Feds investigate NY Public-Works Construction Hiring: Fraud, Exclusion, or Unrealistic DBE Requirements?

Fraud Inquiries Focus on Public-Works Construction Hiring in New York
Public works projects in New York are among those under federal scrutiny, with contractors’ evasion of hiring requirements suspected.

Hiroko Masuike for The New York Times

Workers from Skanska USA Civil Northeast at the Fulton Street Transit Center in Lower Manhattan. The company is the subject of an investigation by federal prosecutors in Manhattan.

By WILLIAM K. RASHBAUM

Published: November 23, 2010

Two of the nation’s major construction companies are under federal investigation, suspected of defrauding government programs on some of the biggest public-works projects in and around New York City, according to people briefed on the inquiries.

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The projects under scrutiny include the city’s $2.8 billion Croton Water Treatment Plant and the Metropolitan Transportation Authority’s $1.4 billion Fulton Street Transit Center in Lower Manhattan, the people briefed on the investigations said.

The two inquiries focus on accusations that the contractors used what were essentially front companies to evade requirements that they hire a certain percentage of subcontractors owned by minorities or women, or businesses certified by government agencies as disadvantaged, the people said.

One of the investigations is expected to be resolved in the coming days with an agreement between one contractor under scrutiny, Schiavone Construction Company, and federal prosecutors in Brooklyn. The agreement will allow Schiavone, one of region’s biggest tunneling contractors, to avoid criminal charges but will require it to pay more than $20 million and maintain certain internal reforms it has put in place, the people said.

The second investigation focuses on Skanska USA Civil Northeast, a subsidiary of Skanska USA, which is ranked among the nation’s top 10 contractors in several categories, including transportation, general building revenue and new contracts, according to several of the people, who, like others interviewed for this article, spoke on the condition of anonymity because the cases had not yet been made public.

While that inquiry, which is being conducted by federal prosecutors in Manhattan, is not as far along, people briefed on that case said it could lead to a similar — perhaps even larger — payment.

Neither company has been charged with a crime.

A lawyer for Skanska, Martin Flumenbaum, said Tuesday: “We understand that there is a broad inquiry relating to the use of minority business enterprises in public-works construction projects in the New York area. Skanska is cooperating fully in connection with that inquiry and is committed fully to complying with laws and regulations governing the use of minority business enterprises.”

Austin V. Campriello, who represents Schiavone, declined to comment. The company was bought in 2007 by Dragados Inversiones USA, part of a Spanish construction conglomerate, after the conduct at the center of the investigation was said to have occurred.

Taken together, the two cases underscore what some law enforcement officials and analysts say is the systemic abuse of similar city, state and federal programs put in place in an effort to level the playing field for companies owned by minorities and women and those certified as disadvantaged.

In New York State, billions of dollars have flowed through this patchwork of programs in recent years, although precise figures are hard to compile.

The projects under scrutiny in the two investigations, which prosecutors are conducting with the transportation authority’s inspector general, are not the only major undertakings by Schiavone and Skanska in the city. In joint ventures with a third company, they are also involved in some of the authority’s most ambitious efforts. They have a $1.14 billion contract to build the tunnels and station structures for the No. 7 subway line extension and a $337 million contract to build some of the tunnels for the Second Avenue subway, though no accusations of wrongdoing have been raised in connection with those projects.

The schemes at the center of the two investigations are simple: Rather than hire a minority- or women-owned subcontractor or a company the federal government has certified as a struggling business, the contractors ran the payroll for their own workers — or paid another subcontractor — through a minority company that served as a “pass through.”

In the case of Schiavone, based in Secaucus, N.J., part of the scheme centered on a company hired to haul away dirt excavated from the water-treatment plant project and work at the $530 million South Ferry subway station renovation and at the Times Square station. The company did a tiny part of the work, while most of it was performed by another company, a mob-connected trucking firm, the people briefed on the case said.

Skanska, those with knowledge of that case said, paid workers for dewatering and demolition at the Fulton Street Transit Center site through a company called Environmental Energy Associates in Ridgefield, N.J. That company, a certified disadvantaged business enterprise, or D.B.E., collected a fee for the service it provided, handling just the payroll, the people said.

Representatives of the offices of the United States attorney in Brooklyn, Loretta E. Lynch, and the Manhattan United States attorney, Preet Bharara, declined to comment on Tuesday.

Several law enforcement officials who investigate construction corruption acknowledged that the goals for the participation of minority- and women-owned contractors and disadvantaged businesses often did not accurately reflect the universe of qualified companies.

A longtime construction industry official who has worked with community groups in an effort to increase the level of participation by female and minority contractors said the often-limited options had made a range of sometimes illegal — at times blatant — solutions commonplace.

The complex set of requirements for certification as a disadvantaged contractor includes being a member of what the federal government characterizes as a “socially or economically disadvantaged” group — women, blacks, Native Americans, Asians and others — as well as a $750,000 limit on personal net worth, a maximum average gross receipts for the business over three years of roughly $22 million and a certain measure of independence from non-D.B.E. firms.

Prosecutors, investigators and industry observers said it was hard to measure the scope of this type of fraud, but most agreed it was widespread. And while such crimes do not result in the theft of government funds — the money is paid and the work is done — they undermine the intent of the federal, state and local laws, which were written to create opportunities for struggling and minority- and women-owned companies. Also, in the view of some, they contribute to a culture of corruption in the industry.

Prosecutors in the United States attorney’s office in Brooklyn have long focused on such cases.

Its Federal Construction Fraud Task Force has made 61 arrests over the past decade for crimes related to this type of fraud. As a result, forfeiture orders have totaled more than $150 million, and 28 people and companies have been banned from seeking additional federal contracts, according to a recent court filing.

But while the United States attorney’s office in Manhattan has seldom made such cases, the investigation of Skanska signals an increased focus in this area for the prosecutors there, some officials have said.

The reasons seem clear. In the past year, New York City’s four-year-old program has resulted in $511 million in prime contracts and subcontracts for certified companies, according to the Mayor’s Office of Contract Services. Over the life of the city’s program — referred to as W/MBE, for women- and minority-owned business enterprise — more than $1 billion has gone to such contracts, according to the office.

At just one federal agency, the Transportation Department, a similar program resulted in $617 million worth of prime and subcontracts in 2009 in New York, New Jersey and Connecticut, officials said. That money was for highway and transportation projects, like the Metropolitan Transportation Authority ones under scrutiny in the two cases, the officials said. That federal program, which certifies and assists what it characterizes as disadvantaged business enterprises, was in some measure the model for the city’s effort.

The investigations developed in two ways. The Brooklyn inquiry grew out of a case focused on mob influence in the trucking industry and the work of an independent monitor who had been hired by the transportation authority to oversee the downtown projects after a scandal involving the construction of the agency’s headquarters, at 2 Broadway.

The trucking investigation uncovered the scheme at the water filtration plant, and the monitor, Toby Thacher, developed information indicating that the disadvantaged business enterprises working on the authority’s projects were fronts. The information was passed on to the office of the transportation authority’s inspector general, Barry Kluger. His office and the federal prosecutors, who in the Brooklyn case worked with the city’s Department of Investigation on the water-treatment plant inquiry, built the cases.

This article has been revised to reflect the following correction:

Correction: November 23, 2010

An earlier version of this article misstated the location of a water treatment facility for New York City.

http://www.nytimes.com/2010/11/24/nyregion/24fraud.html?pagewanted=1&_r=5

MWBE Firms Benefit from Diversity Program at City Center

Minority firms benefit from CityCenter experience

Sam Morris

Kevin Lay of A-1 Concrete Cutting & Demolition drills a hole for a water pipe Jan. 15 for a future store in Crystals at CityCenter.

By Buck Wargo (contact), In Business reporter

Fri, Jan 22, 2010 (3 a.m.)

Minority- and women-owned construction companies are sad to see work winding down at CityCenter, but they haven’t forgotten the benefits they reaped from the project and hope to build on that in the future.

About 200 firms helped build CityCenter, gaining more than $700 million in construction and design contracts over the past five years. It was part of a diversity initiative by MGM Mirage and Perini Building Co., general contractor of CityCenter, to ensure minority-owned firms had a chance to bid on the project.

Many companies took advantage of the opportunity to grow their companies, gain valuable experience and position themselves for major construction projects down the road.

Among them is Las Vegas-based A-1 Concrete Cutting & Demolition, which has done $10 million worth of concrete-cutting and drilling work in addition to excavation and rock removal at CityCenter.

A-1 has operated in Las Vegas for 23 years and has worked for MGM Mirage on projects such as MGM Grand and Bellagio. MGM’s mandate that minority-owned firms participate has been a big plus for A-1, owner Joe Montero said.

“Without this program, we would not have had the (ability) to meet other contractors,” Montero said. “They would do what they normally did, which was use somebody they are used to working with.”

Before CityCenter construction started, A-1 had about 50 to 60 workers. At the height of construction, it had as many as 120. As it winds down work at Crystals, the retail center, it has 42 employees.

Montero also said his company is returning to its roots and trying to do more retrofitting. When hotels don’t have money to build, they remodel rooms instead, he said. “It’s not as lucrative, but it works,” he added.

“Life goes on. There will be other things. We are reaching out to do more government work. That seems to be where the money is.”

Even though the work is nearly finished, many companies that were lured to Las Vegas by CityCenter will continue to have a presence in the city. Dallas-based Azteca Steel parlayed setting up shop in Las Vegas to work on CityCenter to other construction projects.

The general contractor and steel company that built the pedestrian crossing over Harmon Avenue and metal railing and other ornamental metal work at CityCenter has also worked at Planet Hollywood and other casinos and at Queensridge. It will be wrapping up its $30 million in work at CityCenter by the end of the month.

“It has been a great opportunity for us, and now we are established in Las Vegas and looking at other projects,” said Dave Rodney, manager of the Las Vegas office of Azteca, a Hispanic-owned firm. “Without this work, we probably would not have come to Las Vegas. It gave us a chance to establish ourselves. The volume is going to be way down, but our intention is to stay and have enough work for a small crew here.”

Even without minority status, Montero said his firm would have survived because his company didn’t always have that distinction. When MGM went to its diversity program, Montero said he was looking into transferring the business to his wife, but learned that he qualified as a Hispanic since his father was born in Portugal.

“I didn’t even know I was a minority until someone told me,” said Montero, who employs a lot of Hispanic workers and supervisors.

“I really appreciate the efforts of MGM for the opportunity for us to grow. I think small companies need that.”

Rodney said the diversity program helps companies such as his get in the door, but they need to be competitive to get the job.

MGM launched its diversity program in 2000. It required that any construction and design project of more than $1,000 have bids from minority- and women-owned firms.

Phyllis James, a senior vice president, deputy general counsel and chief diversity officer at MGM Mirage, said there are no set-asides or quotas for the firms but only an opportunity to bid.

“What we have found out is that when you open the doors to opportunity, you find people who you didn’t know about before who are qualified to do your work,” James said. “It has opened the doors to the talent that exists.”

That in turn has benefited MGM Mirage because it brings competition to projects and additional skill sets that are needed, an important element for a large project such as CityCenter, James said.

Many of the firms have grown and prospered because of that opportunity and developed the expertise to do other big jobs, James said. It even enabled many to increase their bonding capacity to work large jobs.

“We don’t have any control over what they do later on, but part of our philosophy has been and in particular with CityCenter is that when you give people an opportunity to work on a challenging project like that, it enhances their skill set and makes them able to compete for other jobs, whether it is a casino company down the street. They might not have had that competitiveness if they hadn’t worked on a project like CityCenter.”

http://www.lasvegassun.com/news/2010/jan/22/minority-firms-benefit-citycenter-experience/

Thousands line up for Construction Industry stadium jobs -California

Posted: 01/15/2010 05:08:08 PM PST

Molly Huddleston, left, of Clark Construction talks to potential workers during the Joe Jobs Expo at the Pacific Palms Hotel and Conference Center in Industry Jan. 15, 2010. Huddleston took names and skills of potential workers if their company becomes the general contractor of the Industry stadium project. (SGVN/Staff photo by Leo Jarzomb)

INDUSTRY - Thousands of jobseekers, lured by the chance to land a job building an NFL stadium, descended on Pacific Palms Resort on Friday.

Their goal was anything but rest and relaxation.

Victor Montano, an out-of-work carpenter from Hacienda Heights, was one of them.

He came to the first Joe Jobs Expo to let event co-sponsor Majestic Realty Co. know he wanted to work to help build a stadium, and to offer his experience.

"I came to get a job, and to present to them what I am capable of," Montano said. "I could some day sit back and say, `I helped build that stadium."'

After years of helping to build small convenience stores, being one of the estimated 12,000 construction workers for developer Ed Roski Jr.'s planned Industry stadium would be a feather in his cap, Montano said.

"This would be a tier-topper," he said.

That was a common refrain among the hundreds who waited in a long line of drafters, carpenters and construction workers - men and women - who hoped to help find a job working on the project. That line led directly to Majestic Realty representatives, who took applications and explained the project.

But while the expo, co-sponsored by Majestic Realty Co., online bartering company JoeBarter.com and the San Gabriel Valley Newspaper Group, was for weeks highly promoted with stadium imagery and ads, no one actually got a stadium job.

That reality wasn't lost on Tina Mistry of Cerritos.

"I guess, overall, I'm a bit disappointed, personally," the out-of-work information technology worker said.

While the event was promoted well and the stadium connection attracted many, the reality was it wasn't much different than other job fairs she'd been too, Mistry said.

But organizers, who expected 3,500 to attend the sold-out event at $5 a pop, said the expo was also a way to get the word out about the stadium to the local workforce.

The idea from the beginning was to attract the average Joe, a tie-in to Tom Daley's Covina-based Joe Barter, he said.

Daley got Majestic to agree to co-sponsor the event, and convinced even the Los Angeles Clippers to have a presence there, he said. Ultimately, major construction firms vying to win contracts to build the stadium, and several others, from Goodwill to North-West College, set up booths. There were also several workshops.

"It's all about the jobseekers," Daley said. "I'm just so excited to help out as many as I can in a controlled and positive environment."

Still, in relation to the stadium, jobseekers could only get as far as leaving their information and resumes with Majestic representatives

Potential contracting firm SASCO talks to workers during the Joe Jobs Expo at the Pacific Palms Hotel and Conference Center in Industry Jan. 15, 2010. (SGVN/Staff photo by Leo Jarzomb)

and several construction companies.

When jobs come online, event organizers and construction firm representatives said those who attended Friday's job fair would have a jump on others for openings.

Exactly when those jobs will come is anybody's guess.

While Roski has won entitlements and designed the project, he has not secured a team to play there nor financing for the project.

"It's all dependent on when we secure a team," said Taylor Talt of Majestic Realty.

That was fine with Jesse Castaneda of South El Monte, who said the stadium project will help reinvigorate the area's economy. With unemployment rates hovering at or near 15 percent in much of the San Gabriel Valley, an infusion of jobs from the stadium would be welcomed by many.

"There will be lots of opportunities for all the vendors and others," said Castaneda, who said he lost his job last year as a shipping and receiving representative at Pep Boys after 23 years. "This will be a boost for the economy."

When that happens and contracts are set, jobseekers would be notified about openings, organizers said.

In the meantime, businesses that could be awarded lucrative contracts haven't been exactly standing flat-footed.

"We're competing to win and to be the general contractor," said Alan J. Petrasek, senior vice president of San Diego-based Clark Construction.

Larry Kirkenslager, senior vice president of pre-construction for Fullerton-based SASCO, said his company has already been doing budget and cost analyses on elements of the project.

ryan.carter@sgvn.com

626-962-8811, ext. 2720

http://www.pasadenastarnews.com/news/ci_14202383

More opportunities ahead for minority/women owned businesses? -INDIANA

LEGISLATION REQUIRES STATE GRANT RECIPIENTS TO MEET HIRING GOALS

By Dan Carden - dan.carden@nwi.com, (317) 637-9078 | Posted: Wednesday, January 13, 2010 12:00 am

INDIANAPOLIS | Any construction project or purchase made by a state grant recipient would have to meet minority and female hiring goals under legislation approved by the Indiana House.

State Rep. Mara Candelaria Reardon, D-Munster, sponsored House Bill 1014, which passed the House 79-18 on Tuesday.

The measure requires the Governor's Commission on Minority and Women's Business Enterprises to set annual goals for the use of minority and female businesses. State grant recipients would have to demonstrate they've made a good-faith effort to satisfy those goals as a condition of their grant.

Candelaria Reardon said the legislation "is essential for businesses owned by minorities and women at the state and local levels to encourage their continued and future growth."

Local governments that receive state grant money are most likely to be affected by the legislation. State agency contractors already have to comply with minority and female business enterprise goals.

"If we have standards at the state level, then people using state money should have to follow those same state standards," Candelaria Reardon said.

State Rep. Phil Hinkle, R-Indianapolis, disagreed. He said the legislation would be an "unfunded mandate" on local government, forcing local governments to spend money to comply with a new law without giving them the resources they need to do it.

A report on the legislation's fiscal impact from the nonpartisan Legislative Services Agency said local governments would have only minimal administrative costs if the proposal becomes law.

The legislation now heads to the state Senate for consideration by that body.

http://nwitimes.com/business/local/article_a6977499-c7d8-5620-b8d6-687186a0acfb.html

Tishman Construction Selected for National Minority Business Award

Posted by Michael Gerrity 01/07/10 4:17 PM EST

(NEW YORK, NY) -- Tishman Construction Corporation (TCC) has been

selected to receive the "Outstanding Corporate Supplier Diversity Award"

from the National Minority Business Council, an organization that helps

minority, women and veteran-owned business enterprises (M/WBE).

The award is in recognition of Tishman Construction Corporation's

impressive efforts in 2009 to increase subcontracting opportunities

for M/WBE firms in the construction industry.

Recently, Tishman awarded more than $350 million to M/WBE firms

on construction projects, including two New York City skyscrapers.

This total includes $200 million in contracts on the Goldman Sachs

Headquarters project in Downtown Manhattan--the largest M/WBE project

in the state of New York--as well as $150 million on the Bank of America Tower

at One Bryant Park in midtown.

Goldman Sachs Headquarters

Since the 1960s, when Tishman pioneered its own

M/WBE program years before any government agency

required one, TCC's commitment to engaging the talents

and expertise of M/WBE firms has resulted in the award

and completion of contracts totaling many hundreds of

millions of dollars.

"Tishman Construction has been a true leader in utilizing

minority- and women and veteran-owned businesses as

subcontractors on all of their major construction projects

around New York City and nationwide," said John F. Robinson,

President and CEO, NMBC, Inc. "In recognition of their

impressive record over many years, we are thrilled to

present them with our 2009 award for Outstanding Corporate

Supplier Diversity."

"We at Tishman are proud to receive this honor from

the National Minority Business Council, and we remain deeply committed in our

efforts of expanding opportunities to minority- women and veteran- owned

businesses in our industry," said Daniel R. Tishman, Chairman & CEO,

Tishman Construction Corporation.

Bank of America Tower at One Bryant Park

TCC's experience dates back to the 1960s when the firm built the original

World Trade Center complex for the Port Authority of New York & New Jersey,

a project that posed difficult labor challenges.

While oversight agencies then did not require specific goals for minority workers, Tishman proceeded to initiate its own program. The effort was successful and enabled Tishman to maintain a full schedule without any

loss of production time.

Tishman Construction Corporation is one of the nation's premier

construction organizations that have been in business for over 111 years. Tishman is responsible for the construction of more than 450 million square feet of space in the U.S. and are ranked #2 in the nation on Building Design & Construction magazine's Top Construction Managers list.

TCC's current or recently completed projects nationwide include:

New York: One World Trade Center, previously known as Freedom Tower, to be the city's tallest building, and the renovation and expansion of the Javits Convention Center.

MGM City Center

http://www.realestatechannel.com/us-markets/commercial-real-estate-1/real-estate-news-tishman-construction-corporation-goldman-sachs-bank-of-america-las-vegas-citycenter-one-world-trade-center-freedom-tower-mgm-mirage-1852.php

Boston: Renovation of the 14-story Ames Building, turning Boston's first

skyscraper (built in 1904) into a

four-star boutique hotel known as Ames.

Las Vegas: MGM MIRAGE's $9-billion

CityCenter, an 18-million-square-foot

mixed-use project on the Las Vegas Strip.

Chicago: Construction of a $1.75-billion

capital improvement program involving

1,950 renovation and expansion projects

totaling 37.3 million square feet throughout

the Chicago Public Schools system.

SBA Launches New Online Training Course for Women Entrepreneurs

SBA Launches New Online Training Course: Winning Federal Contracts - A Guide for Women Entrepreneurs
Wed Oct 14, 2009 11:45am EDT

WASHINGTON--(Business Wire)-- Women who own small businesses will be able to use a new online U.S. Small Business Administration training course to learn how to identify and take advantage of federal contracting opportunities. The new training course, Winning Federal Contracts: A Guide for Women Entrepreneurs, is part of an ongoing government-wide initiative to promote opportunities for women-owned businesses in the area of government contracting. 

 This free online tutorial is a practical and easy to use guide that walks a woman-owned small business through the contracting process. SBA is committed to ensuring that women-owned businesses receive at least 5 percent of federal contracts and believes better training opportunities are central to meeting this government-wide goal. 

 "Federal contracts can provide unique opportunities for women entrepreneurs and small business owners to grow their businesses and create jobs, particularly during these tough economic times," Administrator Karen Mills said. "It`s also a win for federal agencies, by contracting with women-owned small businesses; they are working with some of the most innovative and dynamic companies in the country." 

 The SBA`s Office of Women`s Business Ownership oversees a national network of more than 100 Women`s Business Centers (WBCs) that provide education and training to help women start and grow small businesses. In addition, the SBA has 68 district offices and other resource partners throughout the country available to train and counsel women-owned small businesses and entrepreneurs seeking government contracts. 

 "This online training course makes critical information and training available to an even wider array of women entrepreneurs and small business owners," said Ana Harvey, assistant administrator for SBA`s Office of Women`s Business Ownership. "SBA wants to help ensure they have the tools and resources they need to compete for and win federal contracts." 

 The Winning Federal Contracts course is designed to help women entrepreneurs learn about the federal procurement process and to prepare them to compete for contracting opportunities. The self-paced guide uses audio and script to provide information about contract rules, how to sell to the government and where to find contracts. 

 The Winning Federal Contracts course is available on SBA`s Web site at www.sba.gov or directly at www.sba.gov/fedcontractingtraining. It is indexed by subject matter, and includes direct links to additional contracting resources. 

 Release Number: 09-71  U.S. Small Business Administration Cecelia Taylor, 202-401-3059 Internet Address: http://www.sba.gov/news

http://www.reuters.com/article/pressRelease/idUS151739+14-Oct-2009+BW20091014  

Chicago Turner School of Construction Management Graduates 58 Women and Minorities

Turner School of Construction Management Graduates 58 Chicago Area Minority and Women-Owned Businesses

October 14, 2009

Turner Construction Company, together with the City of Chicago, the Exelon Corporation, The University of Chicago, Roosevelt University’s Marshall Bennett Institute of Real Estate and the Federation of Women Contractors has awarded certificates of completion to 58 individuals representing minority and woman-owned business enterprises (MWBEs) , marking the conclusion of the 21st Turner School of Construction Management in the greater Chicago area.

The free, seven-week training program has been a key resource in Chicago for more than 1,000 MWBE business owners over the last 20 years. The program provides insightful and meaningful tools to local woman-and minority-owned businesses, while offering them an opportunity to develop strategic business skills.

The Turner School of Construction Management is designed to enhance the technical, administrative and managerial skills of leaders within these businesses to help them most effectively manage projects and ultimately build their reputations so that they are able to successfully compete in the construction market.“Helping develop greater capacity in the MWBE building community makes good business sense as well as aligning with Turner values and long-history of helping to expand the skills of minority, women, disadvantaged and small-business enterprises,” said Stephen Fort, Vice President and General Manager of Turner’s Chicago operations.

Participants learn the essentials of managing a business, including how to develop a business plan, estimate and bid on a job, obtain bonding, enforce safety principles and establish and manage credit, in order to become better equipped to compete for progressively larger and more complicated contracts. One goal of the program is to develop a pool of minority contractors with the necessary skills to perform work on future Turner projects. Attendees also have the opportunity to network with peers, instructors and others in the construction industry during the training program.

“After graduating from this course, I have gained valuable insight and a new perspective about general contractors and subcontractors, the challenges they face and the way we can more effectively partner with them to benefit the client,” stated Sharon Jaenel, President, PeopleSpace, Ltd.

Wendy Ryce-Smith, President of Ryce Restoration, Inc. stated, “This course has helped Ryce Restoration improve how we plan, bid, estimate, operate, manage risk and partner with general contractors to grow our business.”

http://urbanmecca.net/news/?p=9437