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FOR IMMEDIATE RELEASE |
CONTACT: Erin Duggan |
DISTRICT ATTORNEY VANCE ANNOUNCES CONSTRUCTION INDUSTRY INDICTMENT Manhattan-Based Company Involved in Multimillion-Dollar Fraud |
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| Manhattan District Attorney Cyrus R. Vance, Jr. today announced the indictment of a Manhattan-based construction company and three of its principals for stealing nearly $7 million from five clients through a scheme involving false invoices and kickbacks from subcontractors[1]. The scheme encompassed a number of construction projects in the Tri-State area, including condominium conversions, office renovations, and the construction of a computer data center. THE BUILDERS GROUP (TBG), TBG Owner and President GEORGE FIGLIOLIA, TBG Chief Financial Officer ISAAC STARESHEFSKY and TBG Vice President JOHN KRUPA have been charged with six felony counts of Grand Larceny, stemming from illegal acts performed while serving as construction managers for various developers in interior building projects. The charges stem from the defendants’ scheme to illegally inflate construction costs by submitting false bills from various subcontractors, who would then kick back excess money to the defendants. “Thefts like these, involving millions of dollars in false charges passed on to clients, are extremely serious,” said District Attorney Vance. “We will continue to vigorously prosecute these crimes in order to level the playing field for the majority of the City’s business owners, who do not rely on deceit to turn a profit. Even in these tough economic times, construction costs in the New York City area are expected to reach an estimated $25 billion in 2010. Fraud of the type charged in this indictment is estimated by the City of New York to add as much as 10 percent to the cost of construction.” As revealed in the indictment and in court documents, the defendants systematically stole money from clients who had hired TBG as a construction manager on several interior projects, between 2006 and 2009. One of the primary functions of a construction manager is to negotiate contracts with various subcontractors to perform work on the project and then oversee their progress. As a construction manager, in contrast to a general contractor, TBG became an agent of the client and was required, as a fiduciary, to act in the best interests of that client. TBG was therefore required to obtain the lowest price possible from qualified sub-contractors. According to the indictment and court file, TBG, with the active participation of various sub-contractors, systematically overcharged its clients by inflating the prices of purchase orders for construction materials prices and, later in the project, by again inflating the costs of various change orders. TBG and the subcontractor would first negotiate and agree on the lowest price for the project. Once they settled on the real price, TBG and the subcontractor would then agree on an inflated price to submit to the client. The indictment and court file further reveal that, after the subcontractors received payment from a particular client, the inflated monies were secretly returned to TBG, often either directly or through credits for past debts owed to the subcontractors. Direct kickbacks were typically disguised through the use of fictitious invoices for non-existent services. In other cases, the subcontractors were instructed to send payments to other companies connected to FIGLIOLIA, or to third-party companies owed money by TBG. Finally, in some cases the sub-contractor would keep the inflated monies but perform work on TBG’s behalf at unrelated projects for no charge. The investigation was a joint endeavor between the Manhattan District Attorney’s Construction Industry Strike Force and a detail of the Special Investigations Unit of the New York State Police (NYSP) assigned to the Strike Force. The indictment announced today is the result of ongoing investigations by the District Attorney’s Office into fraud and corruption in the New York City construction industry. Over the past ten years, the Manhattan District Attorney’s Office has obtained convictions and guilty pleas from scores of individuals, including some of the largest general contractors in New York City, for kickbacks and bid-rigging schemes, and recovered more than $40 million dollars through those prosecutions. District Attorney Vance thanked the New York State Police for their assistance in the investigation, including Superintendent Harry J. Corbitt, Special Investigation Unit Major Matthew S. Renneman, Lieutenant George Nohai, and lead Investigator Michael Rhoads, who was supervised by Senior Investigator Gustav Talleur. Assistant District Attorney Christopher Beard, Senior Investigative Counsel, assigned to the Construction Industry Strike Force, is handling the prosecution under the supervision of Assistant District Attorney Michael Scotto, Chief of the Construction Industry Strike Force.
George Figliolia Isaac Stareshefsky John Krupa The Builders Group
[1] The charges contained in the indictments are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
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