United States Department of Transportation

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United States Department of Transportation Office
of Inspector General

United States Department of Labor Office of
Labor Racketeering and Fraud Investigations
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Multi-Agency Investigation

• United States Attorneys Office
• Eastern District of New York
• Chief and Deputy Chief of Public Integrity
  Division
• US DOT/OIG
• US DOL/OIG
• Port Authority of New York New Jersey OIG
• New York City Department of Investigation

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CASE OVERVIEW
Investigative Techniques
Judicial Actions

• Allegations
• Multi-target investigation
• Enforcement Actions
• Search Warrants
• Arrest Warrants
• Interviews
• Cooperation provides information against other
  potential targets
• Document analysis
• Search Warrant Materials
• Computer forensics
• Recorded Conversations

• Indictments/Informations
• Trial
• Convictions
• Sentencings

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SubcontractorCase Summary

• Allegations of employee kickbacks
• Owners required employees to kickback a
  percentage of paycheck, on public works projects.
• Allegations of prevailing wage fraud
• Participation in Contractors Benefits Trust (CBT)
• Company would contribute supplemental benefits or
  fringe benefits to CBT for non-union workers than
  remit payment from CBT to union members locals
  to pay for the union members benefits.

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Investigative Techniques(Subcontractor)

• SW executed at the office of the subcontractor
• Interviews of employees
• Interviews with the Subcontractor
• VP and part owner of the subcontracting company
• Admits to kickback scheme
• Admits to destruction of evidence
• Admits to payoffs to an Executive of a General
  Contracting Company
• Admits to prevailing wage fraud scheme with a
  Labor Law Attorney
• Bookkeeper of the subcontracting company
• Corroborates VPs admissions and provides
  further cooperation

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Subcontractor(Cooperation)
Allegations
Allegations

• Executive of General Contracting Company
• Requested 5 kickbacks on all of the
  subcontracting companys requisitions to the GC,
  in exchange for expedited payments and future
  subcontracts.
• Executive received approximately 180,000 in cash
  payoffs.

• Labor Lawyer
• In recorded conversation lawyer admits to the
  inappropriate use of CBT.
• Instructs subcontractor to destroy information on
  a USB device after being advised that device
  contained information about the fraudulent CBT
  transactions.

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Subcontractor(Cooperation)

• Cooperating subcontractor consents to concealed
  recordings with Executive.
• Multiple in person meetings were conducted
• Conversations were recorded by LEOs
• Use of confidential funds
• Arrest warrant issued for the Executive
• 18 USC 1341 (Mail Fraud)
• Alleges approximately 180,000 in kickbacks

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Executive of General Contracting
Company(Cooperation)

• Executive and defense atty. agree to meet with
  the USAO and agents
• VP admits to scheme (5 kickbacks from
  subcontracting company)
• Enters into a cooperation agreement with USAO
• Provides information against NYC DOT official
• Agrees to wear a body wire and make recorded
  telephone calls.

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Executive - GC(Cooperation)
Allegation
Allegation

• New York City Department of Transportation
• Assistant Civil Engineer
• (NYC DOT Employee)
• Requested Macys gift cards and cash, in exchange
  for expedited payments to GC and NYC DOT permits.
• NYC DOT employee received approximately 10,500
  in cash payments for NYC DOT permits.
• Approximately 100,000 was solicited by Employee
  in exchange for favorably negotiating settlement
  of approx. 16 million dollar claim.

• New York City Department of Transportation
• Director of Movable Bridges
• (NYC DOT Director)
• One of the approving officials for NYC DOT
  necessary for the sign off of the approx. 16
  million claim.
• Requested approximately 500,000 to favorably
  negotiate settlement for Executive.

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Executive(Cooperation)

• Cooperating Executive consents to concealed
  recordings with both NYC DOT employees
• Multiple in person meetings were conducted
• Conversations were recorded by Law Enforcement
• Use of confidential funds
• 17,000 NYC DOT employee
• 10,000 Director
• Arrest warrants issued for both
• 18 USC 666 (Bribery)
• Alleged 400,000 in bribery

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GLOBAL CLAIM

• The Corporation submitted a claim for 16,500,000
  to the City of New York.
• Payment of change orders
• Milestones
• Although the Claim had been filed the parties
  were still free to negotiate.
• The Executive had multiple meetings with both the
  Director and the Employee during which they
  discussed reaching a settlement of the Claim that
  would appear legitimate to NYC/DOT but, in fact,
  would result in a significant payoff to both the
  Director and the Employee.

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Bribery Scheme

• Quid pro quo 18 USC 666
• Agreed the Executive would pay the Director an
  amount equal to 10 of any settlement amount
  exceeding 2,500,000.
• The Director also promised that he could work
  behind the scenes and guarantee a negotiated
  settlement of between 6.5 million and 6.6
  million, in exchange for a bribery payment in
  excess of 525,000.
• Director gave the Executive details about the
  Citys negotiating position and coached how to
  handle the settlement negotiations. During the
  course of the scheme, the Director accepted two
  cash payoffs totaling 60,000.

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Undercover Meetings

• Continued behind the scene work
• DOT meetings
• 10,000 initial payment to Director
• 5000 payment to Employee

Conversation 2 - Dubai
Conversation 1 - 10,000
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5000 CASH PAYOFF
XXXXX
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Final Payment

• 50,000 payment
• Director continues to increase his bribe
• Provides Executive with instruction on the wire
  transfer to Dubai.
• Provides a fake invoice for 200,000 in
  merchandise with routing information to an
  account in Dubai.

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RESULTS

• Director Employee
• November 27, 2007 Arrested
• 18 USC 666 Federal Bribery
• March 24, 2008 Pled Guilty
• 18 USC 666
• January 23, 2009 Sentenced
• Director 12 months and One Day in jail
• Employee 36 months in jail

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CONTRACTORS BENEFIT TRUST (CBT)

• Labor Lawyer Sole Trustee
• Provides Health and Welfare Benefits pursuant to
  the Davis-Bacon Act (40 USC 226a), Little Davis
  Bacon (NY Labor Law Section 220), for prevailing
  wage workers.
• Benefit bank for CBT client-contractors to
  appear to show compliance with prevailing wage
  requirements to state agencies.
• CBT accepts fringe benefit contributions pursuant
  to participation agreements with contractors to
  benefit both unionized (business friendly)
  and/or non-unionized workers
• CBT is a vehicle to get 2 for 1 dollars worth
  of prevailing wages back into the hands of the
  contractor officials/owners
• CBT assets are used to purchase benefits for
  non-prevailing wage workers.
• Owner
• Office Staff

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CONTRACTORS BENEFIT TRUST (CBT)

• Recorded quotes from the Labor Lawyer
• ..you wanna show the DA or whoever else is
  looking, Yeah, we got a, we got a set policy and
  people, whoever qualifies, they get it. So you
  gotta spend some money to make it look good. You
  know? The, the pig theory, you know the pig
  theory? Pigs get eaten, but hogs get
  slaughtered.
• So if they get to the end and they say, You
  know, whatever it is hes doing, we cant figure
  it out.Thats not criminal if they cant figure
  it out.
• We will do it, well put the money in the
  trust just so you can sleep at night. But I
  gotta tell you, two years from now youre going
  to say, You know, we could have got away with
  it.
• Its going to look fishy,what Im afraid
  of is the report. Cause once theres a piece of
  paper that says Im contributing extra for
  such-and-such a job, now thats an admission.
  Youre saying you didnt do it right the first
  time.

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INVESTIGATION RESULTS

• Eight Search Warrants
• Four Arrest Warrants
• Seven Guilty Pleas
• 98,000 Confidential funds used for payoffs
• 143 monitored telephonic conversations
• 38 monitored in person meetings
• Approximately 32 hours of conversation
• Approx. 7 million in restitution/forfeiture
• 67,000 in fines
• 78 months Incarceration
• 168 months Probation/Supervised release
• 200 hours community service
• Three resignations from public service

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QUESTIONS??????
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CONTACT INFORMATION
US DOT/OIG
Special Agent Robert Stanek [phone]
US DOL/OIG
Special Agent Joseph Dellapenna [phone]