Three-year investigation leads to charges against 17 individuals and 15 companies, $14 million to be forfeited, approximately $1 million to be paid to state tax department.
Note: The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
Manhattan District Attorney Cyrus R. Vance, Jr., this week announced a three-year investigation that uncovered evidence of widespread commercial bribery and fraud in the electrical contracting industry in New York City. District Attorney Vance also announced the indictment of Donald Russo, 54, and Bar Electrical Consulting, Inc. for engaging in a bribery scheme that steered millions of dollars of Unity Electric Company business to various electrical supply companies. Russo created a shell company called Bar Electrical to accept bribes from companies who wished to do business with Unity. Russo and Bar Electrical are charged with Grand Larceny in the Second Degree, Falsifying Business Records in the First Degree, Offering a False Instrument for Filing in the First Degree, Criminal Tax Fraud in the Fourth Degree, and Commercial Bribe Receiving in the Second Degree.
Additionally, Alan Brite, 65, the president of Benfield Datacom, is charged with paying bribes to purchasers at various companies to win business, including increasing bids to Unity in order to pay Russo a kickback. Brite is charged with Grand Larceny in the Second Degree, Falsifying Business Records in the First Degree, Commercial Bribe Receiving in the Second Degree, and Commercial Bribery in the Second Degree. Benfield Datacom, Benfield Controls and Benfield Electric Supply Company, are charged with Falsifying Business Records in the First Degree, Commercial Bribe Receiving in the Second Degree, and Commercial Bribery in the Second Degree.
Earlier this month, IG Federal Electrical Supply Corporation entered into a Deferred Prosecution Agreement in which it admitted to violating various New York State Laws involving commercial bribery, theft, and fraud. Additionally, Ira Friedman, 52, Vice President of Operations for IGF, and its Vice President of Purchasing Todd Ehren, 46, pleaded guilty to Falsifying Business Records for misclassifying more than $1 million of their salaries as expenses.
As a result of this investigation, at least 15 companies and 17 individuals have been charged to date, approximately $14 million will be forfeited, approximately $500,000 will be paid in restitution, including $150,000 to be repaid to the International Brotherhood of Electrical Workers Local 3 employee benefit fund, and more than $1 million will be repaid to the New York State Department of Taxation and Finance.
“Bribery and fraud in the construction industry remain a concern,” said District Attorney Vance. “This long-term investigation exposed nearly two dozen industry professionals alleged to have engaged in illegal activity for the purpose of self-enrichment. As a result of kickback schemes like this one, New Yorkers are footing an inflated bill for public construction throughout the five boroughs – in places as varied as the JP Morgan Chase Tower, The New York Police Academy, New York City Center, and JFK Airport. I would like to thank the Port Authority of New York and New Jersey, Queens District Attorney’s Office, New York City Department of Investigation, and the New York State Department of Taxation and Finance for assisting in this investigation. We will continue to work together to root out corruption in the construction trades and ensure the integrity of public and private contracts.”
Port Authority of NY & NJ Inspector General Robert E. Van Etten said: “We have identified an industry-wide corrupt practice involving the payment of bribes and kickbacks that ultimately results in increased costs to the public and negatively impacts the quality of materials and the integrity of the work performed. Today’s announcement should send a very clear message to the construction industry that the Port Authority of New York & New Jersey will not tolerate fraud or any other criminal misconduct on public projects. The Port Authority Office of Inspector General and its law enforcement partners will aggressively identify, investigate, and bring to justice those who corrupt the integrity of the construction industry. I would like to thank NY County District Attorney, Cyrus Vance, as well as ADA Elyse Ruzow for spearheading this investigation which has culminated in the arrest and prosecution of those involved in this corrupt industry practice.”
Queens District Attorney Richard A. Brown said: “Businesses and corruption are not necessarily restricted by county borders and, as such, investigations sometimes require a concerted effort by local prosecutors. In such cases, the cross-designation of a prosecutor from one district attorney’s office to another is a powerful tool that gives law enforcement the ability to cross county lines in order to pursue those who break the law. I am pleased to have been a partner in this collaborative law enforcement initiative with our Manhattan colleague, District Attorney Cy Vance, and the other law enforcement agencies involved in this investigation.”
New York City Department of Investigation Commissioner Rose Gill Hearn said: "Bribery and kickbacks are not an acceptable way of doing business. DOI was pleased to be part of this multi-agency effort to stop and expose this type of corruption."
New York State Department of Taxation and Finance Commissioner Thomas H. Mattox said: “It appears that, in addition to commercial bribery, grand larceny and numerous other charges, the defendants also attempted to cheat the State out of income taxes by falsifying business records. These are serious charges and demand prosecution. That’s why I commend District Attorneys Vance and Brown, along with a host of other enforcement professionals, for their thorough and diligent investigation.”
According to documents filed in court, Russo illegally negotiated with electrical suppliers to receive between two and three percent of Unity’s purchases. Through these commercial bribery and larceny schemes, between 2008 and 2012, Russo pocketed more than $600,000 from five electrical supply companies in exchange for his steering business to them. The funds were deposited into a bank account held by Bar Electrical.
Between 2008 and 2012, Russo also stole more than $50,000 from Unity and hid the theft from his employer by increasing invoice amounts and splitting the increase with IGF. In addition, Brite and Russo negotiated a deal with a Unity subcontractor, where the subcontractor added more than $70,000 to its invoices to Unity. Russo then sent Bar Electrical invoices to the subcontractor, which paid Russo through Bar Electrical.
According to documents filed in court, Brite also paid purchasing agents from two additional electrical contracting firms to steer business to Benfield. In exchange for buying electrical materials and supplies from Benfield, Brite paid purchasing agents from three electrical contracting firms more than $850,000 between 2008 and 2012. Brite also negotiated kickbacks with some of the purchasing agents, receiving more than $200,000 in kickbacks during this time period.
This three-year investigation, led by the Manhattan District Attorney’s Office and the Inspector General for the Port Authority of New York and New Jersey, has uncovered evidence of widespread commercial bribery and fraud in the electrical contracting industry in New York City. In addition to the defendants in court today, others have recently pleaded guilty to related electrical contracting schemes.
In a Deferred Prosecution Agreement filed earlier this month, IGF admitted violating New York State Law by improperly classifying portions of employees’ salaries as expenses, making bribe payments to purchasing agents of various electrical contracting companies, receiving kickbacks from purchasing agents, stealing from their customers by billing them for materials not delivered, and fraudulently filing paperwork claiming to be a woman-owned business. As a result of the salary scheme, IGF underreported its payroll, which led to more than $150,000 of underpayments to the International Brotherhood of Electrical Workers Local 3 employee benefit fund.
According to their guilty pleas on Dec. 9, 2013, Ira Friedman and Todd Ehren pleaded guilty to Falsifying Business Records for misclassifying more than $1 million of their own salaries as expenses. As condition of his guilty plea, Friedman is expected to be sentenced on Jan. 23, 2014, to six months in jail and will be required to forfeit $650,000 and pay approximately $260,000 of back taxes to New York State. Ehren is expected to be sentenced on March 5, 2014, to four months in jail and will be required to forfeit $650,000 and pay approximately $255,000 of back taxes to New York State.
The investigation is being conducted by Assistant District Attorney Elyse Ruzow, Senior Investigative Counsel to the Rackets Bureau, under the supervision of Assistant District Attorney Jodie Kane, Principle Deputy Chief of the Rackets Bureau, Assistant District Attorney Daniel Brownell, Chief of the Rackets Bureau, and Executive Assistant District Attorney David Szuchman, Chief of the Investigation Division. Trial Preparation Assistant Anastassia Baldrige assisted with the investigation.