24 Indicted in $5 Million Construction Kickback and Bribery Scheme

The suspects, who were arrested in a predawn roundup, are accused of skimming money during the construction of luxury buildings and boutique hotels.
24 Indicted in $5 Million Construction Kickback and Bribery Scheme

A subcontractor texted Robert Baselice, an executive at a Secaucus, N.J., firm helping a developer find construction companies for a project. He told Mr. Baselice that he had quoted the developer a price as high as $3.3 million for a job.

“We definitely priced it to the higher side,” the subcontractor wrote.

“Go in with $2,975,000,” Mr. Baselice replied. “You will go down from there.”

The plan, according to Manhattan prosecutors, was for Mr. Baselice to express shock at the high estimate, and then pretend to strong-arm the subcontractor into lowering the price to make the developer believe he was working to get a fairer price.

In reality, Mr. Baselice, then an employee of the Rinaldi Group, and two associates were steering $100 million in subcontracts and change orders to dozens of handpicked subcontractors in return for kickbacks, according to court papers.

The trio, who plotted in diners and over texts, instructed the subcontractors to overcharge developers of high-end hotels and luxury apartment buildings in Manhattan and then give Mr. Baselice and his associates a cut, prosecutors said.

The companies named in the indictment worked on some of the city’s “most significant high-rise projects in recent memory,” Alvin L. Bragg, the Manhattan district attorney, said at a news conference. They included the Remy condominiums in Chelsea, the FiDi Hotel in the Financial District and the Fifth Avenue Hotel in Midtown.

The harm here goes well beyond the monetary amounts,” Mr. Bragg said. “When the bidding processes is rigged, we all lose.”

Two dozen construction executives and contractors who surrendered early Wednesday morning were arraigned in Manhattan Criminal Court on dozens of bribery and kickback conspiracy charges that accused them and 26 companies of stealing $5 million from at least seven developers. All the defendants pleaded not guilty, according to a court clerk and Susan Necheles, a lawyer for two defendants.

The defendants were brought inside the courtroom in handcuffs, many chained to each other. One defendant sat in a wheelchair.

What we see in the indictment is there appears to be one person they said who did all the wrongdoing,” Ms. Necheles said. “And everybody else seems to be basically a victim of extortion.”

A lawyer for Mr. Baselice, Louis Gelormino, said in a statement that his client “completely denies these allegations and expects to be fully vindicated of all the charges brought against him.”

Members of the press were barred from entering Judge Felicia Mennin’s courtroom, which was packed with relatives of the defendants. Court officers kept reporters from witnessing the arraignment until it was nearly over. A spokesman later said the size of the crowd violated security protocols.

The Rinaldi Group provides a wide range of services in the construction industry, working in both the public and private sectors in several states. It faces no charges in the case.

The company “has cooperated fully with the Manhattan district attorney’s office investigation” and will continue to help “in any way that it can,” according to a statement from Ted Diskant, a lawyer who represents the company. “The Rinaldi Group has no tolerance for unethical or unlawful conduct.”

Mr. Baselice, who according to court papers used the professional name Robert Basilice, was fired in spring 2022, according to the company. He had used his position to direct the kickback scheme from April 2013 to July 2021, according to court papers.

At Rinaldi, he oversaw subcontractor bidding and was responsible for providing developers with truthful and accurate information, Mr. Bragg said.

“He did absolutely to the contrary,” Mr. Bragg said.

Mr. Baselice would present developers a list of bidders whom he described as independent subcontractors competing in good faith for work. What the developers did not know is that they had paid to be on Mr. Baselice’s list, as well as the lists of two of Mr. Baselice’s associates, who also contracted out work.

In total, Mr. Baselice and his associates made $7 million from people who paid to be on the list, prosecutors said. They made $5 million in kickbacks from subcontractors who charged prices and change orders, often at inflated prices.

When developers complained to Mr. Baselice at meetings with the subcontractors, Mr. Baselice would feign outrage and demand that the subcontractors lower the price, “in a false display of loyalty to the developers,” prosecutors said in a statement of facts.

“Commercial bribery schemes like this one drive up construction costs in New York City,” said Jocelyn Strauber, commissioner of the city’s Department of Investigation, whose agency worked on the case along with the New York Police Department.

Corruption has long plagued the city’s construction industry, which was once largely controlled by organized crime. As the mob’s influence began to wane in the 1980s and 1990s, when aggressive prosecutions disrupted their machinations, private developers and contractors stepped in to fill the void. In 1995, a contractor was arrested on charges that he bilked several major corporations out of more than $7 million in an elaborate kickback scheme at Manhattan construction sites.

In 2014, a federal judge sharply criticized the city’s contracting procedures for what he called a lack of “adequate and effective oversight” after he sentenced three contractors for engaging in a fraud, kickback and money laundering scheme that resulted in more than $100 million in losses. Four years later, more than a dozen Bloomberg executives were accused of taking bribes from subcontractors and vendors who overcharged the company millions for interior construction work like electrical services.

In the case of Mr. Basilice, 14 of the companies that were listed as defendants — 11 general contractors, two electricians and one plumber — hold city professional licenses, two hold construction and demolition licenses and one is a primary contractor for the city, Ms. Strauber said. However, no charges are related to city contracts, she said.

At least two of the defendants have been convicted in the past of charges related to organized crime, but the indictment does not allege mob involvement in the scheme.

Mr. Bragg declined to say how investigators learned about the arrangement but described it as a “complex, long-term investigation” that “did span some years” and was slowed in part by the pandemic.

Nicholas Gravante Jr., a lawyer for one of the companies charged in the indictment, said his clients had produced documents in response to a subpoena from the district attorney’s office three years ago.

“Subsequently, we heard nothing — not a word — until several weeks ago, when we were told that a sealed indictment had been returned against them,” he said, though the prosecutors did not then disclose the charges. “Now that the 85-page indictment has been unsealed today, we are relieved that we can finally learn what the charges are and responsibly defend against them.”

Mike Vatter, an organizer for Construction and General Building Laborers’ Local 79, attended the news conference, where he told Mr. Bragg that one of the defendants, Alba Services, a demolition company, had been clearing the debris left from a fire that burned down part of a Police Department evidence building in Brooklyn last December.

“I’m just giving you the heads-up,” he said.

“Calling in a tip. I appreciate it,” Mr. Bragg replied.

After the news conference, Mr. Vatter said the union, which had heard repeated complaints from workers about low wages, had been tracking Alba Services for at least two years.

The charges against Alba Services are “a long time coming,” Mr. Vatter said.

By Maria Cramer, Hurubie Meko and William K. Rashbaum

By materials of https://www.nytimes.com/2023/01/18/nyregion/construction-kickback-bribery-scheme.html

Фотографии: Hiroko Masuike/The New York Times

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