The lead contractor that implemented New York City’s automated workforce management system has agreed to a $500 million settlement with the U.S. Attorney.

McLean, Va.-based Science Applications International Corp. (SAIC) also admitted responsibility for illegal conduct by former employees who worked on the CityTime system, which was initially projected to cost $63 million and later ballooned to more than $600 million. Two of the company’s officials and others were alleged to have overbilled and paid kickbacks to subcontractors also working on the time and attendance system.

SAIC was found to have not acted on information from a whistleblower that the company was funneling project work to a single subcontractor, TechnoDyne. Eleven people were charged in the case, and two pleaded guilty.

A statement from U.S. Attorney’s Office Southern District of New York said SAIC had agreed to the appointment of an independent monitor for three years as part of the “deferred prosecutorial agreement.” SAIC also is forgiving an additional $40 million that New York City still owes the company.

The $500.4 million in restitution and penalties is believed to be the largest, by dollar amount, of any investigation alleging state or local government contract fraud, the U.S. Attorney’s Office said. Bloomberg News reported that a spokesperson for Mayor’s Office said that SAIC billed the city $690 million during the course of CityTime’s implementation. New York City will use the restitution payment to help close a $3 billion budget deficit projected for 2014, the spokesperson said.

New York City will get most of its money back. Last summer Mayor Michael Bloomberg asked SAIC to pay back $600 million.

“This investigation revealed that SAIC managers responsible for CityTime placed profit ahead of principle, time and again. A half billion dollars is a staggering sum, but it is a sum commensurate with the staggering scale of the crimes and misconduct we uncovered, and is an amount that makes the city whole,’ said U.S. Attorney Preet Bharara.

John Jumper, CEO of SAIC, said on Wednesday March 14 via a prepared statement that the company has strengthened it compliance program and its balance sheet remains solid.

"We welcome this settlement as an important step in our efforts to move forward as a better, stronger company dedicated to the highest standards of ethics and performance for our customers," Jumper said.

Work on CityTime began in 2003. The system, which is now operational, serves 163,000 New York City employees across 65 agencies, according to SAIC.

In related news, the New York City Council passed legislation Wednesday requiring that the council be notified when a large contract is modified so that costs rise more than 20 percent.

The New York Daily News reported Council Speaker Christine Quinn said “this legislation will prevent the next CityTime.”