OPERATING ENGINEERS (IUOE) / ELEVATOR CONSTRUCTORS
(IUEC)
Seven Bosses, Contractors Indicted in $10 Million Fraud
A Manhattan developer and several union bosses defrauded the N.Y. Metro.
Transp. Auth. (i.e., taxpayers) and a landlord of more than $10 million
by billing for phantom workers at inflated rates, according to an indictment
unsealed Apr. 18 in U.S. Dist. Court in Brooklyn. Seven people, including
developer Frederick Contini and Int'l Union of Operating
Eng'rs Local 14 shop steward Morris "Mickey" or "Fat Boy" DiMinno,
were charged in a 55-count fraud and money laundering indictment. Contini
allegedly conspired with DiMinno and other union bosses to set up a shell
company that billed MTA and the landlord, Zar Realty Mgmt., for non-existent
elevator operators at MTA's new headquarters a 2 Broadway in Manhattan.
The other five defendants are James Roemer, Local 14's treasurer; Matthew J. Downey and David Coakley, members of Int'l Union Elevator Constructors Local 1; Constantine Vafias, a Brooklyn-based construction contractor; and John "Johnny Rhino" Vitiello. Downey and Coakley were among 27 Local 1 members and associates charged in Feb. 2002 with stealing $6 million in wages and benefits through no-show jobs at N.Y.C. construction sites.
MTA signed a 49.5 year lease for 2 Broadway in July 1998, with the condition that Zar would renovate the 1.2 million-square-foot space at a cost of $55 million which eventually grew to $155 million. In 1998, Contini worked for Zar. After a legal dispute with Zar over financing and insurance, MTA contracted directly with Contini in Feb. 1999 to finish the renovation work. Contini allegedly entered into a "sham agreement" with Links Construction to supply temporary elevator operators from Locals 1 (personnel) and 14 (building materials). In reality, the Links agreement--which was not signed by anyone at the MTA or Zar, but which in effect made them financially responsible for the costs incurred--was allegedly a sham method to funnel money to conspirators through the use of cash kickbacks and shell companies. Links, in fact, did not itself hire any elevator operators, and Links was allegedly controlled by Contini.
The Links agreement allegedly inflated costs in two ways. First, Contini allegedly agreed to hourly rates of $136.11 premium and $69.74 standard for Local 14 and $103.46 and $54.48 for Local 1. The premium time rate applied to any time worked in the evening or at night, regardless of whether a worker had also worked a day shift. Although the Links agreement purported to add a 7.5% markup to the above rates, it failed to reveal that the rates themselves were already inflated by at least 15% beyond what it costs to pay union wages and required fringe benefits. Thus, the Links rates were inflated at their inception by nearly 25%, even before considering the inflated hours submitted to MTA.
Second, while the defendants billed the MTA approximately $14.3 million for the payment of Locals 1 and 14 operators, which the MTA paid in reliance on fraudulent invoices, only about $2 million allegedly went to pay union operators. The $2 million was part of approximately $5.33 million that was paid to Conan Construction Co., owned by Roemer. That figure was itself inflated, to account for more than $1.8 million funneled to DiMinno and Downey, and an illicit profit in the hundreds of thousands of dollars paid to Roe Mgmt. & Development, a shell company controlled by Roemer. Because Roemer was Local 14's treasurer and allegedly wanted to avoid the prohibition in the Taft-Hartley Act of 1947 against companies paying union officials, Roemer owned Conan Construction through a nominee.
An additional $2.9 million was allegedly transported to City Check Cashing, located in Jersey City, N.J., and cashed. The cash was then delivered in bags to DiMinno and Contini. The remaining $8.2 million was allegedly funneled to six other entities. 1) On-the-Job Carpentry controlled by Romer received $2.78 million by cashing Links checks at CCC and by cashing bank checks from MTA checks. 2) Yankee Assocs. controlled by Roemer and DiMinno received $1.88 million by cashing Links checks at CCC. 3) D&D Assocs. controlled by DiMinno and Downey received $1.8 million via routing checks from Conan to another shell company, then to D&D Assocs. 4) Swilley Contracting Corp. controlled by Roemer and DiMinno received by $1.05 million by cashing Links checks at CCC. 5) Rhino Demolition/Bulldog Mgmt. controlled by Vitiello received $588,000 via a $25,000 wire transfer from Links and the rest by cashing Links checks at CCC. 6) Finally, a friend of Contini purchased an Italian winery for Contini and Vafias for $150,000 via a wire transfer.
In all, the defendants allegedly succeeded in defrauding the MTA and Zar out of more than $10 million in construction money. The money was used, among other things, to purchase a White Plains, N.Y., home by DiMinno and a Bolton Landing, N.Y., home by Roemer. A substantial amount also went to Contini in the form of cash kickbacks for his participation in the scheme.
The indictment also alleges that Contini, DiMinno, Romer, and Vafias obstructed the grand jury's investigation into their activities by creating and producing for the grand jury fake invoices purporting to justify the payments to Conan and several shell companies. Although the invoices purported on their face to have been created between Mar.1999 and Feb. 2000, they were allegedly created at Contini's request in mid-Aug. 2000, days after Vafias was served with a grand jury subpoena for records. Also, Roemer is charged with ordering the destruction of documents and computers, and of counseling a witness who was scheduled to testify before the grand jury to flee the country.
The charges include interstate transportation of property or money obtained by fraud, wire fraud, mail fraud, unlawful payments to union officials and representatives, money laundering, obstruction of justice, witness tampering, and conspiracy.
Dep't of Labor Dist. Director Ralph Gerchak stated, "These indictments are part of a long term effort by [DOL's] Office of Labor-Management Standards, working jointly with other agencies, to root out pervasive corruption among officials of organized labor in New York City's construction industry. We hope these actions will encourage union members and others with knowledge of illegal practices to come forward and expose corrupt union leadership and assist in restoring democratic processes to these organizations."
The seven were arraigned Apr. 18 before U.S. Magis. Judge Robert M. Levy (E.D.N.Y). All but Roemer, who has a court appearance next week, were freed on bail (Contini and Vafias were freed on $500,000 bail; others unknown). After prosecutors alleged he was a flight risk and that he had told a witness to flee to Ireland, Roemer was ordered held without bail. The case is assigned to U.S. Dist. Judge David G. Trager (E.D.N.Y., Clinton).
MTA fired Contini Apr. 18 and said it didn't fire him sooner because
it didn't want to interfere with the investigations. Embarrassingly,
the Nat'l Ass'n of Corp. Real Estate Executives named Contini "Developer
of the Year" in 1999 for his work on the 2 Broadway project. Likewise,
DiMinno was given the ethics in business award in 2000 by the Passionists
Community, a Roman Catholic organization. [USAO E.D.N.Y. 4/18/02; Bloomberg
News 4/18/02; N.Y. Times, Newsday 4/19/02]
Union Corruption Update is made possible by the generous contributions from readers like you. NLPC, PO Box 6821, Falls Church, VA 22040. Thank you.
In addition to the unions and organizations covered in this Union Corruption Update, readers can look forward to news and information on other corrupt and abusive unions in future editions.
All back issues of the Union Corruption Update can be viewed at NLPC's website (http://www.nlpc.org). Also available is a union-by-union and state-by-state index of all Union Corruption Update articles.
If you have story ideas or suggestions for future editions of Union Corruption Update, please email NLPC at nlpc@nlpc.org. Thank you.
Union Corruption Update is part of NLPC's Organized Labor Accountability Project which is investigating and exposing corruption in the Teamsters, LIUNA, AFL-CIO and many other union organizations. NLPC is a nonpartisan, nonprofit foundation promoting ethics and accountability in government through research, education and legal action.
Union Corruption Update Article Index (by Union)
Union Corruption Update Article Index (by State)
Organized Labor Accountability Project