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2 Indicted in Ft. Dix Scheme

Thursday, March 21, 2013

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Two construction managers are each facing up to 55 years behind bars and $750,000 in fines in an alleged  scheme involving kickbacks and violence during a reconstruction project at Fort Dix in New Jersey, federal prosecutors report.

The charges allege employee and bidding kickback schemes, arson and interstate violence, U.S. Attorney Paul J. Fishman announced Tuesday (March 19).

Now under indictment are Leonard Santos and Alex Rabinovich, of Bristol, PA-based Sands Mechanical Inc., a subcontractor on the rehabilitation of the Marine Corps Reserve Training Center at Joint Base-McGuire-Dix-Lakehurst in Burlington County, NJ.

Fort Dix
Harkins Builders

The allegations involve problems on a restoration project at the Marine Corps Reserve Training Center at Joint Base-McGuire-Dix-Lakehurst.

Sands Mechanical was hired in October 2009 as a subcontractor to provide sheet metal, electrical and plumbing work on the project at the base. The general contractor was a company headquartered in Marriotsville, MD, and has not been implicated in any wrongdoing.

Conspiracy Alleged

A federal grand jury returned a five-count indictment on March 4 charging Santos, 66, of Yardley, PA, and Rabinovich, 57, of Richboro, PA, with one count each of:

  • Conspiracy to obtain kickbacks from public works employees;
  • Malicious destruction of a vehicle by fire;
  • Travel in interstate commerce to commit a crime of violence;
  • Conspiracy to accept kickbacks on federal projects; and
  • Conspiracy to commit false payroll records.

Santos was the principal officer of the company; Rabinovich, the general manager.

The three conspiracy charges each carry up to five years in prison and a $250,000 fine. Traveling in interstate commerce to commit a crime of violence carries a maximum potential penalty of 20 years in prison, and the arson count is punishable by up to 20 years in prison, with a mandatory minimum sentence of five years.

Both men appeared Tuesday in federal court before U.S. Magistrate Judge Anne Marie Donio in Camden, NJ. Santos was arraigned at the time; Rabinovich is scheduled for arraignment Friday (March 22).

A request for comment from Sands Mechanical was not immediately returned on Wednesday.

Marine Corps Reserve Training Center

Court documents allege that the owner of Sands Mechanical offered $5,000 to injure the general contractor's site manager after he questioned the sub's work.

Seven defendants in the case previously pleaded guilty to charges ranging from collecting kickbacks to arson and aggravated assault.

Paycheck Trickery

In late 2009, the U.S. Department of Labor's Wage and Hour Division reviewed how Sands Mechanical employees were being paid and determined that they were not receiving the required prevailing wage for the local county.

Authorities later determined that Santos and Rabinovich had demanded that certain employees kick back part of their weekly paychecks or they would be fired, according to case documents and statements made in court.

Employees were told that the kickbacks were part of a "program" that they were obligated to accept and that co-conspirators "would threaten certain employees of Sands Mechanical with the possibility of bodily harm by the use of physical, even deadly, force if those employees resisted the kickback demands," the indictment said.

In February 2010, the Labor Department obtained a civil judgment to settle the prevailing-wage violations. The judgment required Santos to repay $80,000 to employees who were owed back wages.

'Intimidation and Threats'

Sands Mechanical finally issued the reimbursement checks around June 2010, according to court documents.

However, Sands supervisors Richard Cottone (Santos’s son-in-law) and Michael Featherston warned employees not to cash the checks and instead took the employees to a nearby check-cashing business, where many of the checks were signed over to Cottone. Cottone then cashed the checks and returned the money to Santos, according to the U.S. Attorney's Office.

The indictment said Santos and Rabinovich "knowingly and intentionally conspired with unindicted co-conspirators ... to commit an offense against the United States that is, by force, intimidation and threats of procuring dismissal from employment, to induce employees of Sands Mechanical ... to give up parts of the compensation to which they were entitled."

Cottone pleaded guilty in the case Dec. 11, 2012, and will be sentenced Oct. 10, 2013; Featherston pleaded guilty Jan. 10, 2012, and will be sentenced Oct. 9, 2013.

Santos and Rabinovich would routinely submit inaccurate weekly payroll forms since the kickbacks were removed from the employees' checks, court documents say.

The indictment said Santos and Rabinovich had conspired to “falsify, conceal, and cover up by trick, scheme, and device, certain material facts, by submitting forms … that failed to reflect, among others, the true rate of pay and net wages paid to various Sands employees.”

Fire and Violence

Authorities also described the dangers that befell the general contractor's site manager, who often criticized the work performed by Sands Mechanical employees and ordered it redone.

The manager repeatedly questioned the subcontractor's ability to do its job and threatened to withhold contract payments owed to the company until Santos provided his employees with their settlement checks.

The indictment stated that Santos and another person "intended to punish [the site manager] for adversely affecting Sands Mechanical's financial status."

Court documents allege that Santos, Cottone and others had the manager's truck torched in front of his house before dawn on May 17, 2010.

Sands Mechanical Ing
Harkins Builders

Sands Mechanical was hired to perform sheet metal, electical, and plumbing work on the project. Court documents allege that the company was giving kickbacks to obtain "last looks" at competitors' bids before submitting their own.

Weeks later, Cottone's nephew and two friends tried to run down the manager with their car as he was riding his bike at 5 a.m. on June 10, 2010. The victim suffered multiple serious injuries.

Santos allegedly offered to pay $5,000 for the assault on the site manager, and Santos recruited a co-actor to "lay in wait outside [the site manager's] residence and then physically assault him in such a way that he could not return to the Ft. Dix job site, before Sands Mechanical had completed its work," documents said.

Bidding Kickbacks

The defendants are also being charged with giving kickbacks to a prime contractor to improperly obtain subcontracts for federally funded construction projects.

From November 2009 to January 2013, prosecutors said, Santos and Rabinovich paid off a representative for a Philadelphia contractor to get "last looks" at competitors' bids, giving the company the "ability to review other competitive bids before submitting, what frequently became, the most successful bid."

Santos accumulated $46,200 in kickbacks owed for 10 subcontracts awarded to Sands Mechanical; he still owed about $15,000 in kickbacks by the summer of 2012. Also, in November and December 2012, Santos directed Rabinovich to give $4,156 in cash to the contractor's representative for the kickbacks still owed, prosecutors said.

In addition to the U.S. Attorney and agencies of the Labor Department, the Naval Criminal Investigative Service and Air Force Office of Special Investigations assisted in the investigation.

Editor's Note: This story was revised and updated at 1:30 p.m. ET March 21.


Tagged categories: Construction; Contractors; Criminal acts; General contractors; Government contracts; Laws and litigation; Subcontractors; U.S. Army Corps of Engineers; U.S. Navy

Comment from William Corder, (3/21/2013, 12:52 PM)

Some of our elected officials need to suffer the same fate.

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