Former
Principal in Charge of Bovis’ New York Office Pleads Guilty to Fraud Charge,
Faces up to 20 Years in Prison
Earlier today, the U.S. Attorney’s
Office for the Eastern District of New York filed fraud charges against the
construction firm Lend Lease (US) Construction LMB Inc. (formerly Bovis Lend
Lease LMB Inc.) (“Bovis”) and James Abadie, the former principal in charge of
Bovis’ New York office. Abadie pled guilty this morning in United States
District Court to conspiring to commit mail and wire fraud by fraudulently
overbilling Bovis’ clients for over a decade. Also this morning, Bovis entered
into a deferred prosecution agreement with the U.S. Attorney’s Office for the
Eastern District of New York and the New York County District Attorney’s Office
in which Bovis admitted to fraudulently overbilling clients for over 10 years.
Bovis also admitted defrauding two of its public clients by falsely
misrepresenting the work performed by its minority business enterprise
partners, thus fraudulently obtaining payments on lucrative contracts. The
deferred prosecution agreement requires Bovis to pay up to $56 million in
penalties to the federal government and restitution to victims and to institute
far-reaching corporate reforms designed to eliminate future problems and
enforce best industry practices.
The charges and dispositions were
announced by Loretta E. Lynch, United States Attorney for the Eastern District
of New York; Cyrus R. Vance, Jr., District Attorney, New York County; Janice K.
Fedarcyk, Assistant Director in Charge, Federal Bureau of Investigation; Robert
E. Van Etten, Inspector General, The Port Authority of New York and New Jersey,
Office of the Inspector General; Brian D. Miller, Inspector General, General
Services Administration, Office of the Inspector General; Robert L. Panella,
Special Agent in Charge, Department of Labor, Office of Inspector General; and
Rose Gill Hearn, Commissioner of the New York City Department of Investigation.
Bovis is one of the largest construction
firms operating in New York City. Bovis provides construction, project
management, and consulting services on large-scale public and private
construction projects. Bovis is a U.S. subsidiary of the company Lend Lease
Corporation Limited (“Lend Lease”), which, as of 2009, operated in over 40
countries in Asia and Europe, as well as in Australia and the United States.
Bovis’s New York office is its largest. In 2008, Bovis employed over 1,000
people in the United States, with the majority working in the New York office.
The
Overbilling Scheme
As alleged in the felony information
filed in court today (the “Bovis Information”), Bovis intentionally and
fraudulently billed clients, from at least 1999 to 2009, for hours that were
not worked by labor foremen from Local 79 Mason Tenders’ District Council of
Greater New York (“Local 79”). Bovis systematically added one to two hours of
unworked overtime per day to the timesheets for labor foremen. Bovis also
systematically completed and submitted timesheets falsely listing unworked
hours as worked when labor foremen were absent for sick days, major holidays,
and weeks of vacation. Bovis fraudulently billed its clients for this unworked
time and, on public projects, falsely submitted certified payrolls, defrauding
taxpayers. Finally, Bovis made extra, undisclosed lump sum and stipend payments
to a select group of labor foremen and billed those payments to clients as
well. The clients were unaware of these practices. Pursuant to the deferred
prosecution agreement, Bovis has admitted all of the allegations in the Bovis
Information.
As alleged in a separate felony
information also filed in court today (the “Abadie information”), defendant
James Abadie played a critical role in executing Bovis’s overbilling practices
when he served as the principal in charge of Bovis’ New York office from 2002
to June 2009 and as the general superintendent at Bovis prior to 2002. As
principal in charge, all aspects of project operations and union labor issues
fell under Abadie’s supervision. As the general superintendent for Bovis,
Abadie personally oversaw the day-to-day field operations on all projects and
had extensive involvement with managing union labor. While in both positions,
Abadie explicitly and fraudulently directed his subordinates to carry out the
practice of adding unworked hours to labor foremen’s timesheets, knowing that
these unworked hours were billed to clients who were unaware that they were the
victims of fraud. Abadie pled guilty to the mail and wire fraud conspiracy
charged in the Abadie information.
Abadie and Bovis employed the fraudulent
overbilling scheme across the broad spectrum of Bovis’ projects in the New York
metropolitan area, including some of the area’s most important, large-scale
public and private construction projects. Affected projects included the United
States Post Office/Bankruptcy Court in Brooklyn, New York; the Bronx Criminal
Courthouse in the Bronx, New York; Grand Central Terminal; the Deutsche Bank
building deconstruction in New York, New York; Citifield in Queens, New York;
and the very United States Courthouse in which Bovis was charged and Abadie
pled guilty this morning.
The
Minority Business Enterprise Schemes
Bovis was also charged today with
defrauding the Dormitory Authority of the State of New York (DASNY) with
respect to the Minority Business Enterprise (MBE) requirements on the Bronx
Criminal Courthouse construction project and the New Jersey Schools Development
Authority (NJSDA) and its predecessor organizations with respect to MBE
requirements on school construction projects. Earlier today, Bovis admitted
engaging in these MBE fraud schemes.
MBE programs are affirmative-action
programs designed to increase the participation of small construction firms and
firms owned by women or minorities on public construction projects. New York
and New Jersey set goals for the percentage of work to be awarded to MBEs on a
particular project. In order to win bids on public projects, Bovis agreed to
comply with the MBE program goals. The Bovis information filed today alleges
that on two separate projects, Bovis falsely represented that certified MBEs
were performing work and fraudulently counted that work towards its required
MBE participation goals when Bovis, not the MBE, was actually performing that
work.
The Bovis information alleges that in
2000, Bovis told DASNY, which had responsibility for the Bronx Criminal
Courthouse construction project, that H.J. Russell & Company (HJR), an MBE,
would perform 100 percent of Bovis’ general conditions contract (the “general
conditions” contract included the infrastructure costs of the construction
project not covered by the trade contracts, such as daily trash removal and
operation of the elevators and hoists on the construction site, as well as
certain union labor, including workers from Local 79) work that involved union
labor, thereby substantially satisfying Bovis’s MBE requirements. Over the
course of the project, Bovis falsely informed DASNY in writing every month that
HJR was performing the general conditions contract work as promised. In reality,
Bovis secretly performed the work itself by directly managing the union labor
that was supposed to be employed and supervised by HJR and relegated HJR’s role
to a mere pass-through, thereby fraudulently enabling Bovis to get false credit
for compliance with its MBE obligations and get paid for its work on the
project. Bovis placed many of its long-term union workers on HJR’s payroll,
hired other union labor that was then placed on HJR’s payroll, supervised and
directed the union workers itself, and made all important decisions. HJR’s only
function with respect to the general conditions union labor work was to provide
paychecks for work performed by, or at the direction of, Bovis personnel.
Similarly, in 2001, Bovis told the NJSDA
and its predecessors that Imperial Construction Group Inc. and Imperial
Architectural Group (collectively, “Imperial”) and Qualified Women/Minorities
in Construction (QWIC) would satisfy Bovis’ obligation to have MBEs perform 25
percent of Bovis’ project management contract on the Abbott Schools Program in
New Jersey. Over the course of the project, Bovis falsely informed the NJSDA in
written progress reports that employees of these MBEs were performing work as
Bovis had promised and the contract required, when in fact Bovis itself
secretly performed this work and relegated the roles of the MBEs to mere
pass-throughs. This fraud enabled Bovis to get false credit for compliance with
its MBE obligations and to get paid for its work on the projects. During the
course of the project, Bovis directed Imperial and QWIC to hire various
individuals, some of whom were friends or relatives of Bovis employees. Some
Bovis employees were also transferred to the MBEs’ payrolls. Although these
employees received paychecks from the MBEs, their work was directed by Bovis,
they had Bovis identification and business cards, and they often had little or
no contact with the MBEs while working on the project. In March 2004, Bovis and
Imperial entered into two “Staffing Secondment Agreements,” pursuant to which
14 Bovis employees were “transferred” to Imperial for a period of 10 to 12
months. As part of these contracts, the employees remained on Bovis’ payroll
but were mischaracterized as employees of Imperial to improperly enable Bovis
to count these employees toward its MBE obligations.
The
Guilty Plea and Deferred Prosecution Agreement
Pursuant to the guilty plea entered this
morning, the defendant James Abadie faces a maximum sentence of 20 years’
imprisonment and a fine of $250,000 or the greater of twice the gross gain or
loss from the fraudulent conduct.
Pursuant to the deferred prosecution
agreement filed in court today, Bovis has admitted and accepted responsibility
for its crimes, has agreed to pay up to $56.6 million in penalties to the federal
government and restitution to victims, has agreed to continue to cooperate with
the government, and has agreed to institute far-reaching corporate compliance
reforms. With respect to the financial aspects of the agreement, $40.5 million
represents a penalty to be paid by Bovis to the federal government in three
installments over two years; up to $13.6 million in restitution will be
afforded to all victims of the overbilling scheme; and $2.5 million in
restitution will be paid to the victims of the MBE schemes.
The deferred prosecution agreement also
requires Bovis to institute comprehensive corporate reforms with respect to its
billing practices and its participation in MBE programs. To begin, Bovis has
created the position of ethics and compliance officer, as well as a regional
risk and compliance committee, to oversee its corporate reforms and compliance
with the agreement.
In order to ensure that only hours being
worked are being recorded on timesheets and billed to clients, Bovis has
revised its policies to require (1) that each individual worker certify the
accuracy of all hours recorded on his or her timesheet; (2) multiple layers of
supervisory review of the timesheets to verify the accuracy of the timesheets;
and (3) maintenance of daily records for cross-referencing purposes, so as to
independently verify the accuracy of the timesheets. To verify that the union
timesheet recording and billing procedures are being followed at all levels,
Bovis will maintain a full-time auditor in the New York office who will utilize
site visits, spot audits and regular review of union hours.
In order to ensure compliance with MBE
programs, Bovis will create a MBE liaison position based in the New York office
whose function is to actively ensure that Bovis is meeting its federal, state,
and local MBE obligations. The MBE liaison will regularly meet with federal,
state, and local agencies to discuss the agencies’ expectations and
implementation of the MBE programs on a project-by-project basis. Furthermore,
the MBE liaison will play an active role in the process by which Bovis engages
qualified MBEs and uses best efforts to verify that each MBE is capable of
performing its subcontracts and provides a commercially useful function.
“Through this deliberate scheme of
billing clients for work not done, Bovis deceived their customers and stole
taxpayer dollars. They also abused a program—designed to benefit and train
minority contractors—for their own profit motive. Today’s charges, guilty plea
and settlement mark a significant step in our effort to eliminate fraud in the
construction industry in New York City. Our investigation of the industry
continues, and the resolution we reached today should send a very clear
message,” stated United States Attorney Lynch. “Given the public nature of many
of these projects, we must ensure that taxpayers get their money’s worth and
that the industry complies with the law. The defense of ‘everyone does it’ will
not be a shield against law enforcement.” Ms. Lynch expressed her grateful
appreciation to the investigating agencies.
FBI Assistant Director in Charge
Fedarcyk stated, “Today’s proceedings mark the culmination of a three-year
investigation into a systemic pattern of audacious fraud by one of the world’s
largest construction firms. The overbilling fraud affected city, state, and
federal public building projects. If you are a New York City resident, Bovis
indirectly swindled you on three different levels. Whether projects are
publicly or privately funded, padding contracts and skirting the law are
crimes. And we are watching.”
Port Authority Inspector General Van
Etten stated, “I commend United States Attorney Loretta Lynch and her staff for
spearheading this prosecution and thorough investigation that now brings this
conspiracy out of the shadows and into the light. Bovis’s conduct, as outlined
in the deferred prosecution agreement and information, has gone on for nearly a
decade unchecked. Under-the-table deals with employees, at the cost of clients,
that continue to plague the regional construction industry are simply
unacceptable. This investigation reminds us how both the government and private
sectors must remain vigilant in monitoring the conduct of contractors.
“Equally egregious was Bovis’
manipulation of minority and women-owned businesses. The goal of M/WBE programs
is to provide valuable opportunities for smaller, disadvantaged businesses to
gain market share, not to fill the coffers of multi-national corporations.”
“Today’s guilty plea by Mr. Abadie and
the multi-million-dollar settlement by Bovis puts an end to a fraud scheme to
overbill various construction contracts, including taxpayer-funded public works
contracts throughout New York City, for bogus overtime hours by Bovis’ labor foremen.
We will continue to work with our law enforcement partners to vigorously
investigate such crimes related to the nation’s unions, workers, and public
contracts,” said Special Agent in Charge Panella, New York Regional Office of
the U.S. Department of Labor’s Office of Inspector General, Office of Labor
Racketeering and Fraud Investigations.
The government’s case is being
prosecuted by Assistant United States Attorneys Sarah Coyne and Stephen Meyer.
This case was brought in coordination
with President Barack Obama’s Financial Fraud Enforcement Task Force. President
Obama established the interagency task force to wage an aggressive,
coordinated, and proactive effort to investigate and prosecute financial
crimes. The task force includes representatives from a broad range of federal
agencies, regulatory authorities, inspectors general, and state and local law
enforcement who, working together, bring to bear a powerful array of criminal
and civil enforcement resources. The task force is working to improve efforts
across the federal executive branch and, with state and local partners, to
investigate and prosecute significant financial crimes, ensure just and
effective punishment for those who perpetrate financial crimes, combat
discrimination in the lending and financial markets, and recover proceeds for
victims of financial crimes.
The
Defendant:
Name: James Abadie
Age: 55
Posts
No comments:
Post a Comment