Monday, January 14, 2013

Schlesinger Electrical Contractors, Inc. and Two Members of Schlesinger-Siemens Electrical, LLC’s Board of Managers Indicted for Falsely Claiming SSE Was Properly Licensed

Manhattan District Attorney Cyrus R. Vance, Jr., today announced a $10 million settlement that resolves a three-year investigation into the criminal conduct of SCHLESINGER-SIEMENS ELECTRICAL, LLC[1] (“SSE”), an electrical contracting firm. In the Deferred Prosecution Agreement (DPA) and corresponding Statement of Facts, Siemens Electrical admitted that SSE violated New York State law by filing false documents with the Department of Buildings (“DOB”) and the Department of Environmental Protection (“DEP”).

“This corporation defrauded the City government. It lied about its qualifications to perform the jobs it was hired to do, and overstated the participation of minority businesses,” said District Attorney Vance. “In doing so, it unfairly put itself ahead of more qualified applicants to obtain more than $200 million in contracts to improve the City’s infrastructure. Although it safely and successfully completed the majority of the work it was hired to do, there is no room for dishonesty in business, particularly when taxpayers are footing the bill.”

According to documents filed in court, SSE was formed in 2004 for the purpose of bidding and performing DEP projects. Between August 31, 2005, and January 19, 2007, DEP awarded five contracts to SSE with a total value of $234,798,844:

The MWBE Fraud

The five contracts for the DEP projects required that SSE comply with the New York State Minority and Women-owned Business Enterprises (“MWBE”) program. Pursuant to the MWBE program, SSE was obligated to make good faith efforts to subcontract a specific percentage of the contract amount with certified MWBE companies for each of the DEP projects. Between 2005 and 2012, SSE submitted to DEP utilization reports and other paperwork that did not accurately reflect the role and participation of MWBE sub-contractors in DEP projects in the procurement, installation, and testing of certain equipment. The utilizations reports submitted were false in that they included equipment valued at approximately $10 million that was not provided by the MWBEs.

The Electrical License Fraud

DEP requires that all contracts for electrical work be awarded to licensed electrical contractors who comply with the New York City Electrical Code, which requires all electrical companies doing business in the City to have a licensed Master Electrician serve as the “Responsible Representative”[2] of the electrical business. Between 2005 and 2008, SSE was not in compliance with the Electrical Code because it did not properly employ a Master Electrician who had responsibility for supervising employees conducting electrical work on DEP projects. As an entity, SSE had no electrical employees of its own.

Two members of the SSE Board of Managers– ROBERT SOLOMON, 74, and JACOB LEVITA, 62 – and SCHLESINGER ELECTRICAL CONTRACTORS, INC., (“SCHLESINGER”) have been indicted in New York State Supreme Court on charges of Scheme to Defraud in the First Degree, Offering a False Instrument for Filing in the First Degree, and Conspiracy in the Fifth Degree[3] for defrauding DOB and DEP by misrepresenting that SSE properly employed a Master Electrician, so it could be awarded DEP contracts, when in fact it had not. The defendants had 49 percent ownership in SSE.

When SSE was formed, it did not have a Master Electrician on staff. After the first DEP project was awarded, SSE was informed by DEP that it was required to have its own Master Electrician or it would not be awarded any additional projects. From 2006 to 2008, the defendants, on behalf of SSE, paid $1,500 a month for two years to a Master Electrician working full-time for a different, unaffiliated electrical contracting firm to activate his inactive license and place it with SSE.

In 2007 and 2008, the electrician submitted Electrical License Renewal Application forms to DOB falsely naming SSE as the electrical company for which he was responsible. In fact, during that time period, SSE used SCHLESINGER employees to do the electrical work at 26th Ward Water Pollution Control Plant in Brooklyn and at two projects at the Wards Island Water Pollution Control Plant in Manhattan. The Master Electrician hired by the defendants on SSE’s behalf had no knowledge of these jobs and did not supervise the SCHLESINGER employees working on the projects. In fact, LEVITA applied for the permits for the three DEP projects at issue, despite not being the Master Electrician for SSE.

Additionally, in December 2007, at the request of SOLOMON, the Master Electrician hired by the defendants applied for permits for SSE for the Croton E1 and E2 projects, and falsely represented to DEP that he was the Responsible Representative for SSE.

The investigation into this case is ongoing. SSE will remit the $10 million payment to the Manhattan District Attorney’s Office, which will be forfeited and distributed pursuant to state asset forfeiture law. The DPA is in part in recognition of the cooperation of Siemens Electrical with the investigation, and its decision to voluntarily taken remedial actions in an effort to enhance integrity in the electrical contracting industry in New York City.

Port Authority Inspector General Robert E. Van Etten said: “In this investigation, SSE engaged in a pattern of fraud that provided them with an undue advantage, designed to enrich themselves, in the bidding of public works contracts. They also abused the Minority and Women-owned Business Enterprises program, designed to benefit and train minority contractors by falsifying documents indicating that they utilized these firms. We will continue to pursue investigations of the construction industry, and the resolution reached today should send a very clear message to all contractors that the Port Authority of New York & New Jersey will not tolerate fraud or any other criminal misconduct on public projects. The Port Authority Office of the Inspector General and its law enforcement partners will aggressively identify, investigate and bring to justice those who corrupt the integrity of the construction industry.”

New York City Department of Investigation Commissioner Rose Gill Hearn said: “The monitor, hired by the DEP at the outset of the Croton project to work with DOI to oversee this important infrastructure work, alerted DOI to the issue that the licensee for Schlesinger-Siemens expired. The proactive presence of the City’s monitor on this project has continued to yield important information, while permitting the project to move along. Here a contractor’s fraud and contempt for construction regulations was exposed, including when confronted by DOI investigators, the no-show electrician could not even describe the job he supposedly supervised. DOI will continue to work with its law enforcement partners to stop this type of fraud against the City and safeguard major infrastructure projects.”

Senior Investigative Counsel Elyse Ruzow of the Rackets Bureau oversaw the investigation leading to today’s actions under the supervision of Assistant District Attorney Daniel D. Brownell, Chief of the Rackets Bureau and Deputy Chief of the Investigation Division; former Assistant District Attorney Jane Tully, formerly Deputy Chief of the Rackets Bureau; former Executive Assistant District Attorney Adam S. Kaufmann, formerly Chief of the Investigation Division; and Executive Assistant District Attorney David Szuchman, Chief of the Investigation Division. Assistant District Attorney Duncan Levin, Chief of the Asset Forfeiture Unit, handled the asset forfeiture aspects of the case.

District Attorney Vance thanked Port Authority Inspector General Van Etten, as well as Supervisory Police Investigator Jeffrey Schaffler and Forensic Supervisor Fred Ferrone. District Attorney Vance also thanked DOI Commissioner Gill Hearn and Special Investigator Tiffany Dumas.

Defendant information:

ROBERT SOLOMON, D.O.B. 12/09/38
Port St. Lucie, Florida

JACOB LEVITA, D.O.B. 01/10/51
Brooklyn, New York

SCHLESINGER ELECTRICAL CONTRACTORS, INC.
Brooklyn, New York

Charges for all:

Scheme to Defraud in the First Degree, a class E felony, 1 count
Offering a False Instrument for Filing in the First Degree, a class E felony, 1
Conspiracy in the Fifth Degree, a class A misdemeanor, 1 count

[1] On August 27, 2004, Siemens Energy & Automation (“SE&A”) and Schlesinger Electrical Contractors formed SSE for the purpose of bidding upon and performing DEP projects. On April 12, 2012, Siemens Industry, Inc. (“SII”), the successor of SE&A, acquired Schlesinger’s interest in Schlesinger-Siemens Electrical, LLC, making it a single-member LLC. In connection with the acquisition, SII changed Schlesinger-Siemens Electrical, LLC’s name to Siemens Electrical, effective May 8, 2012.
[2] The New York City Administrative Code defines the term “Responsible Representative” as “[a] master electrician who has the authority to make final determinations and who has full responsibility on behalf of a master electrician business for the manner in which electrical work is done and for the selection, supervision and control of all employees of such business who perform such work. A partnership or corporation shall designate one master electrician who is a partner of such partnership or an officer of such corporation to be the responsible representative of such partnership or corporation.”
[3] The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

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