Preet Bharara, the United States Attorney for the Southern District of New York, today announced the filing of a criminal Complaint charging AARON TUBBS, 43, of Hastings-on-Hudson, Westchester County, New York, formerly a Regional Manager at a General Contractor that performed an approximately $192 million construction project on Bronx-Whitestone Bridge (the “Bridge Project”), with wire fraud in connection with the requirements for participation by minority-owned and women-owned businesses on the Bridge Project. TUBBS surrendered today and was presented on the charge in the Complaint before U.S. Magistrate Judge Paul E. Davison in the federal courthouse in White Plains.
U.S. Attorney Preet Bharara stated: “A major construction project was awarded precisely because it opened opportunities for minority-owned and women-owned businesses. As alleged, these businesses were unlawfully bypassed and deprived of participation. I want to commend our partners: the Offices of Inspector General for the U.S. Department of Transportation, the Port Authority and the Metropolitan Transportation Authority, and the New York State Department of Transportation’s Investigations bureau.”
According to allegations in the Complaint:
The Office of Inspector General of the United States Department of Transportation, together with the Metropolitan Transit Authority (“MTA”) Inspector General, the Port Authority of New York and New Jersey Office of Inspector General, and the New York State Department of Transportation, have conducted an investigation of a company, hereinafter referred to as “MBE-1,” used by general contractors repeatedly on large construction projects in Westchester County, the Bronx, Manhattan, Staten Island, and elsewhere, to obtain credit toward goals required for participation by minority-owned business enterprises and women-owned business enterprises (“MBEs” and “WBEs”) and/or their federal equivalent, disadvantaged business entity (“DBE”) goals. During the investigation, based on numerous interviews and the review of documents, agents learned that MBE-1 was repeatedly used in a scheme, described below, known as “DBE fraud,” “MBE fraud,” and “pass through fraud,” to give the appearance that a minority-owned or woman-owned entity was performing work on a government-funded construction project when in fact other companies, which were not minority-owned or woman-owned, did the work. Among the construction projects in which MBE-1 was used in a fraudulent scheme was the Bronx-Whitestone Bridge Construction Project.
In connection with the investigation, the sole owner and principal of MBE-1 was convicted upon a guilty plea in March 2013, in United States District Court in White Plains, New York, of mail fraud.
The Bronx-Whitestone Bridge
In or about 2008, the MTA initiated a major construction project on the Bronx-Whitestone Bridge (the “Bridge Project”), a suspension bridge over the East River that connects the Bronx and Queens. The project was to replace the Bronx approach and perform repairs to the Queens approach of the Bridge. The MTA estimated that the project would cost approximately $170 million and take approximately four years to complete.
As part of its solicitation for bids on the Bridge Project, the MTA – a “state agency” for purposes of the MBE/WBE Provisions – specified that the Bridge Project was funded by New York State, and therefore that New York State Executive Law Article 15-A governing participation on construction projects by MBEs and WBEs applied. The MTA set an MBE/WBE goal on the Bridge Project of 7% participation by MBEs and 3% by WBEs, for a total of 10%. In connection with setting the MBE/WBE goal, the MTA noted that there were subcontracting opportunities on the Bridge Project, and provided a list of certified MBEs and WBEs with the capability of providing services on the job.
On or about October 23, 2008, a general contractor (“General Contractor-1”) was awarded the contract on the Bridge Project, at a price of approximately $192 million.
In or about 2008 and 2009, AARON TUBBS, the defendant, was a Regional Manager at General Contractor-1. TUBBS participated in, among other things, the award and performance of subcontracts to provide structural steel on the Bridge Project.
In connection with the Bridge Project, General Contractor-1 claimed, in utilization forms and compliance reports, that structural steel would be supplied by a certified MBE, MBE-1, but actually the structural steel was provided by other companies, and MBE-1 was used as a pass-through. In fact, MBE-1 did not meaningfully participate in the Bridge Project, and it received only a small fraction of the state funds that General Contractor-1 represented it had received. The principal of MBE-1 once attempted to enter the Bridge Project job site, and was denied entry.
AARON TUBBS, the defendant, in his capacity as a Regional Manager at General Contractor-1, participated in setting up the fraudulent scheme, creating the pass-through arrangement between General Contractor-1, the MBE, and the actual steel suppliers. For example, according to a representative of a steel supplier (“Supplier 1”), after Supplier 1 agreed to a contract with General Contractor-1, AARON TUBBS, the defendant, informed Supplier 1 that General Contractor-1 would run purchases of structural steel from Supplier 1 through MBE-1 for purposes of meeting minority requirements. Thereafter, in order to purchase the structural steel from steel manufacturers, General Contractor-1 received from Supplier 1 purchase order information, arranged for the information to be placed on letterhead of MBE-1, and arranged for the purchase order to be submitted to the steel manufacturer.
In addition, AARON TUBBS, the defendant, and others at General Contractor-1, sought to employ the same pass-through scheme used on the Bridge Project on another project. The St. George Ferry Terminal construction project was a federally-funded job under the American Recovery and Reinvestment Act of 2009, in Staten Island. The construction project had a goal of nine percent participation by Disadvantaged Business Entities (“DBEs”). General Contractor-1 sought to meet this goal using a DBE as a pass-through. For example, on or about November 9, 2009, General Contractor-1’s field engineer sent an email to another representative of General Contractor-1 stating, in part, “We will be handling rebar at St. George similar to how [General Contractor-1] set up the Whitestone structural steel purchase with [MBE-1]. Aaron Tubbs mentioned that I get in contact with you to describe that process, as we will have our rebar installer, [a purported DBE], manage the material with [another non-DBE company].”
TUBBS is charged with wire fraud, in violation of Title 18, United States Code, Sections 1343 and 2, and faces a maximum of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the investigative work of USDOT’s Office of Inspector General, the Port Authority Office of Inspector General, the Metropolitan Transportation Authority Office of Inspector General, and the New York State Department of Transportation’s Investigations Bureau.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Benjamin Allee is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.