A construction company has been fined $125,000 for skirting diversity requirements in the Rochester Schools Modernization Program (RSMP). Overall the New York Attorney General’s office has secured more than $1.3 million from 10 RSMP contractors.
New York Attorney General Letita James said in an April 6 statement that The Pike Company falsely certified that it complied with state diversity requirements when it subcontracted the supply of materials to several minority and women owned businesses (MWBEs).
In reality, the business utilized non-MWBEs to procure those same materials, the AG’s statement asserted.
“The Pike Company is one of 10 contractors that have been found by the Office of the Attorney General (OAG) to have violated the diversity requirements for the project to upgrade Rochester’s schools and is the most recent company to be held accountable for its violations,” the statement said. “This agreement ends the years-long investigation into allegations of MWBE fraud in RSMP and brings the total damages and penalties secured to more than $1.3 million.”
“Including minority and women-owned businesses in public projects is meant to give opportunities to communities that have been historically left out, not for contractors to work around them,” James said.
“It’s a shame that the Pike Company and other contractors took the easy way out to minimize work with minority businesses. My office has no tolerance for companies that undermine the rule of law and cheat minority and women-owned businesses. I am committed to rooting out fraud and making sure that minority and women-owned businesses get their fair share.”
The RSMP is a three-phase, billion-dollar project to rehabilitate schools in Rochester and is the largest in the city’s history. The OAG started an investigation into RSMP after it received a whistleblower complaint alleging that contractors were evading MWBE requirements.
The RSMP incorporated state law which requires contractors working on public projects to meet certain minimum diversity standards when hiring subcontractors. As such, all contractors working on the RSMP were required to use good faith efforts to subcontract at least 20 percent of their work to Eligible Business Enterprises (EBEs), with 15 percent required to go to minority-owned businesses and five percent to women-owned businesses.
Compliance with these requirements was also a condition to being awarded contracts on RSMP and to receiving payment throughout the project.
The investigation by OAG found that some contractors, including the Pike Company, engaged in “pass-throughs,” where contractors would hire non-MWBEs to perform work, but then run the money and paperwork through the MWBE to create the appearance that they performed the work. They would then falsely certify compliance with the project’s diversity requirements to receive payment for work performed.
For example, the Pike Company claimed that a MWBE would provide more than $800,000 worth of doors, frames, and other hardware to fulfill Pike’s EBE requirement. However, the Pike Company ordered the equipment from a non-MWBE but submitted paperwork that gave the appearance that the MWBE supplied the materials itself.
The Pike Company will pay $100,000 to the state, a portion of which will go to the Rochester Joint Schools Construction Board (RJSCB), and $25,000 to the whistleblower.
As part of the agreement, the Pike Company is required to submit to extensive, multi-year compliance, remediation, and training. The OAG’s Civil Rights Bureau will actively monitor the contractors’ adherence to these requirements.
The other contractors that violated RSMP’s diversity requirements include:
- Bell Mechanical ($200,000);
- Concord Electric Corporation ($350,000);
- Manning Squires Hennig ($200,000);
- Hewitt Young Electric, LLC ($160,000);
- Michael A. Ferrauilo Plumbing & Heating, Inc. ($90,000);
- Mark Cerrone, Inc. ($25,000);
- Kaplan Schmidt Electric Inc. ($100,000);
- Landry Mechanical Contractors, Inc. ($117,000); and
- Nairy Mechanical, LLC ($12,000).
