Dive Brief:
- An arrest warrant has been issued for Michigan contractor Barry Ellentuck, who prosecutors allege overbilled the Detroit Land Bank Authority for asbestos removal and housing blight demolition services his company never performed, the Detroit News reported.
- Prosecutors said Ellentuck, president of ADR Consulting, LLC, pressured an employee to falsify invoices so that he could overbill the authority an extra $5,500. Ellentuck is facing one count of attempted false pretenses with intent to defraud the government between $1,000-$20,000, which is a felony and carries a two-and-a-half-year jail sentence.
- ADR was under contract with the Michigan Land Bank to provide consulting services to the Detroit Land Bank for asbestos removal and other blighted housing demolition work through an intergovernmental agreement. In a separate suit, the state’s housing development agency is suing ADR for fraud, breach of contract and conversion. Neither the state nor the city Land Banks paid ADR for the overbilled amount, according to the Detroit News.
Dive Insight:
ADR denies any wrongdoing and said the move by the attorney general’s office is politically motivated.
"Preliminarily, ADR and its managing member, Barry Ellentuck, categorically deny the allegations as untrue and intend to vigorously defend themselves," the company said in a statement. "We are confident that this politically motivated attack on ADR and Mr. Ellentuck will be resolved in their favor."
Attorney General Bill Schuette said in a statement, "As Detroit continues to rebound, it is imperative that we not allow anyone to stand in the way of the progress we are seeing. We cannot allow criminal behavior in the new Detroit."
In an overbilling case on a much larger scale in New York City this month, Tishman Construction must pay more than $20 million in fines for mail and wire fraud conspiracy for allegedly overbilling clients $5 million from 1999-2009. Prosecutors said Tishman billed at higher-than-agreed-upon rates, padded labor foremen’s time sheets and billed for the days that workers were out sick or on vacation.
In another New York City case earlier this year, one of the city’s largest construction companies, Hunter Roberts Construction Group, confessed to overbilling clients on multiple projects by falsifying the number of hours worked on employees' timesheets and inflating rates. The firm agreed to pay $1 million in restitution and $6 million to the government.
According to the 2015 Kroll Global Fraud Report, 75% of construction, engineering and infrastructure companies have experienced some fraudulent act in the past year. The study also found that the construction industry is second only to retail in the number of fraud cases.