New York City’s construction industry is notorious
for corruption. Much of the sleaze is small time: if you want
to remodel an apartment, for example, you’d better
slip the building super some cash just to make sure the
elevators keep running when you need them.
But some of the corruption is anything but small time. Case
in point: Manhattan District Attorney Cyrus Vance has brought
charges against four executives from blue-chip Lehr
Construction Corporation, alleging that the men
“systematically stole tens of millions of dollars from
investment firms, insurance companies and law firms as they
built corporate offices in buildings across
Manhattan,” the New York Times reported on May 4
(“
Four Construction Executives Are Charged With
Fraud,” by Charles V. Bagli). Indicted in the case
were Jeffrey Lazar, Todd Phillips, Steven Halper and Steven
Wasserman.
According to Vance, the scheme worked like a classic shell
game: Lehr would conspire with subcontractors who agreed to
over-bill Lehr for work on certain jobs — charges Lehr
would pass along to the client. But Lehr would recover the
money from the subs on future jobs, where the subs would
under-bill Lehr for work performed, thus allowing Lehr to
pocket the difference. According to Vance, “This
construction company was corrupt at all levels. Its executives
developed — and successfully executed — a
scheme to steal millions of dollars from their
clients.” The next day, the District
Attorney’s office widened its net to include some of
the subcontractors who allegedly helped Lehr rig its books.
Charged with grand larceny in New York state court, according
to the Wall Street Journal, were Arthur Godsell of Godsell
Construction Corporation; James Roselle of J.T. Roselle
Lighting Inc.; George and Kevin Fotiadis of Liberty Contracting
Corporation; James Pappas of P.J. Mechanical; Kenneth McGuigan
of Superior Acoustics Inc.; and Michael Hayes of Sweeney and
Harkin Carpentry. After pleading not guilty, all the accused
were released on $50,000 bail, the Journal reported
(“
Subcontractors Charged in Scheme,” by Tamer
El-Ghobashy).
The four Lehr execs could face jail terms as long as 25
years, according to the New York Daily News
(“
Lehr Construction Corp's top executives indicted for $30
million in alleged fraud,” by Brian Kates). And
the Lehr prosecution could be just the beginning, the Daily
News reported: “Vance said the indictment represents
the first prosecution in what he said would be a blitz of the
interior construction industry in coming months.”