One of the world’s largest contractors will pay more than $56 million and see an executive in prison in settling a decade-long fraud case involving overbilling and misrepresentation of minority businesses, authorities announced Wednesday (April 25).
Federal prosecutors in New York filed fraud charges in U.S. District Court against the construction firm Lend Lease (US) Construction LMB Inc. (formerly known as Bovis Lend Lease), of New York City.
Bovis admitted defrauding public clients by lying about the work performed by Minority Business Enterprise (MBE) partners in order to obtain lucrative contracts.
New York Mets (left), nyc-architecture.com (right)
|The 10-year fraud covered the whole spectrum of Bovis’s New York projects, including the Mets’ Citi Field stadium (left) and Grand Central Terminal (right), prosecutors said.|
Under a deferred prosecution agreement announced Wednesday, Bovis will pay more than $56 million in penalties and restitution and will institute widespread corporate reforms, prosecutors said.
Bovis is a U.S. subsidiary of Australia-based Lend Lease Corp. Limited, which operates in dozens of countries. New York is Bovis’s largest office.
Also Wednesday, James Abadie, 55, the former principal in charge of Bovis’s New York office, pleaded guilty to conspiring to commit mail and wire fraud by fraudulently overbilling clients for more than a decade.
Over the years, Abadie has headed many significant New York projects, including schools, courthouses, the September 11th memorial, cleanup after the September 11 attacks, and a fatal skyscraper demolition in 2007.
Prosecutors said Bovis “intentionally and fraudulently” billed clients from at least 1999 to 2009 for hours not worked by foremen from Local 79 Mason Tenders’ District Council of Greater New York.
The 15,000-member council represents a half-dozen locals, including construction workers, and bills itself as “one of the most progressive and aggressive labor organizations in the nation.” The council was not charged Wednesday.
Prosecutors say Bovis “systematically added one to two hours of unworked overtime per day to the time sheets for labor foremen” and “systematically” submitted bogus time sheets listing unworked hours as worked.
The fraud included double-dipping on public projects, with time sheets also submitted on sick days and holidays, authorities said. A “select group of labor foremen” even received “extra, undisclosed, lump-sum and stipend payments,” the information says, and Bovis has admitted.
As general superintendent and, later, principal in charge of Bovis’s New York office, Abadie had “extensive involvement” with managing union labor, authorities said. In those positions, he “explicitly and fraudulently” ordered subordinates to pad the time sheets.
Abadie pled guilty to mail and wire fraud in connection with those activities.
The fraud covered the whole spectrum of Bovis’s New York projects, including Grand Central Terminal, Citi Field, the Deutsche Bank demolition, and the federal courthouse in which he pleaded guilty Wednesday, prosecutors said.
Bovis was also charged with, and admitted, fraud involving Minority Business Enterprise (MBE) requirements on several public projects. Authorities said the company had agreed to comply with MBE goals in order to win bids on projects, then performed the work itself without using the MBEs.
In a 2000 project involving construction of the Bronx Criminal Courthouse, Bovis said an MBE called H.J. Russell & Co. (HJR) would perform “100 percent” of Bovis’s general conditions contract, but then “secretly performed the work itself,” prosecutors said.
The scheme involved Bovis putting its own workers on HJR’s payroll and supervising all the work; HJR issued the paychecks.
In 2001, authorities said, Bovis called the shots in similar fashion on a school construction job in New Jersey, using MBE firms as “mere pass-throughs” while directing employees and conducting the work itself.
Under the plea agreement entered Wednesday, Abadie faces up to 20 years in prison and a fine of $250,000 or “the greater of twice the gross gain or loss from the fraudulent conduct.” That amount was not immediately available.
Bovis, meanwhile, also admitted its crimes and has agreed to pay up to $56.6 million in penalties to the federal government and restitution to victims of the overbilling and MBE scams. The firm has also agreed to cooperate with the government in the widening probe.
The agreement also requires Bovis to enact “far-reaching corporate compliance reforms,” including hiring an Ethics and Compliance Officer, maintaining a full-time auditor, and instituting multiple layers of review on time sheets. A new MBE liaison position will oversee compliance with MBE obligations.
‘We Are Watching’
“Through this deliberate scheme of billing clients for work not done, Bovis deceived their customers and stole taxpayer dollars,” said U.S. Attorney Loretta Lynch. “They also abused a program—designed to benefit and train minority contractors—for their own profit motive.”
Lynch said the case “should send a very clear message”—that “the defense of ‘everyone does it’ will not be a shield against law enforcement.”
FBI Assistant Director-in-Charge Janice K. Fedarcyk said, “If you are a New York City resident, Bovis indirectly swindled you on three different levels. Whether projects are publicly or privately funded, padding contracts and skirting the law are crimes. And we are watching.”
PA DBE Scam
The New York case came just weeks after a Pennsylvania bridge contractor was convicted in a similar scam involving Disadvantaged Business Enterprises (DBEs).
In that case, a federal-court jury in Harrisburg, PA, convicted Joseph W. Nagle, of Deerfield Beach, FL, of 26 charges, including conspiracy to defraud the U.S. Department of Transportation and commit wire and mail fraud.
The former CEO of a company that made and installed concrete bridge beams, Nagle faces decades in prison for what authorities called the largest DBE fraud in U.S. history, involving more than $136 million in contracts over 15 years.