The former chief of its New York office faces up to 20 years in jail.
The US Attorney’s office for the eastern district of New York filed fraud charges yesterday against Lend Lease (US) Construction LMB Inc (formerly Bovis Lend Lease LMB Inc) ('Bovis') and James Abadie, the former principal in charge of the New York office.
Projects affected by the fraud included the very US courthouse in which the company was charged and Abadie pleaded guilty yesterday.
Abadie pleaded guilty to a fraud charge and faces up to 20 years in prison for conspiring to commit mail and wire fraud by fraudulently overbilling clients for over a decade. He faces a maximum sentence of 20 years’ imprisonment and a fine of US$250,000 or twice the gross gain or loss from the fraudulent conduct.
Bovis also entered into a deferred prosecution agreement with the US Attorney’s Office in which the company admitted to fraudulently overbilling clients for over 10 years. Bovis also admitted defrauding two of its public clients by falsely misrepresenting the work performed by its minority business enterprise partners, thus fraudulently obtaining payments on lucrative contracts. The deferred prosecution agreement requires Bovis to pay up to US$56m in penalties to the federal government and restitution to victims, and to institute far-reaching corporate reforms designed to eliminate future problems and enforce best industry practices.
“Through this deliberate scheme of billing clients for work not done, Bovis deceived their customers and stole taxpayer dollars,” said United States attorney Loretta Lynch. “They also abused a program - designed to benefit and train minority contractors - for their own profit motive. Today’s charges, guilty plea and settlement mark a significant step in our effort to eliminate fraud in the construction industry in New York City. Our investigation of the industry continues, and the resolution we reached today should send a very clear message.”
As alleged in the felony information filed in court, Bovis intentionally and fraudulently billed clients, from at least 1999 to 2009, for hours that were not worked by labour. According to the US Attorney’s office, Bovis systematically added one to two hours of unworked overtime per day to the time sheets for labour foremen. Bovis also systematically completed and submitted time sheets falsely listing unworked hours as worked when foremen were absent for sick days, major holidays and weeks of vacation. It fraudulently billed its clients for this unworked time and, on public projects, falsely submitted certified payrolls, defrauding taxpayers. Finally, Bovis made extra, undisclosed lump sum and stipend payments to a select group of labour foremen and billed those payments to clients as well. The clients were unaware of these practices. Pursuant to the deferred prosecution agreement, Bovis has admitted all of the allegations.
As alleged in a separate felony information also filed in court, defendant James Abadie played a critical role in executing Bovis’s overbilling practices when he served as the principal in charge of Bovis’s New York office from 2002 to June 2009, and as the general superintendent at Bovis prior to 2002. While in both positions, Abadie explicitly and fraudulently directed his subordinates to carry out the practice of adding unworked hours to foremen’s time sheets, knowing that these unworked hours were billed to clients who were unaware that they were the victims of fraud. Abadie pled guilty to the mail and wire fraud conspiracy.
The US Attorney’s office said that Abadie and Bovis employed the fraudulent overbilling scheme across the broad spectrum of Bovis’s projects in the New York metropolitan area, including some of the area’s most important, large-scale public and private construction projects. Affected projects included: the United States Post Office/Bankruptcy Court in Brooklyn; the Bronx Criminal Courthouse; Grand Central Terminal; the Deutsche Bank building deconstruction; Citifield in Queens; and the very United States Courthouse in which Bovis was charged and Abadie pled guilty.
Bovis was also charged today with defrauding the Dormitory Authority of the State of New York with respect to the minority business enterprise requirements. These programmes are designed to increase the participation of small construction firms and firms owned by women or minorities on public construction projects.
In order to ensure that only hours being worked are being recorded on time sheets and billed to clients, Bovis has revised its policies to require that each individual worker certify the accuracy of all hours recorded on his or her time sheet, there are multiple layers of supervisory review of the time sheets and that daily records are maintained for cross-referencing purposes. Bovis will maintain a full-time auditor in the New York office who will carry out site visits, spot audits and a regular review of union hours.
“Through this deliberate scheme of billing clients for work not done, Bovis deceived their customers and stole taxpayer dollars,” said United States attorney Loretta Lynch. “They also abused a program - designed to benefit and train minority contractors - for their own profit motive. Today’s charges, guilty plea and settlement mark a significant step in our effort to eliminate fraud in the construction industry in New York City. Our investigation of the industry continues, and the resolution we reached today should send a very clear message.”
FBI assistant director-in-charge Janice Fedarcyk said: “Today’s proceedings mark the culmination of a three-year investigation into a systemic pattern of audacious fraud by one of the world’s largest construction firms. The overbilling fraud affected city, state and federal public building projects. If you are a New York City resident, Bovis indirectly swindled you on three different levels. Whether projects are publicly or privately funded, padding contracts and skirting the law are crimes. And we are watching.”
Lend Lease said that it had now cleaned up its act. In a statement, the company said: "Over the last three to four year period, Lend Lease has replaced the senior management team in the US, including local management in New York. Lend Lease has put in place more rigorous processes and an enhanced compliance regime in the US."
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