When I first read the news about the M.A. Angeliades indictment, I wasn’t too shocked. Fraud and dishonesty among New York City contractors! Why I never!
Then, I got to thinking: This is an MTA contractor being accused of fraud in dealing with workers hired for MTA projects. Surely, there’s more going on then just a simple indictment. In light of the recent spate of stories surrounding the MTA’s construction projects and its low-bid philosophy, I think there is a tale to be told here, but first let’s recap the news courtesy of Elizabeth Dwoskin:
A Long Island-City-based contractor with ties to the MTA was indicted today for cheating its employees out of $600,000.
The firm, M.A. Angeliades, which had been contracted to repair 11 subway stations, had 150 employees (though the District Attorney’s office wouldn’t say how many were defrauded). The firm is charged with falsifying business records and defrauding its employees by not paying them the local prevailing wage, which for laborers is $35 per hour plus $24.57 per hour for nights and overtime.
Instead, they paid laborers a flat fee of $20 — while still billing the MTA for the legally required wage.
Apparently, D.A. Robert Morgenthau’s office got wind of the graft from the MTA Inspector General’s office. “If a contractor is stealing in one area, there are other areas,” MTA Inspector General Barry L. Kluger said to NY1 News. “So it’s obviously our responsibility in MTA to look back at these contracts to look at the execution of the contracts to see if there were any direct losses that may have been affected against the MTA, in terms of change orders, overcharging, over-billing.”
The MTA has no plans to end the contract, but according to a statement released by the agency yesterday, agency officials plan to “review the situation with the District Attorney and the Inspector General before determining how to proceed.”
So that’s all well and good, but isn’t this part of a longer story we’ve been seeing pieces of lately? Numerous MTA projects are behind schedule and over budgets. Others — such as the plan to wire some subway stations for cellular service, the plan to outfit the city’s bus stops with arrival boards and the plan to install similar boards and CBTC systems in the subway — are years past due with little forward motion.
Is this what happens when an agency is forced to accept the lowest bid? Is this what happens when an agency has to build everything on the cheap because the state won’t pay its fair share — or any share really? I don’t know the answers to these questions, and perhaps I’m making a mountain out of a construction fraud molehill. I can’t help but wonder though if the old adage, saying you get what you pay for, is in full effect here.
24 comments
Ben – Thanks for posting this. What I struggle with is the question in your conclusion that fraud may be the result of the requirement that MTA accept the lowest bid.
First if you’ll indulge – I’d like to recap what I think happened. The contractor is obligated to pay a laborer “the prevailing wage” which by someone’s definition happens to equal nearly $73,000 a year (before overtime and benefits costs).
Yet somehow the contractor found laborers who would willfully work for the annual equivalent of $41,000. And then they pocketed the difference. This is illegal as the government WANTS the contractor to pay $35 per hour. Right? Ok got it.
Question: Is this “prevailing wage” a statutory or bid requirement? (My guess yes.) Because it seems to me the “prevailing wage” should be set by the market (not the legislature). Was there a test that resulted in the $35 per hour model or is this some legislative gift?
If it is a statutory requirement, there must be other market bending provisions that drive up costs across the entire contracting process. In the case of laborers pay, 42% per hour.
Don’t get me wrong, its great if government contracts have ancillary benefits, yet sometimes these giveaways take on a lives of their own. The contractor thought we weren’t paying attention to the detail – and you know – we’re largely not. Yet we’re all aware that there is a chasm between the way the public and private sector operate.
Yes, fraud was committed… when a contractor pockets workers pay. Yet in the big picture WHO is really being played for a fool? I can’t say for sure as I’m not familiar with the actual circumstances here, yet my hunch is – its the fare paying rider and the New York state taxpayer.
So returning to your question/conclusion does the MTA really accept the low bid? Maybe they are in the fantasy world of government/agency largess contract policy. Yet this particular vendor’s circumstance has revealed that there may be substantial bonus profit potential if the vendor is clever enough to hide it well. And my guess is that many are hiding it very well.
Here’s an alternate conclusion: Some in the legislature have called for a ‘forensic audit’ of the MTA – yet perhaps it would be time well spent to vigorously scour the rules and statutes looking for what must be a law library full of mandated OVER spending requirements.
If we have courage to reset these provisions, we might just find those extra dollars to employ a lot more people at the prevailing market rates to repair our 100 year old subway system and continue digging the Second Avenue line for another year or two.
Ray, the “prevailing wage” is likely set by a union, which means the market gets no say.
No, as usual you have no idea what your talking about. You want so badly to blame everything on unions because you wish you could be in one.
The prevailing wage is NOT set by the unions and it is an extremely important to ensure quality work be done by skilled professional rather than cheaply paid non skilled immigrant workers.
Mike, thanks for confirming the stereotype that union people hate immigrants. What’s wrong with employing an immigrant who can do the same job for one quarter the wage, other than it offends nativist sensibilities?
The problem is that the immigrant laborers don’t pay taxes and work dangerously. The quality of work is never the same because you get what you pay for. If you have cancer and unlimited money do you shop for the cheapest doctor or do you want the best doctor which will always cost more?
Sure immigrants pay taxes. Illegal immigrants actually overpay, because they pay into the social security system without seeing benefits from it. Even legal immigrants overpay because they’re usually not entitled to the federal standard deduction. And far from “working dangerously,” immigrants are as concerned about their own lives as native-born Americans. Drop the stereotypes about immigrants being somehow subhuman or not valuing life as much.
Overspending doesn’t even guarantee good results. The example of doctors is salient: the US has the most expensive doctors in the world, but gets crappy health care in return. French doctors are paid one third of what US doctors get paid, and deliver better results – the WHO ranks France’s health care system 1st in the world; the US is in 30-something place. It’s the same with immigrant labor in major cities.
American doctors make so much money because American patients won’t stop suing them. But that’s a whole ‘nother battle.
I agree with you mike
He ment the illegal immigrants. thee are many legal immigrants in my union. So go start fights else where.
Um, no… I’ve been in unions before and I don’t care to repeat the experience. The crazy work rules… the seniority-trumps-skill mentality… Union work doesn’t guarantee any sort of skill level. Public sector unions are bringing NYC (and governments across the country) to brink of bankruptcy–that is a fact. And your disdain for “cheap immigrants” says a lot about what union labor is all about: protectionism.
Yes it is because of unions that the government is on the brink of bankruptcy(laugh)….Your ignorance is facinating.
What ever a union has is because they earned and negotiated for it. By the way I am not a union member.
I don’t know about bankruptcy, but New York does have unusually expensive government services. Second Avenue Subway is budgeted at $1.3 billion per kilometer, and the Number 7 Extension at $1 billion. In Tokyo, San Francisco, and Los Angeles, all expensive cities, recently constructed or proposed subway lines cost $300-500 million per kilometer.
Another item where New York is very expensive is health care. New York’s per capita health spending is the highest of all US states, without the corresponding public health benefits to show for it. This is less about unions (even though the AMA is arguably the worst union in the country in terms of its effects on the public) and more about bureaucracy, but the same issues apply.
Well, if you’re happy to pay ever-increasing taxes for city worker pensions that are spiraling out-of-control, so be it. By the way, since you’re not a union member, does it anger you in the least that you have to pay the pensions and health benefits of city workers so they can retire at 55?
Oh, and “earning” benefits… that’s rich. I’ll remember that the next time the TWU stages another illegal strike. Maybe you’ll be happy to fork over even more taxes to make up for the lost productivity they cause.
You obviously have a personal problem with unions and especially the TWU. Not all employees get to retire at 55 uniformed services which somehow include sanitation workers can retire much younger.
No it doesn’t bother me because I make much more money than they do. I could have chosen to make less for the defined benefit pension but I chose to make alot more than public employees and worry about my own retirement. But my son is part of NYPD and he chose that profession in part so that he can retire at a relatively young age knowing full well that he can make alot more money working with me.
Alot of civil servants take there jobs for the pension. That is the main drawing card that evens the playing field for less in wages and lots of lost family time that you can neve get back.
According to some organizations, such as the Drum Major Institute, public workers actually get paid more than private ones. DMI has argued that this demonstrates that private contractors are underpaid, and the city should continue relying on unionized public workers. Do you disagree with that analysis, and if so, why?
Dude what kinds of unions have you been in? I know they were not any construction unions. I know this because you have to go to 5 years of school before you become a mechanic. So watch what you say.
The prevailing wage is absolutely set by the unions and so are the work rules. Read the prevailing wage books, read the union rate sheets, and compare them. If you think the unions don’t set the rates you are only fooling yourself! This is a case of political action funds in action!!
Mike you are the man. I wish alot more people in this country had the same view on things that you do. The saying you get what you pay for is the always 100%. Everybody in this country who talks bad about unions are just jealous. They know nothing about how unions work, and how union workers work. Thanks alot Mike. I had to go to 5 years of electrical training.
John
IBEW Local #3
This issue is strictly between the contractor and its workers. What the contractor charged the MTA was basically what any other contractor would have charged the MTA anyway, due to the way prevailing wages work with unions. There might be variations from contractor to contractor, but really, this isn’t hurting anyone other than the workers (unless the contract work has to be given to another contractor because of this incidence–which typically would mean a significantly higher price).
If anything, the MTA deserves praise for catching on to this scheme.
I am curious how fast Vendex is updated with this information. Will be down at the Mayors Office of Contracts searching tommorrow and will see if this info has already been entered.
PS. If anyone ever needs any Vendex searches done, let me know. I go down regularly.
Was at Vendex today. They showed a record of the investigation as of 2008, however the indictment information dated June 09 has not yet hit the system
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[…] a short follow-up to Thursday’s news of an MTA contractor under indictment for fraud. According to the Daily News, M.A. Angeliades, the company accused of by Manhattan D.A. Robert […]
The Angeliades are the fraudsters here. Runs in that family. They like to gamble, lie, and bribe rather than meet safety standards. Scary thing is they’re still working on public projects and even run a daycare center in LIC! Those parents using Lolly’s are paying through the nose yet the teachers are making $11/hr. This family is full of scams.