OFFICIAL USE ONLY

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United States Attorney’s 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

Multi-Agency Investigation

CASE OVERVIEW

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

Investigative Techniques Judicial Actions

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.

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 VP’s admissions and provides further cooperation

Subcontractor(Cooperation)

Executive of General Contracting Company

Requested 5% kickbacks on all of the subcontracting company’s 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.

Allegations Allegations

Subcontractor(Cooperation)

Cooperating subcontractor consents to concealed recordings with Executive.

Multiple in person meetings were conducted Conversations were recorded by LEO’s Use of confidential funds

Arrest warrant issued for the Executive 18 USC 1341 (Mail Fraud) Alleges approximately $180,000 in kickbacks

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.

Executive - GC(Cooperation)

New York City Department of Transportation

Assistant Civil Engineer (NYC DOT Employee)

Requested Macy’s 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.

Allegation Allegation

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

GLOBAL CLAIMGLOBAL 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.

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 City’s 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.

Undercover Meetings

Continued behind the scene work DOT meetings

$10,000 initial payment to Director $5000 payment to Employee

Conversation #2 - DubaiConversation #1 - $10,000

XXXXX

$5000 CASH PAYOFF

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.

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

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

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 he’s doing, we can’t figure it out.…That’s not criminal if they can’t figure it out.”

[W]e will do it, we’ll put the money in [the trust] just so you can sleep at night. But I gotta tell you, two years from now you’re going to say, “You know, we could have got away with it.”

“[I]t’s going to look fishy,”…“[w]hat I’m afraid of is the report. ‘Cause once there’s a piece of paper that says I’m contributing extra for such-and-such a job, now that’s an admission. You’re saying you didn’t do it right the first time.”

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

QUESTIONS??????

Special Agent Robert Stanek – (212) 337-1363

US DOT/OIG

CONTACT INFORMATION

US DOL/OIG

Special Agent Joseph Dellapenna – (646) 264-3557