By Julie Shapiro
LOWER MANHATTAN — A construction company building the Fulton Street Transit Center agreed Thursday to repay nearly $20 million in connection with a scam that used front companies to get around rules that require hiring women and minority-owned businesses.
Skanska USA did not admit guilt in the scheme but agreed to cooperate with the continuing federal investigation, which also includes contracts at the World Trade Center PATH hub and JFK airport.
The scam allegedly started with Environmental Energy Associates, a shell company that posed as a minority-owned construction firm, prosecutors said.
Skanska hired Environmental Energy Associates as a subcontractor on several major projects, using the company's minority-owned status to fulfill federal requirements that are supposed to help disadvantaged entrepreneurs, prosecutors said.
But Environmental Energy Associates did not do any of the work itself, and instead hired other companies to pose as its employees, prosecutors said.
Balu Kamat, president of EEA, and Carmine Desio, the vice president, were arraigned in federal court Thursday on charges of conspiracy to commit mail and wire fraud. They each face up to 40 years in prison.
"The message of today's criminal charges and $19.6 million settlement should be loud and clear," U.S. Attorney Preet Bharara said in a statement. "Every company has to play by the rules, and we simply will not tolerate corruption in our government programs."
Kamat and Desio pleaded not guilty Thursday and could not immediately be reached for comment.
Prosecutors will not pursue charges against Skanska, based on Skanska's promise to pay $9.8 million each to the Metropolitan Transportation Authority and the U.S. Department of Transportation, money that went to EEA rather than to legitimate minority or women-owned companies.
"The Disadvantaged Business Enterprise Program can mean the difference between success and failure for qualified, minority and women owned businesses," Bharara said. "The alleged conduct of these defendants deprived legitimate DBEs from receiving millions of dollars in lucrative government contracts.
Skanska also agreed to review all its existing contracts with minority and women-owned businesses.
"Skanska takes pride in its industry leadership in supporting diversity and we recognize, and regret, that we did not follow best practices with respect to our use of EEA as a [disadvantage-owned business] on certain projects," Skanska President Richard Cavallaro said in a statement. "We’ve learned a tough lesson and we urge others in the industry to learn from it as well."
Environmental Energy Associates did not immediately respond to requests for comment.
Over the past 14 years, EEA has also received contracts with the Port Authority, School Construction Authority and city agencies including the Department of Environmental Protection, prosecutors said.