• Construction Fraud and White Collar Crime

    Author : White Collar Firm April 18, 2017

    In April 2017, the District Attorney of Manhattan announced that four people and three corporations were charged with crimes of construction industry fraud to the tune of $9.6 million. The scheme is alleged to be massive – with at least 40 subcontracting companies being defrauded on 34 construction projects in Manhattan alone.

    The defendants were mid-sized contracting companies which specialized in renovating properties in Manhattan. They relied primarily on subcontractors to perform the work spread across various projects. One defendant defrauded at least 16 subcontractors, totaling $5.7 million, simply by failing to pay the workers for jobs done. If these crimes weren’t bad enough, some of the defendants were also charged with forging documents and falsification of business records to induce owners to continue making payments to the defendant.

    The crimes the defendants were charged with were felony grand larceny, falsifying business records, and a scheme to defraud (all felony charges). In New York, the most serious o these is Grand Larceny in the First Degree, which carries with it a potential prison sentence of anywhere from one to twenty-five years. Probation and community service are not options – even for first time offenders. The DA’s office is not afraid to pursue full punishment, as two defendants were sentenced to jail time for the same crimes last year. Larceny is simply withholding or depriving property from another. In this case, refusing to pay someone for work done would be a strong case of larceny. The prosecution of this matter should be fairly straightforward, as white collar crimes tend to leave a lengthy paper trail. The businesses who were defrauded most likely have recorded where and when they offered services to the defendant, and it would be a case of their word against the defendants. The only potential problem would be the defendants who have falsified business records – there is a chance they also falsified their own internal documents to reflect payments. Of course, bank statements and accounting records should clear up any discrepancies.

    Given the document-heavy nature of many white collar crimes, it helps to be cooperative with the prosecution and attempt to get a more lenient sentence or conviction of a less serious crime. Of course, prosecution of an individual is far simpler than prosecuting a corporation. Corporations are legal persons, and can be held criminally liable for the actions of its directors, agents and employees. Corporations, however, cannot be incarcerated, and therefore, punishment for corporations is usually in the form of a hefty fine or freezing of assets. In the event of a criminal conviction for the corporation, the next thing that usually happens is the victims of the crime will then file a civil suit in order to try to get compensation for damages, as criminal law will not financially compensate victims of crimes. The burden of proof in a civil court is much lower than that of a criminal court, and so a conviction in a criminal court is a virtual guarantee of some finding of wrongdoing in a civil case.

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