Con Ed Inspectors Accepted Kickbacks to Approve Inflated Invoices and Expedite Payments on Multiple Con Ed Construction Projects

Fourteen former construction inspectors for Consolidated Edison Corporation of New York, Inc. (“Con Ed”) have been sentenced on charges stemming from schemes in which they solicited and accepted millions of dollars in kickbacks from contractors between 2000 and 2009 in connection with construction projects in Manhattan, the Bronx and Westchester County. Also sentenced were two contractors for paying kickbacks and the brother-in-law of one of the inspectors for laundering bribe payments to conceal their true nature and source. All of the sentencing proceedings were held before United States District Court Judge Allyne R. Ross at the federal courthouse in Brooklyn.

The sentences were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and mark the culmination of an extensive multi-agency investigation led by the Department of Homeland Security, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI); the Criminal Investigation Division of the Internal Revenue Service; and the Port Authority of New York and New Jersey, Office of Inspector General.

Con Ed is the main utility provider in the New York City area for electric, gas and steam utility services. As such, it is responsible for maintaining and repairing its electrical, gas and steam facilities, as well as installing new lines, and for rebuilding and rerouting existing utility lines when construction projects interfere with them. Con Ed contracts with private construction companies to perform this work, and Con Ed inspectors monitor the projects to ensure that they are being performed safely and to engineering specifications and that Con Ed is not overpaying the contractors.

In the years following the attacks of September 11, 2001, Con Ed directed or took part in much of the subsurface construction in lower Manhattan, and received hundreds of millions of dollars in federal funds, mainly from the United States Department of Housing and Urban Development, to perform the work. In connection with these projects, Con Ed inspectors solicited bribes in exchange for approving contractor invoices that listed phantom pay items, allowing contractors to perform unnecessary additional work on the projects, and expediting Con Ed payments to the contractors. In the aggregate, these schemes cost Con Ed millions of dollars.

The investigation became public with the first series of arrests of the Con Ed inspectors on January 14, 2009. Since that time, officials at Con Ed, especially those employed in its internal auditing unit, have provided assistance to the government’s investigation.

All but two of the defendants arrested in connection with the investigation pleaded guilty. Contractor John Connelly was tried and convicted in August 2010, of paying bribes in separate schemes with various Con Ed inspectors, and retired Port Authority of New York and New Jersey project contractor, Nathaniel Ham, was tried and convicted in March 2011, of conspiring with his brother-in-law William Shannon and two other Con Ed inspectors to launder their bribe payments through Ham’s credit union accounts.

“After 9/11, these defendants were tasked with the responsibility of helping rebuild our city’s infrastructure. They focused instead on lining their own pockets at the expense of utility customers and residents of the metropolitan area,” stated United States Attorney Lynch. “They have now been held to account.” Ms. Lynch expressed her grateful appreciation to the agencies that led the government’s investigation.

“The individuals sentenced in this investigation masterminded an unscrupulous financial scheme that essentially defrauded critical projects aimed at improving New York City’s infrastructure,” said James T. Hayes, Jr., Special Agent-in-Charge of ICE’s Homeland Security Investigations in New York. “HSI will pursue those who attempt to conceal their illicit gains and compromise the people’s trust in public works projects.”

“It is no secret that for years, kickbacks and bribes have been a part of the practice to win and dole out jobs in the construction industry,” stated Charles R. Pine, Special Agent-in-Charge, IRS Criminal Investigation, New York. “What many people may not know is how many different governmental agencies can come together to investigate these crimes. I am very proud of the efforts our Special Agents contributed to this investigation, not only to trace the flow of illegal monies, but to be part of a special law enforcement team that successfully brought to justice one criminal after another. The sentences imposed send a strong message to the industry that those who engage in this type of criminal conduct are not safe from an investigation and prosecution that will land them in jail and forfeit what they stole. Ultimately, crime does not pay.”

Port Authority Inspector General Robert E. Van Etten said: “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. These Con Ed and contractor prosecutions are an example of our joint efforts in this area.”

The government’s case was prosecuted by Assistant United States Attorneys Daniel Brownell, Charles Kleinberg, Claire Kedeshian, Sarah Coyne and Monica Ryan.

The Defendants:

PAUL SANABRIA
Age: 62
Sentence: 27 months’ incarceration, $15,000 in forfeiture to the government and $102,865.42 in restitution to Con Ed.
Residence: New York, New York.

JAMES COFFIN
Age: 56
Sentence: 30 months’ incarceration, $214,250 in forfeiture to the government and $132,800.65 in restitution to Con Ed.
Residence: Lynbrook, New York.

THOMAS FETTER
Age: 63
Sentence: 30 months’ incarceration, $428,520 in forfeiture to the government and $112,708.59 in restitution to Con Ed.
Residence: Middletown, New York.

RICHARD ZEBLER
Age: 52
Sentence: 24 months’ incarceration, $50,000 in forfeiture to the government and $68,881.18 in restitution to Con Ed.
Residence: Bethpage, New York.

KEVIN COOK
Age: 55
Sentence: 27 months’ incarceration, $80,000 in forfeiture to the government and $239,109.24 in restitution to Con Ed.
Residence: Middletown, New York.

ROCCO FASSACESIA
Age: 57
Sentence: 27 months’ incarceration, $357,320 in forfeiture to the government and $339,149.08 in restitution to Con Ed.
Residence: Carmel, New York.

RICHARD GIANNETTO
Age: 57
Sentence: 1 month incarceration, $5,000 in forfeiture to the government and $1,978.28 in restitution to Con Ed.
Residence: Pelham, New York

JOSEPH LIOI
Age: 59
Sentence: 1 month incarceration, $9,000 in forfeiture to the government and $19,582.19 in restitution to Con Ed.
Residence: Patchogue, New York.

ABRAHAM PANAGI
Age: 58
Sentence: 21 months’ incarceration, $13,000 in forfeiture to the government and $54,350.26 in restitution to Con Ed.
Residence: Dougleston, New York.

BRENDAN MAHER
Age: 32
Sentence: 3 years’ supervised release, $10,000 in forfeiture to the government and $70,759.55 in restitution to Con Ed.
Residence: Massapequa, New York.

WILLIAM SHANNON
Age: 65
Sentence: 36 months’ incarceration, $250,000 in forfeiture to the government and $188,719.29 in restitution to Con Ed.
Residence: Dix Hills, New York.

JOHN CONNELLY
Age: 46
Sentence: 18 months’ incarceration.
Residence: Andover, New Jersey.

JACK PALAZZO
Age: 58
Sentence: 12 months’ and 1 day incarceration, $150,000 in forfeiture to the government and $158,445.27 in restitution to Con Ed.
Residence: Carmel, New York.

ANSELMO SAIZ
Age: 44
Sentence: 21 months’ incarceration and a fine of $100,000.
Residence: White Plains, New York.

NATHANIEL HAM
Age: 59
Sentence: 32 months’ incarceration and $1,136,034 in forfeiture to the government.
Residence: Dix Hills, New York.

LEONARD DIROMA
Age: 61
Sentence: 1 month incarceration, $7,000 in forfeiture to the government and $6,677.40 in restitution to Con Ed.
Residence: Mahopac, New York.

 

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