The company managing the first phase of construction in Manhattanville will pay more than $50 million in penalties in one of the largest construction fraud settlements in New York City history.
Lend Lease, formerly Bovis Lend Lease, admitted to defrauding clients by paying foremen for more hours than they had worked and misrepresenting the work they claimed was being performed by minority businesses. The fraud took place between 1999 and 2009.
One of the largest construction firms in New York City, Lend Lease provides construction management services for several of the buildings in Phase I of Columbia’s Manhattanville campus expansion. The University was not identified as one of the victims of the fraud, although several large-scale construction projects across the city were—among them Grand Central Terminal, the Mets’ Citi Field in Queens, and ironically, the courthouse where a former Lend Lease executive pleaded guilty on Tuesday.
The company cooperated with the U.S. Attorney’s office and will not be charged criminally. Lend Lease officials admitted to the crimes, and the company will pay up to $56.6 million in restitution to the federal government and to many of its clients.
But James Abadie, the former executive in charge of Lend Lease’s New York office, pleaded guilty to conspiring to commit mail and wire fraud and faces a prison sentence of up to 20 years.
Lend Lease allegedly employed a practice known in the construction industry as “eight plus two,” paying laborers for an extra two hours of work each day so that they remain with the company. Abadie oversaw the day-to-day field operations of the workers and signed off on timesheets he knew had been falsified, with the intention of overbilling his clients.
The company also admitted to defrauding the Dormitory Authority of the State of New York by misrepresenting the construction work being carried out by women- or minority-owned businesses. At least two public projects were awarded to Lend Lease under the condition that a certain amount of the construction be completed by the women- or minority-owned businesses, when in fact Lend Lease performed the work.
The University issued a statement saying, “All contractors and subcontractors who do business with the University are obligated to comply fully with city, state and federal law, and we expect them to conduct their business in an ethical manner.”
“This includes the current leadership of Lend Lease Americas, which has strongly stated its commitment to improved controls and strengthened regulatory compliance,” the statement read. “We also have and will continue to rely on our own internal processes to monitor performance on our projects.”
Since the city investigation began in 2009, the firm fired or asked for the resignation of employees responsible for the fraud scheme, appointed a new chief executive for its Americas division, and enacted stricter regulations in its code of conduct, according to a statement from Lend Lease.
“We accept responsibility for what happened in the past and have agreed to continue to make restitution to the affected clients,” said Robert McNamara, who took over as chief executive officer of Lend Lease’s Americas region in 2010.
Lend Lease’s fraud settlement comes a week after the State Comptroller announced a fraud investigation of a company certified through Columbia’s mentorship program for minority-, women-, and locally-owned construction firms. That company, Eagle Two Construction, allegedly simulated competition for construction bids in order to secure work at the State University of New York Downstate Medical Center in Brooklyn.