Contractors Arrested For Fraud, Arson And Aggravated Assault
CAMDEN, N.J. – Two principals of a Pennsylvania construction company were arrested today in connection with an employee kickback scheme that occurred during a reconstruction project at the Ft. Dix military base in Burlington County, U.S. Attorney Paul J. Fishman announced today.
A federal grand jury returned a five-count Indictment on March 4, 2013, charging Leonard Santos, 66, of Yardley, Pa., and Alex Rabinovich, 57, of Richboro, Pa., with one count each of conspiracy to obtain kickbacks from public works employees; malicious destruction of a vehicle by fire; travel in interstate commerce to commit a crime of violence; conspiracy to accept kickbacks on federal projects; and conspiracy to commit false payroll records. Both men are expected to make their initial court appearances today before U.S. Magistrate Judge Anne Marie Donio in Camden federal court.
According documents filed in this case and statements made in court:
Between November 2009 and September 2010, Santos and Rabinovich operated Sands Mechanical Inc. as a subcontractor on the restoration and rehabilitation of the Marine Corps Reserve Training Center at Joint Base-McGuire-Dix-Lakehurst in Burlington County, N.J. Sands provided sheet metal, electrical and plumbing work. The general contractor was a company headquartered in Marriotsville, Md. Santos and Rabinovich demanded that select employees kickback a percentage of their weekly paychecks or face termination. Two Sands’ supervisors have already pleaded guilty to these charges: Richard Cottone (Santos’ son-in-law) pleaded guilty Dec. 11, 2012, and will be sentenced Oct. 10, 2013; Michael Featherston pleaded guilty Jan. 10, 2012 and will be sentenced Oct. 9, 2013.
In February 2010, the U.S. Department of Labor’s Wage and Hour Division (WHD) was tipped off that the Sands employees were not being paid the prevailing wage for Burlington County. Santos conceded that Sands failed to pay the proper prevailing wage to its employees and agreed to repay $80,000 to those deprived employees. Santos cut settlement checks to those employees who were owed back wages. However, Cottone and Featherston warned those employees not to cash their settlement checks. Instead, Cottone and Featherston took the employees to a nearby check cashing business, where many of these checks were then endorsed over to Cottone, who cashed them and returned the funds to Santos. Since these kickbacks were removed from employees’ checks, Santos and Rabinovich routinely submitted inaccurate weekly payroll forms that are required whenever the federal government subsidizes a construction project.
The general contractor’s site manager was routinely critical of the work performance of Sands’ employees, which, at times, necessitated that work be done over. The site manager was targeted by Santos, Cottone and others by having his truck torched in front of his residence at 4 a.m. on May 17, 2010. This tactic failed to warn off the site manager. On June 10, 2010 at 5 AM, while riding his bike, the site manager was intentionally run down by a car driven by Cottone’s nephew and two friends. The victim sustained multiple serious injuries.
The defendants are charged with providing kickbacks to a prime contractor to improperly obtain subcontracts on federally funded construction projects. Between November 2009 and January 2013, Santos and Rabinovich paid off a Philadelphia contractor’s representative to get “last looks” at other competitors’ bids. Santos accumulated a total of $46,200 in kickbacks owed for the 10 subcontracts awarded to Sands Mechanical. By the summer of 2012 he still owed about $15,000 in kickbacks. On two occasions, in November and December 2012, at the behest of Santos, Alex Rabinovich was recorded giving a total of $4,156 in cash to the contractor’s representative in payment of the kickbacks still due and owing.
The counts of conspiracy to demand kickbacks from employees on a federally subsidized project, conspiracy to provide kickbacks to a prime contractor and conspiracy to submit false payroll records each carry a maximum potential penalty of five years in prison and a $250,000 fine. The count of traveling in interstate commerce to commit a crime of violence is punishable by a maximum potential penalty of 20 years in prison; and the arson count is punishable by up to 20 years in prison, with a mandatory minimum of five years in prison.
Seven defendants have previously pled guilty to various charges ranging from collecting kickbacks, arson and aggravated assault.
Fishman credited special agents of the Department of Labor, Office of Labor Racketeering and Fraud Investigations, under the direction of Special Agent-in-Charge Robert Panella; the Department of Labor-Wage and Hour Division, under the direction of George Ference, regional administrator; Naval Criminal Investigative Service, under the direction of Special Agent in Charge Cheryl DiPrizio, Northeast field office; and the Air Force Office of Special investigations, under the direction of Special Agent Seth Neville, detachment commander, Joint Base McGuire-Dix-Lakehurst.
The government is represented by Senior Litigation Counsel V. Grady O’Malley of the U.S. Attorney’s Office Organized Crime\Gangs Unit in Newark.