Attorney Charged with Mail and Wire Fraud, Money Laundering, and Obstruction of Justice in Scheme to Defraud Government Agencies
STEVEN COREN, an attorney admitted to the New York bar, was indicted on charges of scheming to defraud government agencies in connection with his clients’ construction contracts with those agencies, conspiring to launder the funds wrongfully obtained from those agencies, and obstructing the federal grand jury investigation by directing one of his clients to destroy documents related to the scheme.1 COREN’s arraignment is scheduled this afternoon at 2:00 p.m. before United States Magistrate Judge James Orenstein at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Roslynn R. Mauskopf, United States Attorney for the Eastern District of New York, Gordon S. Heddell, Inspector General, United States Department of Labor, Patricia J. Haynes, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation, New York, and Ned E. Schwartz, Special Agent-in-Charge, United States Department of Transportation, Office of Inspector General, New York Regional Office.
According to the indictment, from 2000 through 2005, COREN and several of his client-contractors defrauded government agencies by falsely representing that the contractors’ workers were being paid the prevailing wage as required by the federal Davis-Bacon Act and New York State Labor Law. Davis-Bacon requires that contractors on federally funded government contracts pay their workers the prevailing wage rate, as determined by the Secretary of Labor, consisting of a basic hourly rate and fringe benefits, and then certify that they have complied with the law prior to receiving payment from the government. New York State Labor Law, which governs New York’s state and local public works contracts, contains virtually identical requirements.
COREN allegedly executed the scheme by creating the Contractors Benefit Trust (“CBT”) – a multi-employer entity for which he acts as the trustee. COREN instructed the contractors to deposit the fringe benefit portion of the prevailing wage into the CBT, making it appear that they had complied with Davis-Bacon and New York State law. Thereafter, COREN advised the contractors that they could use the funds for purposes other than providing benefits to the employees on whose behalf the contributions were made.
The government’s investigation spanned more than five years and included the use of several cooperating witnesses who were contractor participants in the CBT. Following COREN’s advice, the contractors defrauded several New York government agencies, including the New York City Housing Authority, the New York City School Construction Authority, the Metropolitan Transportation Authority, and the New York City Department of Citywide Administrative Services, by falsely certifying payment of the entire prevailing wage to their employees when, in reality, they deposited the fringe benefit portion of the prevailing wage into the CBT and used most of the funds for unrelated purposes. Construction projects impacted by COREN’s scheme include the MetroNorth Larchmont Railroad Station, 18 New York City public schools, and 20 public housing projects. Over the course of the scheme, just two of the involved contractors diverted more than $1,000,000 in funds that were rightfully due their employees, with a portion of those funds going to COREN himself.
The investigation yielded hours of consensually recorded conversations between COREN and contractors during which COREN outlined the scheme and counseled the contractors to make sure that any CBT transaction “doesn’t look like a fraud.” COREN suggested that they could purchase life insurance policies for themselves with the workers’ fringe benefit funds and cash out the policies as a way “to get the money out of the Contractor’s Benefit Trust into [the contractors’] own pocket[s].” COREN further advised the contractors to set up vacation benefit plans funded by the prevailing wage fringe benefit funds, principally for the benefit of the contractors. At one point COREN told the contractors, “We’re going to abuse the [CBT], there’s no question about it. The question is how do we cover it up.”
The indictment also charges that when COREN learned one of the contractors was under investigation, he obstructed justice by directing the contractor to destroy documents that revealed transfers of funds out of the CBT for expenses unrelated to the employees on whose behalf the funds were deposited. After federal agents conducted a search of the contractor’s premises, COREN again directed the contractor to destroy any incriminating documents. Subsequently, COREN met with the contractor and instructed him to put money back into the CBT to cover up the improper disbursements.
“The defendant is charged with defrauding government agencies, and then intentionally obstructing the government’s investigation by ordering the destruction of evidence,” stated United States Attorney Mauskopf. “As an attorney admitted to the bar of this state, he took an oath to uphold the law. The violation of that oath makes the crimes charged all the more reprehensible.” Ms. Mauskopf thanked the New York City Housing Authority, the New York City School Construction Authority, the Metropolitan Transportation Authority, the New York City Department of Citywide Administrative Services, and Trial Attorney Rebecca Pyne from the U.S. Department of Justice, Organized Crime and Racketeering Section, for their assistance, and added that the investigation is continuing.
U.S. Department of Labor, Inspector General Heddell stated, “It is reprehensible to prevent American workers from receiving their wage and compensation rights under the Davis-Bacon Act. The charges announced today confirms my office’s dedication in investigating those who would defraud federal and state governments by both violating this important protection and denying workers the health and retirement benefits this law ensures. We will continue to work with other law enforcement agencies to fight those who engage in this activity.”
IRS Special Agent-in-Charge Haynes stated, “IRS-CI, together with the law enforcement community, are united in our resolve to financially disrupt those who would commit crimes against our society and violate the public trust.”
“This case shows that we will vigorously pursue those who seek to evade laws and regulations that protect the integrity of federally-funded transportation projects,” stated Special Agent-in-Charge Schwartz, U.S. Department of Transportation, Office of Inspector General.
If convicted, COREN faces a maximum sentence of 20 years’ imprisonment for mail and wire fraud, 20 years’ imprisonment for money laundering, 20 years’ imprisonment for obstructing justice, and a $250,000 fine on each count of conviction.
The government’s case is being prosecuted by Assistant United States Attorneys Richard Faughnan, Sarah Coyne, and Kathleen Nandan.
Name: STEVEN COREN
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