Non-Union Construction Fraud Case: "Despicable, Greedy, Criminal"
In the video above, Manhattan District Attorney Alvin Bragg announces the indictment against non-union construction company JM3, and others, for a wide ranging corruption scheme to cheat New Yorkers and minority-owned construction companies out of money and work.
JM3 Construction allegedly schemed to lie to the city and defraud minority-owned businesses, workers, and insurance of millions.
This week, Manhattan District Attorney Alvin Bragg announced indictments charging eight individuals and six companies with construction fraud and corruption, including schemes that defrauded city and state agencies and affected the development of several affordable housing projects in New York City.
The indictments outline a broad and complex plan hatched by non-union construction companies to defraud many different groups to illegally seize public funds and win construction projects.
The state alleges that the New Jersey-based non-union sheetrock and carpentry company, JM3 Construction, LLC, collaborated with other non-union sub-contractors to "fraudulently use minority and women-owned business enterprises as pass-through entities to obtain contracts for affordable housing developments," and that they engaged in payroll and insurance fraud and other forms of corruption.
DA Bragg said the colluding businesses pulled off the following list of violations.
Using cash payroll to defraud the city and state of taxes
Ripping off the New York State Insurance Fund (NYSIF) of more than $2 million
Illegally leaving workers uninsured
Conspiring to misuse MWBE to fraudulently win contracts
Taking jobs from legitimate MWGEs
Corrupting the construction industry bid process
Running smaller contractors out of business.
He said, "The common factor in all of these alleged schemes is greed at all costs,” and added, “When the field is rigged, law-abiding companies and legitimate MWBEs are cheated out of much-needed contracts. And when executives care more about their bottom line than their employees and the law, hard-working New Yorkers suffer.”
The district attorney's office accuses JM3 and owner Larry Wecker of using a series of shell companies to cash government checks that were intended to go to independent MWBE contractors. Those MWBE companies were on the JM3 books "on paper only," according to Bragg. Meanwhile, "non-MWBE contractors and suppliers actually did the work and supplied the goods," he said. According to the indictment, it was the these non-MWBE firms that took the payments. "Legitimate MWBE firms were disadvantaged of that opportunity."
Housing Preservation and Development (HPD) Commissioner, Adolfo Carrión, Jr., said "“we stand by our commitment to diversifying who the city does business with." He added that "we have zero tolerance for anyone seeking to defraud the city and harm minority and women-owned businesses."
Cheating on Insurance
The grift extended into insurance and taxation as well. None of the money taken during this scheme was reported to NYSIF, a not-for-profit agency of the State of New York that offers workers' compensation, New York State disability benefits and Paid Family Leave insurance. Because of the fraud, New York City construction workers were underinsured.
Exacerbating that insurance exposure, JM3 discouraged injured workers from going to the hospital for fear their scheme would be discovered. In on incident, a worker who needed and received emergency care (he took 45 stitches for a gash received on the job), the worker was instructed by JM3 to lie to the emergency care givers about where the accident happened.
And because none of the income was declared with the state, New York State and City were deprived of business and personal income taxes, putting a heavier burden on everyday New Yorkers.
Commissioner Carrión called the entire scheme "disturbing, despicable, greedy, criminal." But one project estimator that Union-Built Matters spoke with called the events, "typical." He said "I'm glad these guys got caught. Do you think this was the first scheme they hatched? I'm skeptical."
The estimator, who didn't want to be identified because he must do business with both union and non-union contractors, said now is the time for increased vigilance. "The New York City construction industry got something like $88 billion poured into it last year. Anytime there's that much money flowing into an industry the watchdogs get stretched. They can't possibly keep up with the oversight of something that big. And that's when the bad guys start to drool. I think there are a lot of drooling bad guys operating in our industry right now. And it makes the whole thing worse for all of us."
Help keep New York City construction clean. When considering real estate here, ask to look at buildings put up by unions.
"The common factor in all of these alleged schemes is greed at all costs."
Manhattan District Attorney
"We stand by our commitment to who the city does business with."
Adolfo Carrión, Jr.
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