- A Manhattan federal jury has convicted Canadian contractor DCM Erectors and its owner Larry Davis for minority- and woman-owned business fraud during the execution of almost $1 billion of steel work at the Freedom Tower and World Trade Center Transportation Hub projects, according to Reuters.
- Prosecutors alleged that DCM and Davis enlisted two minority firms to be administrative fronts on the projects while DCM, trying to avoid paying tens of millions of dollars to minority firms, did all the work itself.
- Davis' lawyer said the company and Davis will appeal the verdict and that the minority firms did the work they were supposed to do on the two projects. One of the contractors, however, testified that DCM and Davis paid him $2 million to do "basically nothing," according to The Real Deal. Davis' sentencing is expected in November.
When Davis was first arrested in 2014, he told prosecutors that he would plead guilty but changed his mind and said he did not intentionally break the law while under contract with the Port Authority of New York and New Jersey, according to Reuters. However, prosecutors claimed that Davis falsified records to make it appear that minority contractors were performing work.
Many projects using public funds have minority, women or disadvantaged contractor requirements. While some contractors have said there is a dearth of quality DBE firms, there doesn't appear to be a short supply of contractors trying to circumvent the rules. Just this week, South Carolina federal prosecutors charged a group of construction executives with setting up shell DBEs and MBEs, as well as recruiting existing ones, in order to secure about $350 million of government work. Officials also alleged that the network utilized veteran-owned companies to win contracts.
In June, Illinois prosecutors won a conviction against contractor Elizabeth Perino, who faces up to 80 years in prison, for allowing two large general contractors to use her company as a front so that they could meet their minority contractor participation requirements. Authorities alleged that Perino took a fee, based on labor costs and other expenses, of $365,000 in exchange for participating in the fraud.
Also in June, a San Diego contractor paid $5.4 million to settle DBE fraud charges related to work it had executed at two California military bases. Prosecutors alleged that Harper Construction Company did work through an associated business, Frazier Masonry Corp., while representing to government officials that it had subcontracted that same work out to DBE companies.