Construction Giant to Pay $55M in Plea
One of the largest construction firms in the United States will forfeit $55 million after pleading guilty to felony fraud involving a lengthy list of prominent clients.
Manhattan-based Structure Tone Inc. (STI), a $3 billion-a-year multinational whose project portfolio ranges from Saint Patrick's Cathedral in New York City to movie theaters in Hong Kong, "systematically" overbilled big-name clients millions of dollars between 2005 and 2009, according to New York District Attorney Cyrus Vance Jr.
In 1998, STI paid $10 million and pleaded guilty to felony charges related to its role in a $2 billion bid-rigging and bribery scheme involving Sony Corp. and other high-profile companies, The New York Times reported.
The company said the plea and penalty would have no effect on its business.
The current overbilling scheme was built largely on falsified and inflated invoices by STI's subcontractors. Authorities said STI required the subs to inflate their bids with unnecessary contingencies. The victims included Bank of America, Bloomberg and many other prominent banks, financial institutions, law firms and advertising agencies, Vance's office said.
The forfeiture is one of the largest ever imposed on a construction company, Vance said in a statement.
Structure Tone’s attorney, Daniel Connolly, entered a guilty plea on behalf of the company Wednesday (April 30) in Manhattan Supreme Court to one count of first-degree falsifying business records, a felony. No executives were identified in the plea agreement.
2 Types of Contracts
Founded in 1971, STI focuses on construction interiors and typically acts as either a Construction Manager (CM) or a General Contractor (GC) on its projects, authorities said.
As a CM, Structure Tone is required to act in the best interests of the client, making certain that the client receives the best value for the money spent.
"Other than its management fee for a particular subcontractor, there are no legitimate circumstances under which STI is entitled to additional profit based upon the subcontractors’ costs to the CM client," the D.A.'s office said.
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Structure Tone was responsible for interior construction on the 27-story Daniel Patrick Moynihan U.S. Courthouse, which contains nearly 1 million square feet and opened in 1996.
As a GC, Structure Tone charges clients a lump sum, or fixed price. Its profit is then the difference between that price and its actual cost to complete the project.