From left to right: Budget Director Tim Rudd, former Chief Administrative Officer Frank Caliva and Mayor Ben Walsh.

The owner of a company City Hall hired to work on its payroll modernization project has accused Syracuse officials of using her woman-owned business as a pass-through. 

Susan Fahrenkrug laid out her allegation in a 200-plus page complaint handed to city officials in November 2024 and obtained by Central Current. 

In the document, which Fahrenkrug did not file in court, she alleges the city signed a contract with her firm, Advanced IT, but then bypassed Advanced IT and steered the work to Advanced IT’s subcontractor, multinational consultant Ernst & Young.

“This collection of documents is for ‘whistleblowing’ purposes and to protect Advanced IT to not be identified as a (women-owned business enterprise) ‘pass-through’ business in New York State,” the complaint began. 

At times, the city cut Advanced IT out of its work to instead collaborate with EY, Fahrenkrug wrote in a statement sent to Central Current. She declined to be interviewed for this story.

Fahrenkrug wrote in an email included in the complaint that she received about 10% of the value of the contract while EY received 90%. 

Advanced IT was eligible to receive up to about $1 million in contracts from the city but she alleges she did little work, according to her complaint and statement. 

In her complaint, Fahrenkrug wrote that she believed the payroll project had been canceled but later found out it had not. 

“​​Recently, in November 2024, Advanced IT learned that the Payroll Modernization Project was not cancelled,” Fahrenkrug wrote to Central Current. Shortly after Fahrenkrug found out the project had not been canceled, she brought her concerns to city officials and others.

City spokesperson Brooke Schneider denied in an email response to Central Current that Advanced IT was used as a pass-through and that the city had received the services it paid for.  

Fahrenkrug also sent emails to the office of New York State Gov. Kathy Hochul and the minority- and women-owned fraud email account at Empire State Development, according to emails obtained by Central Current. 

“I filed a complaint to the City of Syracuse,” Fahrenkrug wrote to ESD. “I need help.”

It’s unclear if either office reached out to Fahrenkrug. 

In New York, government agencies are required to try to hire minority- or women-owned businesses for a fair share of the contracts they approve.  

The State Inspector General’s Office has investigated cases in which minority- or women-owned businesses were paid to fulfill government contracts, but they allegedly were just pass-through companies, and their work was actually done by other businesses. 

Some cases have resulted in criminal charges. 

City Auditor Alex Marion provided a copy of Fahrenkrug’s complaint to the New York State Attorney General’s Office. The AG’s office is reviewing Fahrenkrug’s complaint, a spokesperson said. 

While Schneider said Syracuse did not engage in a pass-through scheme, the city’s budget director in an email about Fahrenkrug’s allegations said EY may have committed fraud.

Budget Director Tim Rudd wrote in an email to the city’s Corporation Counsel Susan Katzoff and First Assistant Corporation Counsel Joseph Barry III, “it has become clear to me that the path taken by EY to secure their position earning more than $6 million from the city was full of misinformation at best and intentional fraud that enlisted the city to carry out the fraud at worst.” 

Ernst & Young did not reply to a request for comment for this story. 

The city’s updated payroll and timekeeping systems are not yet operational for city employees. So far, the city has spent $7.7 million on payroll modernization and is on the hook for $2 million more.

Fahrenkrug’s allegations

Fahrenkrug backed many of her allegations with emails sent between her, Ernst & Young employees and city officials. 

In her complaint, Fahrenkrug laid out the case that she was used as a pass-through with a few key details: 

  • When Fahrenkrug began contracting with the city and subcontracting with Ernst & Young, employees for EY wrote the scope of work that Fahrenkrug’s company would eventually submit to the city, according to emails between Fahrenkrug and an EY employee. 
  • The city and EY pushed Advanced IT out of work on the project, instead corresponding and working with EY. Fahrenkrug makes the argument in the complaint and in a statement sent to Central Current that she did little to no work for the money she was paid. 
  • Advanced IT agreed to pay about 90% of the money it received from the city to EY, according to an email between Fahrenkrug and an EY employee. 

Advanced IT’s relationship with the city dates back to 2021, when the company was included in a general services contract with five other technology consultants. Since then, the city has repeatedly gone back to that contract and amended it to pay those tech consultants. 

A year later, Ernst & Young reached out to Advanced IT at the recommendation of the city’s then Director of Digital Services Kelsey May, according to an email between an EY employee and Fahrenkrug. 

Within about four months, Advanced IT agreed to be the prime contractor on a portion of the payroll modernization project while agreeing to use Ernst & Young as a subcontractor. 

In November, EY employees began writing a draft scope of work for Fahrenkrug to send to the city, emails show. 

Advanced IT ultimately agreed to two contracts with the city, one in late 2022 and another in mid-2023. 

As Advanced IT and EY began working on the project, Shawn Malbeuf, an employee for Advanced IT wrote to the city’s Director of Analytics, Performance and Innovation hoping to gain access to the city’s buildings, networks and systems for the project, according to an email included in Fahrenkrug’s complaint.

The city’s former Chief Administrative Officer Frank Caliva emailed an EY employee, “Andrew – See attached screenshot of an email from Advanced IT. Just want to get aligned.” 

A representative from EY then emailed Fahrenkrug and Advanced IT to let them know that EY and the city would correspond directly. 

“Frank just sent us the attached outreach on the HCM project. While we work to get this signed, please refrain from any outreach on the subject of the project until we have (the statement of work) signed and expectations on communications set by Frank,” wrote EY representative JP Scullin. “We do not want any unintended risks stopping us both from getting to the finish line.”

“Separately – it does seem that the communication by Shaun is overstating what the scope would be, we should get some time to review with you and kickoff before we formally start to make sure all parties are on the same page.”

In the complaint, Fahrenkrug included a chart documenting each party’s responsibility in a portion of the project which did not include Advanced IT. 

“Advanced IT stopped reaching out to the city,” Fahrenkrug wrote in a statement, “allowing EY to manage the project.” 

On Jan. 4, 2024, a representative of EY told Advanced IT that the city decided not to move forward with the modernization project, Fahrenkrug wrote in a statement to Central Current. 

In November, however, Fahrenkrug found out that the city continued with the project. 

On Nov. 6, Fahrenkrug dropped off her complaint to Deputy Mayor Sharon Owens, who then provided the complaint to Corporation Counsel, Schneider wrote in response to questions from Central Current. 

‘Misinformation at best and intentional fraud … at worst’

Among those who received a copy of Fahrenkrug’s allegations was Tim Rudd, the city’s budget director. On Nov. 20, two weeks after Fahrenkrug dropped off her complaint, Rudd wrote an email to Katzoff and Barry III titled “Privileged and confidential – Advanced IT and EY.” 

In the email, Rudd recommended the city:

  • Freeze all payments to Ernst & Young
  • Seek a new waiver or put out a new request for proposal for the project 
  • Revoke the city’s general Bureau of Information Technology consulting contract
  • Share the information given to the city by Fahrenkrug with the New York State Attorney General’s Office   

Rudd also detailed in the email a conversation he had with Caliva that he argued shed more light on why Advanced IT was included in the project with EY. 

Frank Caliva, formerly the city’s chief administrative officer left Mayor Ben Walsh’s administration on Monday. Caliva’s departure came two days after Central Current reported on the city’s inability to get payroll modernization off the ground, a key initiative under Caliva’s purview. Credit: Courtesy of the City of Syracuse

After Fahrenkrug dropped the complaint off at City Hall on Nov. 6, Rudd approached Caliva in the Common Council Chambers about Fahrenkrug’s complaint, Rudd wrote.

Caliva explained that he knew the incident not to be minority- and women-owned business fraud because EY had expressed that they had an upper limit on the dollar amount of work they could do with the City of Syracuse “due to a preexisting agreement and that they would need another entity to push the work through,” Rudd wrote. 

“The evidence provided by Susan Fahrenkrug corroborates that the City had no sincere interest in working with her,” Rudd wrote. “The tail wagged the dog and seemingly the prime contractor was treated in the manner appropriate for a subcontractor while the subcontractor was engaged as though they were the prime contractor.” 

Caliva deferred comment on the specifics of the project to the city and did not reply to emailed questions about his interaction with Rudd. 

City officials, however, disagree with Rudd’s characterization. 

After the complaint was brought to the City of Syracuse, it conducted its own investigation of the allegations, Schneider said. 

“The investigation determined local and state requirements were satisfied and that, through the vendors involved, the City was receiving the services for which it contracted,” wrote Schneider. 

The fallout

The fallout from Fahrenkrug’s complaint has taken months to round into form. 

The Common Council obtained a copy of the complaint and is investigating it, according to Councilor Corey Williams. He declined to comment further on the contents of the complaint. 

Earlier this month, not long after the Council obtained a copy of the complaint, councilors voted unanimously to hire a third-party company to audit the city’s Bureau of Information Technology and the payroll modernization project. 

Caliva resigned in December, two days after Central Current reported the new payroll system’s failure to launch. 

Rudd, who alerted the mayor’s office to his concerns, has since told the administration he plans to resign March 18. He switched his party affiliation from Democrat to Republican and plans to run for mayor, notably against his boss Deputy Mayor Sharon Owens. Rudd had previously donated $1,000 to Owens and helped her campaign. 

And for the time being, the payroll modernization project appears to have been put on pause. 

“The city intends to conclude its engagement at the end of January,” Schneider said of payroll modernization. “As the city always does, it will review all invoices before payment in the normal course of business.”

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Chris Libonati is the managing editor of Central Current. He is a founding editorial member of the organization and was hired as Central Current's first reporter. He previously worked at the Syracuse Post-Standard...