Fraud Charges Against Construction Company Involve Hotel, Convention Center, Casino Projects

Projects Included the World Trade Center Towers, the Plaza Hotel Renovation, the Javits Convention Center Expansion and Renovation Project, and the Aqueduct Casino

The U.S. Attorney’s Office for the Eastern District of New York filed fraud charges last week in Brooklyn federal court against Tishman Construction Corporation (“Tishman Construction”), one of the largest construction companies in New York City.

Tishman Construction is charged with mail and wire fraud conspiracy for improperly billing its clients more than $5 million over a ten-year period for hours not worked and at rates that were in excess of the agreed upon contract rate.

Tishman Construction also entered into a deferred prosecution agreement with the U,S, Attorney's Office in which Tishman Construction admitted to fraudulently overbilling clients and agreed to pay more than $20 million in restitution to victims and penalties to the federal government.  The company has additionally instituted far-reaching corporate reforms designed to eliminate future problems and enforce best industry practices.

The deferred prosecution agreement marks the third resolution by the U.S. Attorney's Office aimed at rooting out fraud in the construction industry.  In April 2012, Lend Lease (US) Construction LMB Inc. (formerly Bovis Lend Lease LMB Inc.) was charged with defrauding its clients, entered into a deferred prosecution agreement, and paid $56 million in restitution and penalties for engaging in a ten-year overbilling scheme.  More recently, 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 fraudulent overbilling scheme.

The charge and disposition were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Michael Nestor, Inspector General, Port Authority of New York and New Jersey; Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office; Carol Fortine Ochoa, Inspector General, General Services Administration, Office of the Inspector General; Cheryl Garcia, Special Agent-in-Charge, Department of Labor, Office of Inspector General; and Mark G. Peters, Commissioner, New York City Department of Investigation.

“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," stated U.S. Attorney Capers. "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.  Today’s criminal action and resolution is another example of our steadfast efforts in combating and eliminating fraud in New York City’s construction industry.”

Mr. Capers thanked the investigative agencies for their outstanding commitment and dedication over the course of this multi-year industry investigation.

“Tishman’s conduct that perpetuated an industry-wide fraud for more than a decade has come to an end," stated Inspector General Nestor. "Government contracting agencies, and private clients alike, deserve to be billed strictly for what they bargained for, not duped into overpaying for gratuitous or phantom services.  Responsible for overseeing one of the largest government contracting agencies in the region, the Port Authority Office of Inspector General will continue to uproot fraud and corruption within the area’s construction industry.”

“This overbilling scheme padded daily work logs and falsified overtime—all at a cost to taxpayers and the public," stated Commissioner Peters. "This type of fraud needlessly drives up construction costs and undermines integrity at these sites. DOI thanks the hard work of our law enforcement partners on this investigation, and we will continue to work together to root out and stop this type of corruption.”

The Overbilling Scheme

As alleged in the felony information filed last week, Tishman Construction, a New York based construction firm, engaged in a fraudulent overbilling scheme that impacted its projects for at least a ten-year period.  These projects included the World Trade Center Towers One (the “Freedom Tower”), Three, Four and Seven; the World Trade Center PATH Transportation Hub; the Plaza Hotel renovation; the Javits Convention Center Expansion and Renovation Project; the Aqueduct Casino in Queens, and scores of other projects.

The U.S. Attorney's Office said Tishman Construction’s role on construction projects was typically that of a construction manager, which often required it to supervise the work done by subcontractors or trade contractors. From at least 1999 through approximately October 2009, Tishman Construction billed clients, including government contracting and funding agencies, for hours that were not worked by labor foremen from Local 79 Mason Tenders’ District Council of Greater New York.  Tishman Construction carried out this fraudulent overbilling by: (a) adding one to two hours of unworked or unnecessary “guaranteed” overtime per day to the time sheets for the labor foremen; (b) providing five hours of guaranteed overtime per day, whether worked or not, for a particular senior labor foreman; and (c) allowing labor foremen to be absent from work for sick days, major holidays, and one or two weeks of vacation per year.

In furtherance of this overbilling scheme, Tishman Construction completed and submitted time sheets to its clients as though the labor foremen had worked those days, the U.S. Attorney's Office alleges. Additionally, 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 Construction’s contracts with its clients.

The government’s case is being prosecuted by the Business and Securities Fraud Section of the U.S. Attorney's Office. Assistant United States Attorney Whitman Knapp and Special Assistant United States Attorney Jonathan P. Lax are in charge of the prosecution.