Con Ed Employee Charged in $4 Million Kickback Scheme
Defendant Accepted Money To Approve Illegitimate Payments To A Contractor
Sassine Razzouk, a Section Manager in the Central Engineering Unit for Consolidated Edison of New York (Con Ed), was arrested yesterday for soliciting and accepting approximately $4 million in kickbacks from a contractor in connection with Con Ed electrical/design projects from as early as 2008 through the present.1 The defendant’s initial appearance is scheduled later today before United States Magistrate Judge Cheryl L. Pollak, at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges and arrest were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; James T. Hayes, Jr., Special Agent-in-Charge of U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) in New York; Charles R. Pine, Special Agent-in-Charge, Criminal Investigation, Internal Revenue Service, New York; and Robert E. Van Etten, Inspector General, The Port Authority of New York and New Jersey, Office of the Inspector General.
Razzouk’s arrest is part of the government’s continuing investigation that led to the filing of federal charges against ten Con Ed supervisors on January 14, 2009, for collectively receiving more than $1 million in kickbacks from contractors in exchange for the supervisors’ agreement to approve inflated and/or fraudulent payment invoices, as well as expediting the payments on those invoices.
As a Section Manager, Razzouk oversaw various projects within Con Ed’s electrical generating plants and substations involving the creation of plans and designs for new electrical control systems as well as drafting new diagrams to maintain existing systems. In supervising these projects, Razzouk managed and developed their scopes, prepared the requests for bids, reviewed the submitted bid proposals, awarded the contracts, and subsequently reviewed and authorized the payments to contractors under the contracts.
According to the complaint, starting in about 2008, Razzouk received tens to hundreds of thousands of dollars monthly in payments from a contractor (“the contractor”) who was performing work for Con Ed under contracts approved and supervised by Razzouk. Initially, the payments were issued from the contractor’s account to MDM Capital, a company controlled by Razzouk. MDM Capital account records indicate that since 2008, the only disbursements made appear to be for Razzouk’s personal expenses, including payments for two Mercedes Benz automobiles, property taxes for Razzouk’s second home, Razzouk’s personal income tax payments, $230,000 in mortgage payments, and $2.7 million that was transferred into a second account controlled by Razzouk.
After the arrests of other Con Ed employees were publicized in January 2009, Razzouk and the contractor took steps to conceal their scheme. Starting in February 2009, checks were no longer directly issued from the contractor’s company to MDM Capital. Instead, the contractor first issued a check from his company to another company he controlled that did not perform work for Con Ed. Shortly thereafter, the contractor issued a corresponding check in the same amount from the second company to MDM Capital. The two related checks often listed the same Con Ed project the contractor had been performing for Con Ed in the memo section of the checks.
From 2008 through December 2010, the contractor was paid approximately $18 million for projects he had with Con Ed that were supervised by Razzouk, and Con Ed records indicate irregularities with certain payments. For example, the records reveal that the contractor often grossly underbid his competitors in order to win Con Ed contract bids, only to have the contract value greatly increased through subsequent approval of additional payments to the contractor by Razzouk, often for work or materials that were required as part of the original contract specifications. In some instances, the approval of additional payments to the contractor actually doubled the initial contract value.
“In these most difficult of economic times, the defendant allegedly perpetrated a scheme of staggering proportions for his personal financial gain, the cost of which will ultimately be borne by the City’s utility payers,” stated United States Attorney Lynch. “He will now be held to account for the charged criminal conduct.” Ms. Lynch thanked the Internal Auditing Unit of Con Ed for its assistance and added that the government’s investigation is continuing.
“ICE HSI investigates financial crimes that exploit vulnerabilities within the U.S. financial trade and transportation sectors that could be used by criminal organizations,”said ICE HSI Special Agent-in-Charge Hayes. “I commend the El Dorado Task Force, an ICE HSI-led financial investigative component of the Department of Homeland Security that identified this and other public utility employees that allegedly defrauded residents of New York for years.”
“Even after learning that financial investigations were underway and that other Con Ed employees had been arrested, the defendant allegedly took steps to conceal the kickbacks and continue his scheme,” said IRS Special Agent-in-Charge Pine. “As the charges announced today demonstrate, this was a futile effort.”
Port Authority Inspector General Van Etten stated, “We work with our law enforcement partners to identify corruption within the construction industry, which ultimately hurts both the public and government during the best of times. Its impact is more seriously felt during the current economic difficulties. The Con Edison prosecutions are an example of our joint efforts in this area.”
If convicted, Razzouk faces a maximum sentence of 10 years’ imprisonment and a $250,000 fine.
The government’s case is being prosecuted by Assistant United States Attorneys Daniel Brownell and Sarah Coyne.
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