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Major NYC Builder Admits Fraud

Tuesday, December 15, 2015

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Tishman Construction Corp.—the firm behind One World Trade Center and the Plaza Hotel projects—has admitted to overbilling clients more than $5 million over the last decade, federal authorities have announced.

Through a deferred prosecution agreement, the company has agreed to pay $20.2 million (in restitution and penalties) in response to mail and wire fraud charges, the U.S. Attorney’s Office for the Eastern District of New York reported Thursday (Dec. 10).

Tishman Construction, with roots dating back to 1898, is one of the largest construction concerns in New York City.

Port Authority
Port Authority of New York and New Jersey

Tishman Construction built the iconic One World Trade Center in Manhattan, the tallest building in the Western Hemisphere and the fourth tallest in the world.

Prosecutors have alleged that the company improperly charged clients, including government agencies, for phantom overtime and at rates that were in excess of the agreed upon contract rate.

As part of its agreement, Tishman also instituted “far-reaching corporate reforms designed to eliminate future problems and enforce best industry practices,” the authorities reported.

A spokesman for Tishman Construction has told media outlets that the company fully cooperated with the investigation.

Recent Fraud Cases

The case is the latest in an ongoing effort to root out fraud in the construction industry, a focus of the U.S. Attorney’s Office.

In April 2012, Lend Lease Construction LMB Inc. (formerly Bovis Lend Lease LMB Inc.) was charged with defrauding clients. The company entered into a deferred prosecution agreement and paid $56 million in restitution and penalties for engaging in a 10-year overbilling scheme.

In May 2015, Hunter Roberts Construction Group LLC, entered into a non-prosecution agreement and agreed to pay more than $7 million in restitution and penalties for engaging in an eight-year overbilling fraud scheme.

Major Projects

According to prosecutors, Tishman Construction engaged in a fraudulent scheme that impacted its projects for at least 10 years.

Javits Center
Javitscenter via Wikipedia.org / CC by-SA 4.0

Tishman's overbilling scheme impacted the Javits Convention Center Expansion and Renovation Project, prosecutors said.

Those projects include:

  • World Trade Center Towers One, Three, Four and Seven;
  • The World Trade Center PATH Transportation Hub;
  • The Plaza Hotel renovation;
  • The Javits Convention Center Expansion and Renovation Project; and
  • The Aqueduct Casino in Queens.

Acting mostly as construction manager of these projects, Tishman supervised the work done by subcontractors and trade laborers, according to prosecutors.

Scheme Details

From at least 1999 to October 2009, Tishman billed clients, including government contracting and funding agencies, for hours that were not worked by labor foreman from Local 79 Mason Tenders’ District Council of Greater New York.

Prosecutors said Tishman carried out overbilling by:

  • Adding one to two hours of unworked or unnecessary “guaranteed” overtime per day to the time sheets for the labor foremen;
  • Providing five hours of guaranteed overtime per day, whether worked or not, for a particular senior labor foreman; and
  • Allowing labor foremen to be absent from work for sick days, major holidays, and one or two weeks of vacation per year. 

To further facilitate the scheme, the company completed and submitted time sheets to its clients as though the labor foremen had worked those days. 

PATH Painting
Port Authority of New York and New Jersey

The company's project portfolio also includes the World Trade Center PATH Transportation Hub. Worker shown above painting the interior of the Oculus this summer.

In addition, from approximately 2005 through 2009, without seeking advance approval from its clients, Tishman Construction paid a particularly senior labor foreman, and billed its clients, at wage rates that exceeded those specified in Tishman contracts with its clients.

“Through a systemic practice, Tishman Construction bilked its clients by charging them for unworked time and at rates higher than those bargained for by their clients,” U.S. Attorney Robert L. Capers said in a statement.

“By doing so, Tishman Construction defrauded its clients and abused the trust placed in it to provide construction services on some of New York’s most storied buildings.”

Deferred Prosecution

Tishman accepted responsibility for its improper billing practices and has agreed to offer restitution to its clients in the amount of $5,650,917.97 and pay a penalty of $14,580,000.00 to the government over a two-year period.

The government has agreed to defer prosecution for a period of 24 months and will attempt to obtain an exclusion of time to allow Tishman Construction to demonstrate good conduct and compliance with the terms of the agreement, according to authorities.

Tishman’s remedial measures include the hiring of a compliance director; adopting a new code of conduct; and updating time-sheet recording and billing policies.

   

Tagged categories: Business matters; Commercial Construction; Construction; Criminal acts; Ethics; Fraud; Government contracts; Tishman Construction

Comment from john lienert, (12/15/2015, 9:44 AM)

i hope the "senior labor foreman" ( read: MAFIA ) lost family in the 9-11 horror


Comment from Chuck Pease, (12/19/2015, 9:48 AM)

Why is it the wealthy people with lots of money always seem to escape prosecution and a guy like me goes straight to jail for the same crimes. Is there no integrity left in this greed driven country?


Comment from Rodney White, (1/7/2016, 8:42 AM)

Hmmm- Graft and corruption in union labor contracts in New York City---hard to imagine....


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