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Fulton Street Transit Center Contractor Ducked Hiring Laws

By Heather Grossmann | November 23, 2010 6:35pm | Updated on November 24, 2010 6:13am

By Heather Grossmann

DNAinfo News Editor

MANHATTAN — Federal prosecutors are investigating whether a contractor building the Fulton Street Transit Center used front companies to duck city rules that require hiring minority and women-owned businesses.

Skanska USA, the main contractor on the $1.4 billion project to connect six subway lines at Fulton Street and Broadway, was legally required to hire a certain percentage of businesses owned by women, minorities or other "disadvantaged" persons.

Instead, they hired just one "disadvantaged" company, Environmental Energy Associates, to process payroll to make it look as though Skanska had hired minority workers when in reality they were just paying their own employees, the New York Times reported.

Michael Horodniceanu, center, MTA president of capital construction, stands on the station's sunny lower level with Uday Durg, right, program executive, and Bharat Kothari, construction manager.
Michael Horodniceanu, center, MTA president of capital construction, stands on the station's sunny lower level with Uday Durg, right, program executive, and Bharat Kothari, construction manager.
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DNAinfo/Julie Shapiro

Environmental Energy Associates then collected a fee for simply handling Skanska's payroll, according to the Times.

The MTA, which is working with Skanska on the Fulton Street project, said an "independent compliance monitor" they hired to be on the lookout for fraud first discovered that Skanska was bypassing the city's requirements.

The authority then provided "pertinent information" to the MTA's inspector general, who brought the findings to federal prosecutors, said agency spokesman Aaron Donovan.

"We are cooperating fully with the investigation," Donovan said.

Skanska also issued a statement saying that they were fully cooperating with the government.

"Skanska has used Environmental Energy Associates in the past as part of our commitment to support minority and women-owned business enterprises," the statement read. "Skanska is proud of its record in supporting minority business enterprises in New York and we have worked hard to ensure our businesses comply with our own strict DBE (Diversity Business Enterprise) guidelines."

A Skanska spokeswoman declined to comment further. Environmental Energy Associates would not immediately comment.

Catherine McVay Hughes, chairwoman of Community Board 1's WTC Redevelopment Committee and a former construction manager, said she was shocked to hear Skanska might be involved in fraud.

"It was a surprise to learn about the fraud inquires, that there may have been abuse in a program to level the playing field for women and minorities in construction," McVay Hughes said. "It would be a shame."

She said construction of the Fulton Street Transit Center had been uneventful to date, with everything on schedule and within budget.

"Construction is already a difficult field to break into because of the specialty of skill and required capital, and this only makes it more difficult," McVay Hughes said. "Where there is money, there is corruption, and I hope that this didn't happen here on such a high profile project which is in our backyard."

The Manhattan U.S. Attorney's Office said they don't comment on "the existence of any investigation."

Another major construction company under city contract, Schiavone Construction Company, is also being investigated for fraud in meeting the city's requirements for hiring disadvantaged businesses, according to the New York Times. That company is working on the $2.4 billion Croton Water Treatment plant upstate. Some of the accusations against Schiavone are also related to work they did on the $530 million South Ferry subway station renovation and at the Times Square station, the Times reported.

The paper reported that Schiavone is expected to settle the investigation with prosecutors by paying out more than $20 million and instituting internal reforms relating to the hiring of minorities and women.

Both Skanska and Schiavone are also involved in numerous other projects not under investigation, including the expansion of the 7 train subway line and tunnels for the Second Avenue Subway.