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3 ‘Buffalo Billion’ defendants sentenced to federal prison (NY)

Posted by National Alliance for Fair Contracting on

AUTHOR – Kim Slowey
PUBLISHED – Dec. 10, 2018

Dive Brief:

Three defendants were sentenced to federal prison last week in the “Buffalo Billion” corruption scandal. Syracuse, New York-based developers Joseph Gerardi and Steven Aiello, as well as former Buffalo general contractor Louis Ciminelli, were convicted of fraud and other charges earlier this year for their roles in a bid-rigging scheme that netted their companies hundreds of millions of dollars.

U.S. District Court Judge Valerie Caproni sentenced all three in separate hearings, handing each one a $500,000 fine plus jail time. Caproni ordered Aiello to serve three years, Gerardi to serve 30 months and Ciminelli to serve 28 months. Ciminelli has up to one year to pursue an appeal before reporting to prison. Gerardi and Aiello also remain free, but Caproni has yet to decide how long they ultimately will be able to postpone incarceration, pending appeals.

Prosecutors said Aiello’s and Gerardi’s company, Cor Development, netted $100 million in state construction work for a $14.4 million film soundstage in Syracuse and a $90 million LED lighting factory in Dewitt, New York, as part of a bid-rigging scheme. As LPCiminelli’s former chief, authorities accused Ciminelli of paying a bribe to a former aide of New York Gov. Andrew Cuomo in order to score a $750 million contract to build a SolarCity plant in Buffalo.

Dive Insight:

Not long after Ciminelli was charged in the bid-rigging case, LPCiminelli reportedly lost $4 billion in contracts and was forced to lay off 10% of its staff after losing an estimated 14 projects. The company also sold off much of its equipment and tools and repositioned itself as a program manager and developer.

Two other former LPCiminelli executives were also indicted in the case, but prosecutors decided there wasn’t enough evidence against former company president Michael Laipple and dismissed the charges in June. Kevin Schuler pleaded guilty to fraud and conspiracy for his part in the scheme and testified against Ciminelli and others.

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Two New York firms implicated in minority contractor fraud (NY)

Posted by National Alliance for Fair Contracting on

By Kim Slowey
Oct. 17, 2018

Dive Brief:

Bell Mechanical and Kaplan Schmidt Electric have been named in an alleged minority contractor scheme in Rochester, New York, that resulted in the arrest of Orville Dixon, head of Journee Construction, earlier this year, according to the Democrat and Chronicle. The two local contractors were named after an analysis of Rochester City School District contracts and complaints by the FBI and U.S. attorney general.

Bell and Kaplan Schmidt allegedly needed to hire a certain percentage of minority- or women-owned subcontractors to meet the requirements of the school district’s modernization program. Instead, the two supposedly used Dixon, who is African-American, and Journee as a “pass-through” to make it appear as if Journee was doing the work. Bell allegedly created a fake purchase order in 2013 that showed it bought $600,000 worth of HVAC equipment from Journee and put Bell’s workers on Journee’s payroll to make it appear that Journee was staffing the project. Kaplan Schmidt also supposedly falsely claimed it purchased material from Journee and allegedly agreed to pay Dixon’s company 2.5% of the subcontract amount.
In 2016, contractors working for the Rochester school district were fined a total of $825,000 to settle claims of fraud related to minority contracting. Those companies were Concord Electric Corp. (fined $350,000), Hewitt Young Electric ($160,000), Michael A. Ferrauilo Plumbing and Heating ($90,000), Manning Squires Hennig ($200,000) and Mark Cerrone Inc. ($25,000).

Dive Insight:

There are a growing number instances of minority contractor fraud in the U.S., possibly a result of more state and local government agencies adopting or increasing minority- or woman-owned business requirements. Sometimes there may not be enough qualified minority firms available for the job, but in some cases, contractors just want to expedite construction and are willing to risk the potential fallout.

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Albany contractor pleads guilty to $800K fraud scheme (NY)

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2 local men accused of exploiting, defrauding minority-owned businesses

Staff report
Friday, October 12, 2018

ALBANY – One of two local men accused of exploiting and defrauding minority-owned businesses in an $800,000 scheme has pleaded guilty and agreed to pay back his victims, Attorney General Barbara Underwood announced Friday.

After pleading guilty to felony grand larceny and scheme to defraud in Schenectady and Albany county courts this week, Michael Martin, 47, of Latham, is expected to receive a sentence of 3 1/2 to 12 years in state prison, Underwood said. He has also agreed to pay back the roughly $800,000 he stole from minority-owned businesses, employees and an insurance company.

Martin and his business partner, 52-year-old Scott Henzel of Albany, were arrested in July following a joint investigation by the Attorney General’s Office, state Inspector General’s Office and the state Labor Department. According to investigators, Martin was the crime’s mastermind.

“The defendant’s elaborate scheme defrauded minority-owned businesses and his own employees – all to game the system for his own benefit. Now he’s facing the consequences,” Underwood said. “My office will continue to prosecute fraudsters that take advantage of New York businesses, workers and taxpayers.”

As part of his plea, Martin admitted that he served as president and owner of Eastern Building & Restoration, a general contractor headquartered in Albany, from 2004 to 2014. Henzel, he said, served as controller.

In those roles, he said, they offered two minority business enterprises – Lorice Enterprises and Precision Environmental Solutions – a chance to partner with Eastern to learn how to successfully run and bid on construction projects. In reality, the pair took over the two businesses, Martin said, managing all day-to-day business activities, including staffing of laborers and bidding decisions, as well as all banking activity and financial decisions.

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Turner Construction, Bloomberg LP execs face bribery, bid-rigging charges (NY)

Posted by National Alliance for Fair Contracting on

AUTHOR – Kim Slowey
PUBLISHED – Dec. 12, 2018

Dive Brief:

Manhattan District Attorney Cyrus Vance announced Tuesday the indictments of former Bloomberg LP and Turner Construction Co. executives, as well as subcontractors and vendors, on charges of conspiracy, bribery, bid-rigging and other offenses after they allegedly tried to steal approximately $15 million from Bloomberg during a major renovation of the financial media giant’s New York City offices.

Charges against 14 individuals and three corporations include conspiracy, grand larceny, money laundering and commercial bribery. Those indicted include Bloomberg’s former head of global construction, Anthony Guzzone, and former construction manager, Michael Campana. Also charged in the matter are Turner’s former vice president and account executive, Ronald Olson, and former project superintendent, Vito Nigro. Vance’s office said the four allegedly conspired to inflate subcontractor bids, create bogus work orders and change orders and misappropriate unused subcontractor allowances. Subcontractors Litespeed Electric Inc., Cooling Guard Mechanical Corp. and Hugh O’Kane Electric Inc. and associated individuals were charged with allegedly furthering the conspiracy by paying bribes, participating in bid-rigging, falsifying business records and laundering criminal proceeds.

Vance said “inside information” about the Bloomberg project was given to subcontractors in order to help them win contracts for the job. The defendants, he said, inflated their budgets with fake invoices and purchase orders and even filed phony applications for women-owned business status. Subcontractors allegedly gave the former Bloomberg and Turner executives cash and other incentives like vacations and free home renovations in exchange for their lucrative contracts. “Today’s indictments and guilty pleas,” Vance said, “demonstrate that if you are engaging in organized crime that blocks fair competition in Manhattan, our prosecutors will find you, turn over every stone, and shut you down.”

Dive Insight:

“Turner applauds the hard work by the District Attorney’s staff in bringing this case and appreciates the District Attorney recognizing Turner for its assistance in the investigation,” Turner spokesman and attorney Thomas J. Curran of Peckar & Abramson told Construction Dive. “Of course, Turner rejects the conduct alleged against two former employees as an absolute betrayal of Turner’s core values of integrity, which are followed by the 9,000 Turner employees who work hard, honestly and well every day.”

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TENNESSEE DRYWALL WORKERS WIN UNPAID OVERTIME IN DOL SETTLEMENT (TN)

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EMPLOYEES MISCLASSIFIED AS INDEPENDENT CONTRACTORS SHORTED ON WAGES, WORKERS COMPENSATION, SAFE WORKPLACES

November 21, 2018, 1:15PM. By Anne Wallace

Hermitage, TN – On October 19, 2018, the U.S. Department of Labor announced that Tennessee contractor, Vasquez Drywall, had agreed to pay $103,300 in back wages to workers misclassified as independent contractors and a $2,424 civil penalty. Employment misclassification is rampant in the construction industry in Tennessee and throughout the country. The practice deprives employees of overtime pay, workers compensation insurance and basic workplace safety protections. Undocumented construction workers are particularly at risk because they are unlikely to bring lawsuits or seek other enforcement action to preserve their rights.

VASQUEZ DRYWALL — PART OF A BIGGER PROBLEM

DOL Wage and Hour Division investigators found that Vazquez Drywall violated the Fair Labor Standards Act’s (FLSA) overtime requirements by inaccurately classifying employees as independent contractors and paying them piece rates or flat salaries regardless of whether they worked more than 40 hours a week. The Division also found the employer failed to keep accurate payroll records for these workers. “Even if employees are paid piece rates, or on salaries,” noted Wage and Hour Division District Director Nettie Lewis, “they are typically still due overtime when they work more than 40 hours in a week.”

Since the wage order and fine were the products of a settlement, the details of what actually occurred and how many workers were affected remain unclear. What is clear, however, is that underpayment is a chronic problem in the Tennessee construction industry.

In June 2018, workers brought a federal lawsuit against two subcontractors involved in the construction of a new J.W. Marriott in downtown Nashville. The lawsuit claims that Mr. Drywall and First Class Interiors violated the FLSA by failing to pay workers the federal minimum wage or overtime pay for hours in excess of the normal 40-hour work week. It alleges that the company “willfully filed fraudulent information returns [with the IRS] classifying the plaintiffs as independent contractors rather than employees.”

In 2013 the Nashville Post reported that “[b]ased on estimates the [Tennessee Department of Labor and Workforce Development] provided, there are between 21,990 and 36,680 misclassified and unreported construction industry workers in Tennessee. Misclassified and unreported workers are estimated to range from 11 percent to 22 percent of all workers in the construction industry statewide.”

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Wage violations, false payrolls mean Bonney Lake firm banned from bidding on public construction projects (WA)

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Nov. 27, 2018

Tumwater – A Bonney Lake construction firm and its owner are permanently banned from bidding or working on public projects in Washington as the result of a recent settlement with the state Department of Labor & Industries (L&I) over wage violations and false reporting of payroll records.

I&C Northwest and owner Jim Lingnaw also agreed to pay more than $200,000 in back wages and penalties for the violations. The company did pipe insulation work on 14 schools and a warehouse across Western Washington in 2015 and 2016. The firm will repay $153,000 in wages to nine employees, each of whom worked on several of the projects.

L&I cited the company last year for the unpaid wages and for false reporting of payroll records. Under the settlement, reached recently, Lingnaw agreed to pay $1,000 a month in penalties for the next four years and is barred from being involved with his son’s companies should they work on public projects.

“The citations are based on I&C’s repeated wage violations despite L&I’s efforts to educate the company on following the prevailing wage law,” said Jim Christensen, Prevailing Wage Program manager for L&I. “We’ve been investigating the company since 2014.”

The schools I&C worked on include one high school, four middle schools, and nine elementary schools. The schools are in Bellevue, Clover Park, Mercer Island, North Thurston, Tacoma, Tahoma, Tumwater, Seattle, and Snoqualmie Valley school districts. The company also performed work on a warehouse for the Central Kitsap School District.

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Alaska governor signs comp reform bill (AK)

Posted by National Alliance for Fair Contracting on

Louise Esola
8/28/2018 – 1:03:00 PM

Alaska Gov. Bill Walker on Friday signed into law a bill that aims to reduce administrative costs in the workers compensation system and provide a clear definition of independent contractor, thus helping to combat worker misclassification.

H.B. 79 also creates an interim legislative workers compensation working group tasked with reviewing the workers compensation system.

“Injured workers and employers will both benefit from these changes to Alaska’s workers compensation system,” Gov. Walker said in a press statement. “We are cutting costs while making workers compensation work more efficiently.”

Labor Commissioner Heidi Drygas said worker misclassification is a growing problem in the state. “Providing a clear definition of independent contractor will help businesses be successful and in compliance, and will help workers clearly understand what constitutes independent contractor status,” she said in the statement.

The Alaska Truckers Association, the Alaska chapter of the National Federation of Independent Businesses, Painters Local 1959, and the Alaska Homebuilders Association all testified in support of the bipartisan legislation, according to the statement issued by the governor’s office.

(See Article)

Sacramento latest city to mandate local hiring (CA)

Posted by National Alliance for Fair Contracting on

By Kim Slowey
Aug. 23, 2018

Dive Brief:

  • The Sacramento City Council voted Tuesday to amend its city code and adopt the contentious, according to the Sacramento Bee, Local Hire and Community Workforce Training Program, which requires contractors to use a 50% local workforce on most city-funded projects of $1 million or more.
  • The program also requires that 20% of apprentices on covered projects be “priority apprentices,” who live in economically disadvantaged areas or are veterans, prior offenders, recipients of public assistance, foster youths, homeless or women. The new ordinance also requires that 50% of the budgets for two major city projects, including the renovation of the Sacramento Convention Center, be spent with local businesses in certain counties and that 15% of those businesses be small, regional enterprises.
  • In the sample agreement included on the city council’s agenda is “Contractor(s) performing construction work on the project described in the agreement shall, in filling craft job requirements, utilize and be bound by the registration facilities and referral systems established or authorized by the local unions,” a provision which some nonunion contractors argue will hinder their participation in city work. Proponents of the agreement, however, said that nonunion contractors perform around 60% of city work and that nonunion workers can simply register with the unions so that they can be included in the local hire program.

Dive Insight:

Unlike some other local hire mandates, Sacramento’s gives contractors an out of sorts by allowing them to hire from any source if unions cannot provide them with the necessary workers within 48 hours of a request. On the other end of the spectrum was the Detroit workforce requirement for contractors performing services during construction of the Little Caesars arena. The city fined construction companies that didn’t meet the 51% local hire requirements a total of $5.2 million. The Sacramento ordinance does not include such punitive measures for failing to meet the goals.

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San Francisco to expand background checks on contractors after deadly tunnel accident (CA)

Posted by National Alliance for Fair Contracting on

By Kim Slowey
Aug. 22, 2018

Dive Brief:

  • San Francisco Municipal Transportation Agency officials have promised, according to the San Francisco Chronicle, that they will make background checks into contractors that want to do business with the city more robust following the death of a signal technician employed by Shimmick Construction who had been working on the $40.9 million Twin Peaks Tunnel Improvement project. The agency awarded the contract for the project to the Shimmick/Con-Quest Joint Venture in February.
  • As part of the agency bidding and contracting process, construction companies are required to complete a pre-bid questionnaire that asks if they have been cited by Cal-OSHA for any serious and willful citations in the previous 10 years. Shimmick allegedly responded “no” to that question, and a Shimmick representative told the Chronicle that its answers on the city’s questionnaire were accurate. An analysis of Cal-OSHA records by the Chronicle, however, revealed that the company had received multiple safety violation citations in that period of time, many of which the company is protesting, including one involving a November 2016 death and an excavation-related incident for which the company received a serious/willful citation.
  • The increased scrutiny of contractors and their histories comes at the order of San Francisco Mayor London Breed who called for a “better system of checks and balances” when hiring contractors to perform on large city contracts. Agency spokesman Paul Rose told the Chronicle the SFMTA expected the Twin Peaks project to be completed on time and that it still planned to use Shimmick on future agency projects. The San Francisco Examiner yesterday reported that SFMTA Director Ed Reiskin reportedly defended the agency’s choice of contractor, calling Shimmick reputable.

Dive Insight:

States and municipalities typically require contractors to fill out a mountain of paperwork, but construction companies presenting false information on questionnaires or other qualification statements risk being debarred from doing business with an agency that determines they intentionally gave false answers or misrepresented mandatory qualifications having to do with elements of their businesses like work experience or financial capacity.

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San Jose High-Rise Contractor Pays $250,000 Over Alleged Wage Theft, Labor Trafficking (CA)

Posted by National Alliance for Fair Contracting on

by Dominoe Ibarra
July 23rd, 2018

The builder of a downtown San Jose apartment tower shelled out $250,000 to workers to settle labor violations alleged by federal investigators. Full Power Properties LLC-the builder that succeeded KT Urban on the the 650-unit Silvery Towers project-owed the money to 22 workers, the U.S. Department of Labor (DOL) announced last week.

Investigators found that Full Power Properties profited off underpaid workers employed by Job Torres, a subcontractor doing business as Nobilis Construction. During off hours, those workers lived in captivity, in a squalid warehouse run by Torres.

Acting on a tip that Hayward-based Nobilis Construction used undocumented workers as slaves, agents from the U.S. Department of Homeland Security served search warrants at multiple sites in August of 2017, took Torres into federal custody and referred the case to the DOL’s Wage and Hour Division.

Investigators say they found that Torres kept workers in a cramped second-story loft hidden behind a wall, with wood bunks and no running water. Torres allegedly locked the door from the outside, which led investigators to conclude that the workers were being held against their will.

According to the feds, Torres smuggled workers in from Mexico and would threaten them into submission by mentioning to anyone who complained that he knew people from drug cartels. The construction boss allegedly collected contact information for each worker’s family “in case of emergency,” so he knew where their loved ones lived.

There were signs of trouble long before federal investigators began looking into claims of forced labor in February of 2017. Silvery Towers developer KT Urban, which enjoyed tax breaks from the city to incentivize the project, came under fire in 2016 for hiring non-union workers, prompting a series of protests by local labor unions.

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