• Alzheimer’s Association
  • CSEA_Help Wanted_Labor Relations
  • Urban CNY-Survey 2.0 LinkedIn-530 x 75 px
  • Malmgren Concert Black History Month
  • Syracuse Stage Murder on the Orient Express
  • 5 for CNY - Learn How
  • Land Bank - Restoring Properties

Celebrating Urban Life Since 1989

Menu Hamburger White
  • Land Bank - Restoring Properties
  • 5 for CNY - Learn How
  • CSEA_Help Wanted_Labor Relations
  • Urban CNY-Survey 2.0 LinkedIn-530 x 75 px
  • Alzheimer’s Association
  • Syracuse Stage Murder on the Orient Express
  • Malmgren Concert Black History Month

A.G. Schneiderman Announces $825k in Settlements with Contractors Who Faked Compliance with Diversity Subcontracting Requirements on Rochester Schools Modernization Program

5 Contractors Working On Billion-Dollar Project Deceptively Claimed To Meet Project’s Minority- And Women-Owned Businesses Subcontracting Goals

Schneiderman: We Will Continue To Aggressively Enforce The Law Against Contractors Who Game The System

NEW YORK – Attorney General Eric T. Schneiderman today announced settlement agreements with five Rochester-area companies that falsely claimed to meet state diversity requirements in order to win and maintain contracts on the $1.2 billion Rochester Schools Modernization Program (RSMP)—the largest public project in the city’s history. The settlement agreements were reached with Concord Electric Company; Michael A. Ferrauilo Plumbing & Heating, Inc.; Manning Squires Hennig Co., Inc.; Hewitt Young Electric, LLC; and Mark Cerrone, Inc.  The total amount of the five settlements is $825,000.

State and local law requires contractors to meet certain minimum diversity standards for the hiring of Eligible Business Enterprises (EBEs) as sub-contractors. The RSMP’s Diversity Plan, as adopted by the Rochester Joint School Construction Board (RJSCB), required contractors to subcontract 20 percent of their work to EBEs: 15 percent of their work to Minority Business Enterprises (MBEs) and five percent of their work to Women Business Enterprises (WBEs) or to obtain waivers for these requirements.  The Diversity Plan was incorporated by reference into the contracts with every prime contractor, and prime contracts were awarded only to contractors that certified that they would meet the diversity sub-contracting requirements.

An investigation by the Attorney General’s Office (OAG) found that the contractors submitted bid proposals, presented pay applications, and/or arranged false sub-contracts in connection with the RSMP that misrepresented their utilization of EBEs, in violation of both the RSMP’s Diversity Plan and state law.

Attorney General Eric T. Schneiderman
Attorney General Eric T. Schneiderman

“Women and minority owned businesses have historically been shut out of government contracts for all the wrong reasons.  That’s why our state, and localities, implement reasonable diversity standards to level the playing field.  These contractors engaged in flagrant schemes that flouted the diversity rules they were required to meet, and in the process, denied minority- and women-owned businesses a fair shot at winning valuable sub-contracts,” said Attorney General Schneiderman. “My office will continue to aggressively enforce the law against contractors who game the system.”

The Attorney General’s investigation found that the contractors engaged in “labor pass-throughs,” whereby contractors would hire non-EBEs to perform work, but then run the money and paperwork through EBEs to create the appearance that an EBE had performed the labor.  The investigation also found that certain contractors engaged in “supplies pass-throughs,” whereby the contractors would order supplies from non-EBE manufacturers, but then run the money and paperwork through EBEs to create the appearance that the EBE had supplied the materials.

For example, Concord Electric claimed credit for over $400,000 worth of work purportedly performed by B.S.V. Metal Finishers (BSV), a certified MBE supplier; but in reality, Concord actually ordered the supplies directly from a non-EBE (Zeller Corporation). Concord dealt solely with Zeller in the selection, pricing, and delivery of materials. In many instances, BSV supplied blank letterhead, and representatives from Zeller put their quotes on the BSV letterhead to give the appearance of BSV’s participation, when in fact BSV served only as a pass-through entity.  Meanwhile, Concord paid a percentage of the contract to BSV, although BSV had served no commercial function.

In another example, Michael A. Ferrauilo Plumbing & Heating hired a non-EBE sub-contractor to perform certain labor, but to meet the diversity requirements, Ferrauilo arranged the paperwork as if an EBE, Cannon & Noto (C&N), had hired the non-EBE sub-contractor to do the work. Payment was made by check written by Ferrauilo to C&N, but C&N merely endorsed the check so that the non-EBE sub-contractor could deposit it.  Meanwhile, Ferrauilo paid a percentage of the contract to C&N, although C&N had served no commercial function.

The monetary terms of each settlement agreement are as follows:

  • Concord Electric Corporation ($350,000);
  • Manning Squires Hennig ($200,000);
  • Hewitt Young Electric, LLC ($160,000);
  • Michael A. Ferrauilo Plumbing & Heating, Inc. ($90,000); and
  • Mark Cerrone, Inc. ($25,000).

As part of the agreement, the Attorney General secured commitments from all five contractors to submit to extensive, multi-year compliance, remediation, and training requirements. The Attorney General’s Civil Rights Bureau will actively monitor the contractors’ adherence to these requirements.

Also as part of the settlements announced today, Hewitt Young Electric, Manning Squires Henning, and Mark Cerrone will fund a total of $400,000 in reserves, which will assist EBEs in meeting their costs, helping them to take advantage of sub-contracting opportunities. This is an innovative program designed by the Attorney General to address the difficulty of small-business sub-contractors which must regularly pay their labor force, but are often forced to “float” months of salary while awaiting payment from the project’s developer and then the prime contractor. These long periods of outlay are often too much for small M/WBEs to endure.  To address this difficulty, the Attorney General has secured an agreement from these prime contractors to fund a “reserve” from which M/WBE sub-contractors can draw in order to make their payrolls. Then, when the prime contractor is eventually paid by the RJSCB for an M/WBE’s work, it will replenish the reserve.

Thirteen Rochester schools were renovated during the largely-completed first phase of the Rochester Schools Modernization Program, which was budgeted at $325 million, including $278 million in State funds.

The Attorney General thanks the whistleblower who shed light on these serious violations of the law and for assisting the OAG in its investigation. The Attorney General also thanks the RJSCB for its efforts and its consistent support of the OAG’s investigation under the leadership of the Board Chair, Allen Williams, and its former Chair Thomas Richards. Specifically, the OAG appreciates the valuable and substantial assistance provided during the course of its investigation by the RJSCB, including the Board’s sharing and presentation of its extensive forensic audit. In light of the damages suffered by the RJSCB as a result of these contractors’ conduct, a portion of the monies recovered in the settlements will be distributed to the RJSCB as restitution.

Allen Williams, the Chair of the RJSCB, said, “The settlements announced today are the result of the joint efforts of the Office of the New York Attorney General and the Rochester Joint Schools Construction Board. The Board is proud of its Diversity Plan, which has ensured that minority-owned, women-owned, and disadvantaged business enterprises, as well as women and minorities in the workplace, have meaningful opportunities to participate in the Rochester Schools Modernization Program. Efforts to defeat those important requirements by circumventing the Board’s workforce and business participation goals will not be tolerated. As we move into Phase II of the Program, we will be actively monitoring the diversity requirements to ensure that no wrongdoing occurs. We thank Attorney General Eric Schneiderman for his leadership in vigorously investigating and exposing efforts to subvert the Board’s Diversity Plan.”

Thomas Richards, former Chair of the RJSCB and its Special Committee partnering with the Office of the New York Attorney General, said, “We thank Attorney General Schneiderman for his dedication and hard work on this important issue. The Rochester Joint Schools Construction Board has worked closely with the Attorney General’s office throughout this investigation.  We are proud that the Board has been able to assist the Attorney General in promoting compliance with the Diversity Plan and combating allegations of wrongdoing.”

A whistleblower alerted the OAG to this conduct and filed a qui tam lawsuit.  The Modica Law Firm represents the whistleblower.  Steven V. Modica, Esq., principal of that firm, said, “I thank Attorney General Schneiderman and his team for pursuing this important case. The State is committed to addressing the historical disadvantage experienced by Minority and Women owned businesses in the construction industry.  There’s no place in New York for those who seek to sabotage this commitment for their economic benefit.”

The investigation leading to the settlements announced today, which address both the civil rights issue and the waste of taxpayer money, was conducted by the Taxpayer Protection Bureau, which Attorney General Schneiderman established in 2011 to combat the fraud and abuse of taxpayer dollars, and by the AG’s Civil Rights Bureau.

Assistant Attorneys General Sandra E. Pullman and Adam Pollock led the investigation, with assistance from Legal Support Analyst Joseph U. Onwu.  The Taxpayer Protection Bureau is led by Bureau Chief Thomas Teige Carroll and Deputy Bureau Chief Scott J. Spiegelman and is part of the Attorney General’s Criminal Justice Division. The Civil Rights Bureau, led by Bureau Chief Lourdes Rosado, is part of the Division of Social Justice, which is led by Executive Deputy Attorney General for Social Justice Alvin Bragg.

Attorney General Investigator David Buske also assisted in this investigation.  The Investigations Bureau is led by Chief Dominick Zarrella and Deputy Chief Investigator Tony Karam.

The OAG’s investigation, and the settlements announced today, was not connected to the RSMP’s Project Labor Agreement (“PLA”). Given the pending litigation with respect to Phase II, the Attorney General has no comment on the PLA.

The Attorney General’s investigation into diversity fraud on the RSMP is ongoing.

The company in charge of Syracuse’s School Renovation Project is the same company,  The same company that received a extremely critical report of the MWBE Contract Compliance programs among other construction management issues.

 Windell Gray: President and CEO of Landon & Rian, the compliance officer overseeing diversity contracting and hiring. A critical audit appeared to show the firm was not up to the task. The firm was underbid last year and has been replaced.

Editors Note: Gilbane, despite having experience in Albany, Buffalo and Syracuse, was ineffective in forecasting workable timelines, never seemed to grasp the full scope of the project, delegated considerable responsibility to construction managers and additional consultants (possibly at additional cost), appeared ill-informed about state funding processes and waived district standards to meet budget. One contractor told auditors the quality and timeliness of direction from Gilbane was “abysmal.” The company at the time headed by Wendell Grey

According to the Democrat and Chronicle “In lengthy responses to the audits, Landon & Rian and Gilbane blamed nearly impossible conditions, a steep learning curve and auditors’ inaccuracies.

Landon & Rian President Windell Gray provided a written response that blasted the report as “neither accurate, nor thorough,” saying the evaluation was “done in a rushed and haphazard fashion.”

Eleven times in his 24-page response, Gray referenced an email from the auditor that acknowledged having overlooked a file cabinet containing more than 100 documents.

Gray remains on the project, finishing paperwork on the completed projects. His firm released a statement noting its 15 years of experience, but did not directly address the criticisms.”




Local, State & National




Contact Us