WNYC's Bob Hennelly is an award-winning investigative journalist. While at WNYC he has reported on a wide gamut of major public policy questions ranging from immigration and homeland security to power outages and utility mergers.
Paterson’s Third Act: Construction Monitor
Monday, August 20, 2012
Talk show host and former Governor David Paterson is adding another job to his resume. He’s going into the integrity monitoring business for the construction sector — and he’s partnering up with an industry insider turned whistleblower.
Paterson told WNYC that he felt his experience as a former criminal investigator for the Queens District Attorney’s office, along with the diplomatic skills he honed in Albany, make him a natural for his new venture.
Paterson will become the majority owner of Icon Compliance Services, LLC. The firm will conduct independent investigations and work closely with law enforcement, regulators and other stakeholders with an interest in legal compliance by the construction industry.
The former governor believes, in the government contracting world, cost over runs are passively accepted, when instead there should be closer scrutiny. He said frequently government projects "are wasteful and often concessions are made for political reasons in the public sector and then you never really get a product that you paid for — or you over pay for an average product."
Paterson is teaming up with Brian Aryai, a former vice president of Bovis Construction, as well former U.S. Treasury agent for 13 years. Paterson said an accountant friend saw the potential for synergy between the two.
The men are not breaking new ground. There are other construction integrity monitor businesses operating, but Aryai believes the steady pace of prosecutions, non-prosecution and deferred prosecutions show there is room for growth and significant improvement.
“If you look at some of the frauds, it is astounding that some of the fraud that has come to the surface in the recent past. It’s been on the headlines, it’s almost laughable they were not detected," Aryai said.
As reported last month on WNYC, Aryai first brought to the attention of federal prosecutors a long standing industry practice know as "8 and 2." That’s when construction companies paid union foreman two hours of overtime everyday even though they were not present on the job and passed along the costs of the "bonus pay" to clients.
In April, Bovis Lend Lease entered into a deferred prosecution agreement and agreed to pay up to $60 million in fines and restitution for fraudulent billing stretching back a decade for well-known projects, like the demolition of the Deutsche Bank Building and the renovation of Grand Central Terminal.
Federal prosecutors continue to investigate the billing practices of the city's biggest contractors, including Turner, Plaza, Skanska and Tishman. They are associated with projects such as the Croton Filtration Plaza, the extension of the 7th Avenue Subway and the World Trade Center. The contracts under scrutiny run into the billions of dollars.
Paterson's new firm will qualify as a minority-owned firm, a designation that can be helpful in being considered for public work. He said his company will also zero in on minority business fraud — where contractors create phony minority businesses — in the construction industry.
"The saddest thing is that the real minority businesses were not getting the business in this state, particularly when I became governor," Paterson explained. "It's like rent a minority — try and make some money — it’s dangerous, it’s illegal and it defeats the whole purpose of the program."
In addition to the new venture, Paterson sits on the MTA Board, acts as a consultant for the National Federation of the Blind and is working on a fund to build "green" housing with Joe Granno, former chair of UBS Financial Services.