Dive Brief:

• As part of a state police and Manhattan District Attorney's Office investigation into potential pay-to-play schemes in the interior construction industry totaling $100 million, The New York Times reported that Bloomberg and Turner Construction offices in New York City, as well as those of other contractors, have been raided and executives who participated in bribery, bid-rigging and other fraud have been fired. The investigation is still underway, and no arrests have been made.
• The Turner-supervised renovations of Bloomberg's Manhattan offices are one aspect of the investigation, with authorities alleging that certain Bloomberg and Turner executives took bribes and kickbacks from interior subcontractors in exchange for being awarded contracts. Investigators also claim that those executives padded contract amounts and over billed Bloomberg, which is not accused of any wrongdoing, by $1 million. To avoid detection, the executives reportedly bypassed the internal controls in place to prevent such activities.
• Interior construction projects total more than $9 billion annually in New York City. Construction experts told The Times that fraud is one of the reasons the cost of doing business and building in the city is so high. 

Dive Insight:

The financial toll of cases like these can be significant for companies, even if only a few executives are accused of wrongdoing.  Buffalo, New York contractor LPCiminelli reportedly lost out on a total of $4 billion of work since 2016 after high-ranking executives were charged with bribery amid bid-rigging allegations in relation to the $750 million Tesla solar panel factory in Buffalo. The company has since stopped its general contractor activities, auctioned off tools and equipment, and started offering program management and development services. The LPCiminelli executives charged in the case have pleaded not guilty and are set to go on trial later this year.

Aside from business-to-business fraud, New York City officials have also tried to root out illegal activity directed toward construction workers. Just before the end of 2017, Manhattan District Attorney Cyrus R. Vance Jr. said that his office, as well as law enforcement in nearby counties, had charged more than 400 contractors with stealing more than $2.5 million from employees.

These alleged "wage theft" crimes included writing bad checks, paying at rates below the prevailing wage and not paying workers at all, with incidents averaging between $13,000 and $700,000 per company.