.)

Legacy Comments3

A year after Havenstein joined the company, it was charged with fraud. How can he say that he worked quickly to uncover the fraud and correct it? Nick Vazzana, Democratic House Candidate

As Hillary would say; "What difference does it make?" This guy could own a cookie factory that produces all the girl scout cookies sold in the country for free and the dems would still demonize him.

"$500 million in penalties and restitution in order to avoid federal prosecution " Another case where PEOPLE commit the crime but the executives use corporation money to buy their freedom. I feel safe saying the $500M did not come from the employees.

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