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Monday, December 6, 2010

Contractor on Bronx Water Filtration Plant Admits to Fraud

One of the primary contractors that worked on the enormous Croton Water Filtration Plant being built in Van Cortlandt Park admitted last week to committing fraud in reporting its sub-contracting of minority and women-owned businesses.

Schiavone Construction, which performed much of the tunneling and trucking during the early phases of the filtration plant project, agreed to pay the federal government $20 million in penalties. The company now doing the bulk of the construction work on the filtration plant, Skanska, is also under investigation for similar misdeeds.

Members of Community Board 7 who worked with Skanska in putting together a class to help minority and women-owned businesses get competitive for big city contracts wondered how this could have happened on such a large, heavily-scrutinized project. They're also wondering: what else might be going on?

There is a meeting of the Croton Facilities Monitoring Committee next Wednesday and this is sure to be a hot topic for discussion. 

In addition to violating its two contracts with the Department of Environmental Protection (DEP) for the filtration plant work, Schiavone admitted to committing fraud during its work on two Metropolitan Transit Authority (MTA) subway station projects in Manhattan — Times Square and South Ferry.

For each of these projects, all of which received federal funding, Schiavone was obligated to comply with the state’s minority and women-owned business enterprises (MWBE) program. The program requires companies to subcontract work with businesses owned and operated by minorities and women. It was designed to even the playing field for these traditionally disadvantaged businesses.

But on Monday, after a lengthy federal investigation, Schiavone admitted to lying in its reports to the DEP and MTA. The reports claimed Schiavone was subcontracting out to certified MWBE businesses, when in fact, they were not.

The New York Times first reported on the investigation in an article two weeks ago. The report cited sources as saying this type of fraud on large municipal projects is widespread.

Community Board 7, the Department of Small Business Services and the DEP have worked with Skanska over the past two years to help local minority and women-owned businesses become certified to work on big city projects like the filtration plant.

More than 60 local minority and women business owners participated in two separate sessions of classes.

“There are lots of business owners who wanted to join the classes and compete for these contracts,” said Ozzie Brown, a Board 7 member who helped organize the classes. “They would come to class at night after a full day’s work.” Brown said it’s unclear if Skanska is going to sponsor more classes.

Paul Foster, the chairman of Board 7 and a member of the Croton Facility Monitoring Committee, said the committee has been asking the DEP for verification of the businesses hired under the MWBE program. “It makes you wonder, what else is going on?”

In an e-mail, a DEP spokesman said the agency was cooperating with the invesitgation and had hired a monitor in 2007 to track all the filtration plant contracts.

The filtration plant has been plagued by missteps and mismanagement even before construction began in 2004. A comptroller’s report said the project’s cost was badly underestimated and it is now running more than $2 billion over budget.

--By Alex Kratz

Ed. note: This story first appeared in the Dec. 2 edition of the Norwood News.


  1. The City of NY should immediately take them Schiavone off the vendors list. They should never be allowed to earn another penny of NYC taxpayers. And the State should do the same.

    This is not a little accounting error, this is full-fledged fraud that cuts to the heart of doing business with the city.

    Also, given the nature of the fraud and the fact that this project was virtually handed to Schiavone by former DEP Commissioner Chris Ward, the City Council should hold hearings to find out the level to which the current head of the NY/NJ Port Authority (Ward) is compromised in this scheme as well. He is intimately involved in these kinds of large-scale projects, including the rebuilding of 9/11 and he must be fully vetted... especially now.

  2. Maybe if these goals were more realistic, companies would be able to meet them legitimately, and wouldn't try to beat the system. Wouldn't that be better for everyone involved?


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