Dive Brief:
- Two New York men have been charged in Albany County, New York, court with stealing the identities of two minority-owned businesses, fraudulently securing millions in construction contracts and failure to pay more than $400,000 of pension wages to more than 50 employees, according to a press release from New York Attorney General Barbara D. Underwood's office.
- The indictment alleges that Michael Martin and D. Scott Henzel, both executives of Albany-based Eastern Building & Restoration, which is no longer in business, approached two minority-owned companies, Lorice Enterprises and Precision Environmental Solutions, about showing them how to bid on jobs and win more business. Martin and Henzel then allegedly took over the operations of the two businesses, through which they fraudulently secured millions of dollars in public works contracts for Eastern. Prosecutors claim that Martin and Henzel also failed to pay New York state withholding and unemployment insurance taxes on behalf of Lorice and Precision, as well as $6 an hour in pension wages to more than 50 Eastern employees as part of a mandated prevailing wage rate.
- Martin has also been charged under a separate indictment in Schenectady County, New York, with stealing $150,000 from Precision through a fake lease agreement and $200,000 from an insurance company by filing a false insurance claim on behalf of Precision. Authorities allege that Martin spent more than $1 million of the illegal proceeds on luxury items and expensive vacations. If convicted on all counts, Martin and Henzel could each spend 10 to 20 years in state prison.
Dive Insight:
Unfortunately, some contractors see minority contracting fraud as an easy way to secure lucrative government contracts, but authorities are catching more and more of these scams and prosecuting the offenders.
In April, a Wisconsin grand jury indicted Milwaukee-based contractor Sonag and its owner, Brian Ganos, on 22 counts of fraud for allegedly setting up minority- and veteran-owned businesses that ended up netting Sonag and Ganos more than $200 million in federal contracts earmarked for minority construction firms. Ganos installed qualifying owners as figureheads, but Sonag and he actually ran the operations. Later that month, three of the "straw" company owners pleaded guilty to fraud.
The industry has in the past reported that it has been a challenge to find enough qualified minority firms to meet federal and state hiring mandates. In the current environment of skilled worker shortages, it could become even more difficult to meet those goals.
