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$5M Settlement to Repay 500 Workers

Monday, June 16, 2014

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A New York general contractor will pay nearly $5 million to make good on wages and benefits owed to hundreds of its subcontractors' employees on a $60 million federally funded project.

The U.S. Department of Labor has announced two settlements with MDG Design & Construction LLC of Huntington Station, NY, for wage violations in 2010 and 2011 on the Grand Street Guild construction project on New York's Lower East Side.

The latest settlement requires MDG to pay $3.8 million in back wages and fringe benefits to about 200 construction workers employed by subcontractors. A previous, separate investigation led to the repayment of more than $1.1 million to about 300 subcontractor laborers and mechanics on the same project.

MDG Design & Construction

MDG Design & Construction violated numerous wage laws on the $60 million HUD-funded Grand Street Guild project in Lower Manhattan, federal authorities said.

MDG was found guilty of numerous violations of wage and labor laws, including failure to pay the required prevailing wages and submitting inaccurate or falsified payroll records to the government.

The Labor Department filed the charges in May 2013 and has already obtained debarments for multiple subcontractors on the project.

'A Proud Reminder'

MDG was the general contractor for the low-income project, which was funded by the U.S. Department of Housing and Urban Development (HUD).

The rehabilitation included new bathrooms, kitchens, asbestos removal, painting, electrical, brick and facade work, and renovations to the exterior and common area. The project also included a new maintenance building, community amphitheater and playground.

"This $60,000,000 rehabilitation has transformed one of the Lower East Side's neediest projects and now stands as a proud reminder of how a project can be transformed with tenants in occupancy," MDG says on its website.

Monitors and a Hotline

The settlement does not bar MDG from future contracts. It does require the contractor to commit "to implementing and abiding by a comprehensive enhanced compliance agreement to ensure future compliance" with all wage laws, and to ensure that its subs do likewise.

MDG Design & Construction

The three-square-block Grand Street Guild project included a new maintenance building and other new structures. General contractor MDG has not been barred from future government contracts.

MDG must also hire an independent, DOL-approved monitor, to conduct regular reviews of the company and its subcontractors for three years. The monitor will train MDG staff and subcontractors and establish a 24-hour hotline to accept confidential reports of wage and other violations.

Debarments, Other Firms

In addition to MDG, the settlement applies to Charis Consulting LLC and Kona Contracting LLC, as well as to Michael Rooney and Nicola DeAcetis, who own all three companies. It also applies to Neys Escobar, an owner of Kona.  All of the companies are based in Huntington Station, NY.

MDG's website calls Rooney, who has a BA in accounting from Pace University, "a leader in the affordable housing industry." The site describes architect DeAcetis as "highly regarded in the industry for his expertise and creativity to solve difficult construction issues..."

The company posted no statement on the settlement and did not respond to a request for comment.

Previously, the Wage and Hour Division obtained three-year debarments for project subcontractors ACJ Construction Corp., JECA Construction Corp., Millennium Century Construction Inc. and Omega Interior Corp.

Michael Rooney BIshop's Testimonial Award Reception
The Real Deal (left); NYNP (right)

Last fall, MDG founding principal Michael Rooney (left) said he had no knowledge of underpayments by subcontractors. In 2011, MDG was honored for raising funds for Cathholic Charities housing programs. Principals Nicola DeAcetis and Rooney are second and third from left, respectively, in the photo at right.

"This settlement reinforces the Labor Department's commitment to take strong action to ensure that workers are properly compensated for their work," said David Weil, administrator of the DOL's Wage and Hour Division.

“General contractors on federally assisted projects have a responsibility to ensure that their subcontractors comply with prevailing wage laws and properly compensate their employees.”

Debarment Sought

According to The Real Deal, a New York real estate magazine, the DOL "sought to bar MDG from bidding on federal projects through 2016" after filing the case against the company.

In addition, the magazine reported, three of the project's subcontractor workers filed a class-action suit against MDG in October 2013. The workers claimed they were paid no more than $50 per day and were told to hide from inspectors. Workers also said they were locked in a room when inspectors visited.

Nevertheless, the New York City Housing Authority hired the contractor in November to repair 874 of its apartments in the Bronx. Brooklyn and Manhattan.

"We would hope that when a contractor is under investigation, there would be a heightened sense of scrutiny," the workers' attorney, Lloyd Ambinder, told the New York Daily News at the time.

Owner's Denial

Rooney told the news outlet that any underpayment had occurred without MDG's knowledge.

“MDG has zero tolerance for labor law violations,” Rooney told the news outlet. “There is no allegation that MDG was aware of, condoned, or participated in the violations of its subcontractors. MDG is confident that there will be no findings … that MDG engaged in any misconduct.”


Tagged categories: Construction; Ethics; General contractors; Government contracts; HUD; Labor; Project Management; Subcontractors; Violations

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