Construction giant Tishman to pay $20M fine for overbilling scheme

Dive Brief:

Tishman Construction will pay more than $20 million in fines for mail and wire fraud conspiracy resulting from its alleged $5 million overbilling of clients for a period of 10 years, CBS New York reported. Prosecutors said the fine includes victim restitution and federal penalties.
Prosecutors said Tishman billed at higher-than-agreed-upon rates, padded labor foremen’s time sheets and billed for the days that workers were out sick or on vacation.
From 1999 to 2009, intentional overbilling occurred on multiple projects, including One World Trade Center, Aqueduct Casino and the expansion of the Javits Convention Center, according to prosecutors. Tishman officials said they have cooperated with the investigation and have instituted safeguards as a result of flawed company policies.

Dive Insight:

According to the dates of the alleged fraud, the criminal behavior occurred prior to AECOM’s $245 million purchase of Tishman Construction in 2010.

Prior to its acquisition by AECOM, Tishman Construction was part of the Tishman group of real estate and construction firms founded in 1898 in New York City.

"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," Brooklyn U.S. Attorney Robert L. Capers said in a news release.

According to the 2015 Kroll Global Fraud Report, 75% of construction, engineering and infrastructure companies have experienced a fraud incident in the past year, making the industry second only to retail in the number of fraud cases.

In May, Hunter Roberts Construction Group, one of New York's largest construction firms, admitted it had overcharged clients on several projects by falsifying the number of hours worked on employees' timesheets and inflating rates. The firm agreed to pay $1 million to affected clients and an additional $6 million to the government.

Construction fraud is so prevalent New York City — a trend some officials say is the result of a recent building boom — that the city established a construction fraud task force in August, made up of five city agencies, to investigate all levels of criminal behavior and unsafe practices in the construction industry.