Dive Brief:
- Manhattan District Attorney Cyrus R. Vance Jr. and Metropolitan Transportation Authority (MTA) Inspector General Carolyn Pokorny announced that a former Metro-North Railroad contract manager and two private-sector business executives have been indicted for bid rigging and related fraudulent activity in conjunction with contract awards for Metro-North, a suburban commuter rail service run by the MTA.
- Prosecutors said former Metro-North employee James Berlangero fed confidential bid information submitted by other contractors, as well as internal MTA pricing and other sensitive data, to WRS Environmental Services Inc. in exchange for $70,000 and other kickbacks. Some of the ill-gotten benefits include $32,000 to Berlangero's residential mortgage company, $8,000 to Berlangero's credit union account, a $10,000 sponsorship for Berlangero's brother's race car and personal services performed by WRS employees at Berlangero's home.
- The DA's office also filed charges against WRS, which received $10 million in Metro-North asbestos removal, remediation and waste removal contracts. WRS CEO and owner Michael Rodgers and Thomas Willis, the company's director of business development, also have been charged with felonies for their roles in the fraud. The information that Berlangero allegedly passed to WRS gave the company an illegal edge over its competitors.
Dive Insight:
The New York State Senate confirmed Pokorny as the MTA's new inspector general in May, and she was tasked with conducting audits to make sure that all of the MTA's systems are being run efficiently but also with investigating and exposing fraudulent activities within those systems. Pokorny succeeded Barry Kluger, who retired.
During Kluger's tenure at the IG's office, he oversaw the investigation into Talib Lokhandwala, a former MTA construction project manager who pleaded guilty in 2018 to asking for and receiving approximately $152,000 of bribes from MTA contractors in exchange for a promise of future work. Lokhandwala had to pay a fine of $20,000 and serve a 46-month prison sentenced followed by three years of supervised release.
Despite having a hand in Lokhandwala's case and other fraud incidents and issuing many audit reports during his 12 years as IG, government watchdogs pointed out that Kluger had not produced any audit reports or investigation results in the three years preceding his resignation. In July, two months after stepping in as the new IG, Pokorny's office posted 30 reports detailing employee fraud and other abuses.
Pokorny's confirmation as the new IG came at about the same time that the MTA announced a reorganization plan in an attempt to shave costs and eliminate waste from the authority's processes, particularly as they relate to its capital construction projects. During the last few years, the MTA has taken a beating in the press for how expensive subway projects are to build in New York City, as well as the mismanagement and inefficiencies that led it to that point.
The MTA was also under pressure to make sweeping changes since it is about to embark on a $51.5 billion capital improvement plan.
Some of the agency's new regulations, however, have resulted in a lawsuit and plenty of pushback from the contracting community. In June, the MTA passed new rules that require contractors to be debarred if they exceed the schedule by 10% or are unsuccessful in their pursuit of change orders by 10% or more of the adjusted contract amount. The regulations are retroactive.
A group of contractors has filed suit against the MTA, calling the new measures a "death penalty" for companies that rely on government work.
