The $390 Million MetroCard

Inside New York’s Megabuck Lovefest With Automation

In 1988, the company reached a $7.25 million no-guilt settlement with the U.S. Army over claims it had falsified tests on a contract to manufacture and refurbish handheld mine detectors. Three years later, the government of Iran sued Cubic Defense for almost $28 million over a 1977 contract for an air combat maneuvering range. Two courts have ruled in favor of Iran, granting the country $2.8 million, plus interest, a verdict Cubic is contesting.

Cubic's transportation division won the first New York contract the year Cubic Defense, caught up in the federal "Ill Wind" scandal, pleaded guilty in a federal court to three felony counts of conspiracy, theft of government property, and filing false statements. Cubic admitted to taking part in a conspiracy to bribe an air force official with a Swiss bank account, gifts, travel, meals, and promises of future employment with the company to win government contracts—an offense for which the firm paid $4.65 million in fines. Colvin Clay "Sam" Wellborn, former president of Cubic Defense, was sentenced to 18 months in prison and fined $15,000.

The same month the Cubic exec was sentenced, the company's negotiations with New York sparked their own investigation.

Still on line: New York City shells out millions to the company that makes MetroCard.
photo: Tara Engberg
Still on line: New York City shells out millions to the company that makes MetroCard.

New York City Transit depends on Cubic engineers to fix the MetroCard software—which is often a lengthy, expensive, and convoluted process.

The office of Transit Inspector General John S. Pritchard III had received reports that members of the negotiating and selection committees had engaged in insider trading on Cubic stock. The office also examined an incident in November 1990 where a Cubic officer passed five $20 bills to transit personnel in a stack of technical documents. An engineer, Richard Rowlands, said that he had taken $200 out of a cash machine and accidentally hid $100 of it inside the documents in his briefcase for security. "I felt absolutely sick and angry with myself," Rowlands explained to the press. "I felt that I'd done something incredibly stupid."

Based on this information and the other results of the investigation, the inspector general cleared Cubic of wrongdoing.

Despite this oozing river of doubt, Cubic won New York when it undercut the price of the only other finalist—a consortium of NYNEX and a major French company's Fairfield, Connecticut-based subsidiary, Alta Technology—by $20 million. Before awarding the bid, Transit's selection committee courted reassurance from the air force that the military had not banned Cubic from receiving federal money, then ushered the company in.

By February 1992, not even a year after Cubic won the New York contract, transit overtook defense as the company's top business, and stayed there. Through it all, Richard Trenery managed New York's newly created automated fare program, though he did not sit on the committee that selected Cubic. He did not return calls for comment for this story. "He determined what the agency needed, what type of technology we might want to employ, things of that nature," says Transit spokesman Al O'Leary.

Before joining Cubic, Trenery worked for Transit for 11 years. He came on in 1988 as program manager for automated fare collection, at $95,000 a year. In 1996, he became manager of MetroCard Services and then chief officer of MetroCard Sales, where he ran retail sales on MetroCards, set up deals with outside vendors, and oversaw MetroCard bus and van programs.

Trenery appears to have been involved in many phases of launching the MetroCard program in New York, but Transit spokesman O'Leary says Trenery never strayed into having a conflict of interest. "The rules are clear, and Cubic and Mr. Trenery have complied with the rules," O'Leary says.

"One says that if an offer comes to an employee while working for the city, you are allowed to pursue it but must recuse yourself from further dealings on behalf of the city. If you look at his career, from '96 to '99 he was in a job with no connection to automated fare collection management. He was out of a line of work dealing with Cubic. . . . Once you leave you're not permitted to work on any contract related to the government contract for two years. Mr. Trenery is not only not working with New York Transit, I've been told that he's not even in the U.S. at this point."

Cubic officials, for their part, say they're not seeking to gain from Trenery's previous experience in New York. "We got letters from the Transit Authority stating that he was free and clear and ready to hire," says Cubic spokesman Ron Kane. "We have no interest in him working on anything having to do with the Transit Authority. We were interested in him because of what he knows and can use in other places."

Kane says Trenery left the agency amid massive departmental reshuffling in late 1999. A Cubic competitor was also interviewing Trenery for a job, Kane says. For Cubic, Trenery may work on projects in Washington, D.C., and Sydney, particularly focusing on smart-card programs, and on Cubic's privatization of the entire automated fare collection system in London, a contract from which Cubic expects a possible $700 million over the next 17 years.

Transit employees and former officials were not surprised when Trenery, who left the $125,000-a-year position as chief officer of MetroCard sales in December 1999, reappeared at Cubic the next month. Shifts to the private sector by public employees are taken as a matter of course. "Nobody makes the money at Transit that they can make in the private sector," says union leader Hansjergen. "That's what private companies do. They go to business with quasi-governmental organizations and pull out the senior management to allow them a hook into the organization."

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