Manhattan DA Brings Charges in Alleged Affordable Housing Construction Fraud

Manhattan District Attorney Alvin L. Bragg, Jr. announced indictments charging eight individuals and six companies with fraud and corruption within the construction industry, including conspiring to fraudulently use minority and women-owned business enterprises (MWBEs) as pass-through entities to obtain contracts for affordable housing developments.

The indictment charges the lead defendants, JM3 Construction and two subcontracting firms, and their principals with 60 total counts including workers’ compensation insurance fraud, money laundering, falsifying business records, and commercial bribing.

According to court documents, JM3 Construction is a non-union drywall and carpentry company that specializes in government-subsidized affordable housing projects in New York County and the greater New York City area.

During the course of the investigation, JM3 Construction’s cash payroll typically amounted to $150,000 a week, which also included the company making weekly cash payments to certain subcontractors. According to investigators, none of the cash was reported to the companies’ workers’ compensation insurance providers or tax authorities.

The companies and their owners also allegedly took steps to hide and cover up workers’ injuries so that clients and insurance providers would not discover the cash payroll.

Both subcontractors — MGS Construction. and its JACG Construction — had workers’ compensation insurance policies with the New York State Insurance Fund (NYSIF). Prosecutors assert that the subcontractors made false statements to NYSIF about their companies’ workforce size and payroll amounts. The indictment alleges that MGS Construction defrauded NYSIF of more than $1.7 million and continued to work following the cancelation of its insurance policy, thereby putting its workers at risk. JACG Construction is alleged to have defrauded NYSIF of more than $360,000 in premiums.

“The common factor in all of these alleged schemes is greed at all costs,” said District Attorney Bragg. “When the field is rigged, law-abiding companies and legitimate MWBEs are cheated out of much-needed contracts. And when executives care more about their bottom line than their employees and the law, hard-working New Yorkers suffer.”

“Insurance fraud, including workers’ compensation fraud, costs honest companies and employees tens of millions of dollars every year,” said Gaurav Vasisht, NYSIF chief executive officer.

The indictments were the result of a long-term investigation that began with looking into suspicious check-cashing activity. In turn, this led to separate investigations into recipients of bribes and alleged Minority and Women-Owned Business Enterprises fraud schemes.

The charges contained in indictments are merely allegations, and the defendants are presumed innocent unless and until proven guilty.