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WTC Contractor Indicted in $600M Fraud

Monday, October 20, 2014

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A New York City steel contractor and its CEO have been charged with defrauding a federal minority set-aside program to obtain hundreds of millions of dollars in contracts on the World Trade Center Project.

DCM Erectors Inc. and president and CEO Larry Davis were indicted Oct. 8 by a federal grand jury in U.S. District Court in Manhattan on charges of wire fraud and conspiracy to commit wire fraud, authorities announced Friday (Oct. 17).

WTCTransitHub_DCM
DCM Erectors

Authorities say DCM established nominal joint ventures with W/MBE-certified firms, then farmed out the work to other companies or did the job itself. The contracts included a $330 million agreement for steel fabrication and erection on the World Trade Center transit hub (pictured).

The indictment follows an 18-month investigation and plea deal that was withdrawn over the summer. The investigation continues.

22,305 Tons of Steel

The indictment alleges a "fraudulent scheme" by Davis and DCM to violate the Minority- and Women-owned Business Enterprise Program (M/WBE) to gain:

  • A $256 million contract in 2007 for work on the 104-story 1 World Trade Center; and
  • A $330 million contract in 2009 for work on the 800,000-square-foot WTC Port Authority Trans-Hudson (PATH) Transportation Hub.

DCM fabricated and erected the superstructures—22,305 tons of structural steel in all— for both projects, which are being developed by the Port Authority of New York and New Jersey.

DCM is a subsidiary of The Davis Group, a Toronto-based conglomerate of 11 companies owned and/or managed by Larry Davis.

DCM's sister companies include Harris Structural Steel Fabrication LLC, a bridge fabrication and coatings company managed by DCM, and MRP LLC steel fabricators, both based in New Jersey.

1WTC_DCM
DCM Erectors

Both DCM Erectors and its CEO, Larry Davis, are accused of defrauding set-aside programs to win WTC contracts.

Cost overruns on both WTC projects ballooned DCM's contract value to about $810 million as of a year ago, reports say. (The cost of the transit hub, estimated at $2 billion in 2007, is now $3.4 billion.)

The 16-acre World Trade Center Project received about $2.2 in grant funds from the Federal Transit Administration. DCM has been involved with projects on the site since clean-up after the September 11 attacks.

The company also has a $136 million contract related to the 4 World Trade Center construction.

How It Worked

Authorities say DCM developed joint ventures with an MBE and a WBE in order to gain the contracts, then found another subcontractor to do the work, or completed the work itself.

DCM established a joint venture with minority-owned Solera Construction Inc., of Ossining, NY, "for the purpose of using it to satisfy MBE requirements on public construction projects," according to the Department of Transportation's Office of Inspector General, which is leading the multi-agency investigation.

DCM Erectors

DCM fabricated and erected the structural steel for 1 World Trade Center, a contract that has well exceeded its original $286 million value. DCM has been involved in demolition and construction at the site since shortly after the September 11 attacks.

From 2009 through August 2012, Davis and DCM claimed about $70 million of MBE credit on the value of work performed by the joint venture, while all of the work was performed by DCM or a non-minority contractor.

The New York Post reported this summer that Solera owner Johnny Garcia, 66, had been paid $2 million to go along with the scheme.

DCM established a similar JV with WBE-certfied GLS Enterprises Inc., owned by Gale D'Aloia, 48, a former employee of Davis. She reportedly received $575,000 over three years for her role in the scheme, authorities said.

Davis allegedly used phony business records and work orders to make it appe - See more at: http://therealdeal.com/blog/2014/08/01/wtc-steel-contractor-charged-with-criminal-fraud/#sthash.xDEb3kz6.dpuf

Neither of the smaller partners has a website, and neither could not be reached Friday (Oct. 17) for comment.

Both Garcia and D'Aloia have pleaded guilty in the case and are awaiting sentencing, reports said.

Money for Nothing

The New York Times reported a year ago that the Solera work was actually carried out by AC Associates, a metal deck erector based in Lyndhurst, NJ. GLS operated as a "subcontractor that received money but performed no work," sources told the newspaper.

DCM
Port Authority of New York and New Jersey

The 16-acre World trade Center Project is being developed by the Port Authority of New York and New Jersey.

Two years ago, the Wall Street Journal reported financial problems on the projects, saying the Port Authority had been been "quietly advancing money to the contractor" and paying some of the subcontractors directly.

The investigation is continuing, reports the DOT's OIG, which is pursuing the case with the Internal Revenue Service and the Department of Labor's OIG.

   

Tagged categories: Bridges; Commercial Construction; Contractors; Government contracts; Infrastructure; Laws and litigation; Steel; Structural steel; Transportation

Comment from Mike McCloud, (10/20/2014, 7:37 AM)

This just shows, once again, there are not enough "qualified" MBE and WBE companies out there. The "owners" of these MBE/WBE got there money. They may have had all white men working for them. I'm a white man that has about 75% great minority employees and I don't get any government favors. What a bunch of nonsense.


Comment from Karen Fischer, (10/20/2014, 9:15 AM)

Isn't it interesting that the powers that be had not interest in going after anyone until AFTER the erection was complete? Let them finish the job, then go after them. Who is corrupt here?


Comment from Humphrey Galantis, (1/10/2015, 12:57 AM)

Mike: I think you may have the whole M/WBE program slightly mixed up. Based on the guidelines, a relatively small portion (~15%) of the contract bids are reserved for companies that are OWNED by women/minorities (with the other ~85% distributed to the highest bidder—regardless of ethnicity/gender). Minority laborers generally always account for at LEAST 75% (or more) of the total construction labor workforce in lower-level, "grunt" positions. You wouldn't get any government favors for having 75% minority workers, because so does everyone else. The rarity is when minorities/women OWN construction companies. These regulations also help limit minorities/women being passed over due to their gender or ethnic group (which surely occurred often before). Politics in the construction industry is still a white-man's world, and white NYC construction owners aren't always the most progressive individuals. The construction industry is still a very old-fashioned industry, and still has many leaders that were involved in the 60s-70s, when women and minorities had little/no rights (and, construction companies are often passed down to children who maintain the same sort of standards). That's one of the main reasons this system was devised: Construction companies with white owners tend to favor each other, and tend to mistrust women or latinos/blacks in these manly, high-risk scenarios. An analogy it can be compared to would be a committee of old, rich, white republican bankers. They surely would not go out of their way to entrust a latino woman with a large account over another old rich white man. In closing: You get no government favors because you already have an advantage just being a white male construction owner. (I am a white male, BTW, so don't mistake my comment for some sort of crusade for the minorities. Karen: The "powers that be" were investigating cases of fraud for years before the job was complete. Pretty much every construction company involved with the job (and there are hundreds) had agents of the Port Authority come and seize all their hard drives and files, etc., and the PA had hundreds of millions of documents to sift through. Honestly, I'd rather give all the jobs to white men and get it done that provide the additional $100s of millions in tax $s that a halt would have incurred. It would be a very complex situation just trying to get to the bottom of the fraud—BEFORE you factor in the complexity of the actual construction job. You may be aware that the Port Authority was drastically behind schedule on the construction, and extremely over budget. A case like this would have brought the already-delayed, monetary disaster to a screeching halt. Not to mention that we are discussing what was the most notorious construction project in the world. In addition: Would you really be surprised, anyway, considering the shambled state of the Port Authority? I'd like to know how much corruption occurs within the regulatory agency that is supposed to be investigating the corruption.


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