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Games Contractors and Subs Play – Trouble Ahead

Bid rigging is a treacherous game played by owners, contractors and subs in every market in the US. It becomes a really big deal when it is uncovered in a highly competitive (cutthroat) market like New York City, and it can take a variety of forms as illustrated in indictments in a recent case in the city.

According to Bisnow and a recent press release from the Manhattan District Attorney’s Office, 14 individuals and 3 corporations were charged with Conspiracy, Grand Larceny, Money Laundering and Commercial Bribery. Those charges are not to be taken lightly and the penalties include fines and jail time.

According to the press release, “New York’s sky-high construction costs are driven not only by market demand, but by pay-to-play industry corruption that makes it impossible for honest companies to compete,” said District Attorney Vance.

The indictments were handed down after a lengthy investigation into the what was called a massive, years-long kick-back scheme on two interior construction projects at the Bloomberg, LLP offices at 120 Park Avenue and 919 Third Avenue. The misdeeds included the passing of inside information on bids to sub-contractors, the creation of falsified documents such as invoices and purchase orders and falsified applications for status as a Women’s Business Enterprise (WBE).

In return for the help of the owner and the General Contractor in the bid rigging process, the subcontractors provided both the former Turner executives and the former Blomberg executives with what are commonly called, “cash sandwiches.” Those cash sandwiches were provided in paper bags or envelopes, thus the name. Additionally, the Subs paid for vacations and home remodels for the co-conspirators in the case.

According to the indictments, the co-conspirators are alleged to have stolen $15 million from Bloomberg, LLP. The release states, “In addition to the defendants indicted today, more than a dozen individuals and corporations have entered guilty pleas thus far and paid approximately $5.5 million in restitution.”

Honest specialty contractors and subs in the major US markets will have an increasingly difficult time competing for new projects if these games are allowed to continue. If the owners, their GCs and subs play these games with impunity, then the market will get even more confused and messy than it is right now.

We should note that the indictments are just that and those indicted individuals have the right to be tried by a jury of their peers before being judged guilty.

This is another in our ongoing series of Games Contractors and Subs play.