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Restitution hearing held in fraud case

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“A restitution hearing for a 2010 fraud case was held Thursday afternoon in Judge Daniel Merritt Jr.’s court.

In April, Robert Contorno, 50, pleaded no contest to charges of organized fraud of less than $20,000 and was sentenced to five years probation. As part of the plea deal, Contorno agreed to pay restitution to multiple victims.

Back in 2009, Contorno’s Click Construction company was hired by four Spring Hill residents to fix sinkholes on their property. A sheriff’s office investigation found the Palm Harbor man relied on a non-certified engineer to prepare sinkhole reports and filed false documents to collect money from insurance and mortgage companies. Contorno hired a certified engineer to sign off on the reports after the fact.”

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Developer not insured under SDI policy, cannot claim damages

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“In a recent appellate decision in New York, a developer sued its construction manager for fraudulent misrepresentation that the construction manager had obtained full Subguard™ coverage [subcontractor default insurance or “SDI”] to protect developer against default by the largest subcontractor – concrete superstructure – on a Manhattan hi-rise project. The developer alleged it relied on defendant’s representation and suffered damages when the subcontractor defaulted and there was no SDI for the default.

The court affirmed the trial court’s dismissal of the complaint because (1) the developer was not an insured under the SDI policy (only contractors are named insureds under such SDI policies), thus it could not claim damages under the policy even if it had been in place, (2) the failure of the construction manager to perform a contract duty cannot be transformed into a tort by merely alleging a fraud of its performance, (3) the construction manager had no “special relationship of trust and confidence” with the developer merely from an arm’s length business relationship and thus claims of reliance on the construction manager’s expertise did not give rise to a confidential relationship that might support such a claim, and (4) the developer could not support its claim that it justifiably relied on the representation because the developer did not inquire if the subcontractor was covered and the contract acknowledged that not all subcontractors may be qualified to be admitted into the SDI program.”

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Report alleges contractor took advantage of federal programs, won $500M in contracts

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“Yesterday a Congressional committee published a 157-page report alleging a government contractor used questionable behavior to win federal contracts that could be worth more than $500 million. The worst part: While the contractor’s methods smell bad, some of his actions appear to be in line with the letter of the law.

Among Strong Castle’s alleged transgressions is the abuse of a federal program that sets aside some contracts for disabled veterans.

Strong Castle was stripped of its HUBZone designation earlier this year, but the report indicates that the low bar for qualification in the disabled-veterans set-aside program means that Castillo seems to have qualified.”

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Ohio Engineering, Testing Firms Hit With Big DBE-Related Settlement

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“The federal government announced its largest construction-related False Claims Act settlement of 2013 earlier this month involving alleged disadvantaged business enterprise fraud by a collection of Ohio-based engineering-related companies.

The U.S. Dept. of Justice says it has reached a settlement with Dayton-based TesTech Inc., TesTech owner Sherif Aziz, Dayton companies CESO Testing Technology Inc., CESO International LLC, and CESO Inc., and their owners, David and Shery Oakes. They have agreed to pay $2.88 million to resolve the fraud allegations.

The allegations were brought with the assistance of a whistleblower, former employee Ryan Parker, who will receive $562,370 of the settlement funds under provisions of the FCA.

The prosecution claimed in its allegations that the defendants created TesTech as a subsidiary to the Oakes’ other testing and engineering businesses, falsely filed paperwork that represented Aziz as owner of TesTech, and received minority-owned business and DBE status in Ohio and other states under false pretenses.”

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Contractor Sues Fluor Team Over DOE Site Project Design

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“Claiming the Fluor Corp.-led team that manages and operates a federal nuclear-waste site in Aiken, S.C., intentionally misled it about the status of design completion on a $90-million plutonium and uranium waste-disposal project under way, Baker Concrete Construction Inc. sued the joint venture on June 6 in U.S. District Court there.

Baker seeks damages of nearly $20 million from Savannah River Nuclear Solutions LLC for costs related to design changes for the facility at the U.S. Energy Dept.’s Savannah River site, says the firm’s attorney.

Alleging multiple instances of fraud in its complaint, Baker says the SRNS joint venture, which was responsible for design, either “knowingly released inadequate and outdated” design documents or “grossly failed to adequately perform the necessary due diligence” related to facility engineering.”

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Hensel Phelps to Pay Big Settlement Involving a San Diego Hilton

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“Thousands of workers who built a Hilton hotel in San Diego, CA, will receive more than $8 million owed to them in a prevailing-wage case, according to California’s Labor Commission.

The hotel project had been deemed a public work, because of millions of dollars in credits that the private developer received from the San Diego Port District.

The workers—employed by national contractor Hensel Phelps Construction Company and 172 subcontractors during construction of the 1,190-room Hilton San Diego Bayfront Hotel—will receive the full prevailing wages they earned on the public works project, the Commission announced in a news release Monday (June 17).”

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Philadelphia Demolition Contractor Has Criminal Record for Insurance Fraud

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“The contractor hired to demolish the building at 2136-38 Market St. in Philadelphia has a criminal record stemming from a phony car-wreck scheme with a Philadelphia police officer, according to court records.

And his demolition work next to a Salvation Army thrift shop worried neighbors, workers and others in the days before Wednesday’s fatal collapse, because an adjoining wall was left unsupported.

The demolition was being done by Griffin Campbell Construction of 1605 Butler St. That North Philadelphia address is also the residence of Griffin T. Campbell, 49, who could not be reached for comment.

Campbell has city permits to demolish six other properties, including three Market Street properties owned by STB Investments Corp., the owner of the collapsed building. The principal of STB is Richard Basciano, owner of many seedy properties and once dubbed “the undisputed king of Times Square porn.

According to court records, Campbell filed for Chapter 13 bankruptcy protection in March, listing $221,000 in liabilities, including $10,000 in unpaid city business taxes and delinquent state and federal taxes, as well as numerous bank liens on properties he owns in North Philadelphia.

Campbell pleaded guilty in April 2009 to having filed a false insurance claim, claiming to be a passenger in a car involved in a 2005 auto collision that was actually a hoax to defraud an insurance company.

After filing the false claim, Campbell was paid $17,500 by Cambridge Insurance Co., plus $5,856 for medical bills. The scam unraveled when a Philadelphia officer, Deshane Riggins, admitted preparing “numerous fictitious accident reports” and identified Campbell’s as one of them.

Police described the case as one of at least 45 phony auto accidents staged by Wallace “Pops” Morris of Kingsessing, the ringleader of the scam. Riggins, the officer who made the scam possible, was paid $400 to $500 for each false report corroborating an accident. He was fired in 2008 after pleading guilty to 19 counts of insurance fraud.”

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D.C. Cuts Forrester Payment by $1M Over MBE Joint Venture

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“One of the Washington, D.C. area’s biggest general contractors agreed to take $1 million less than it had requested for a big district high school renovation project because the district said the company had misrepresented its work with a minority-owned business enterprise on the project and two others.

The contractor, Rockville, Md.-based Forrester Construction Co., made itself the majority and controlling partner of the joint ventures, entitling it to most of the profits, without informing the district and in violation of its contracting rules, the district alleged in the settlement.

Irv Nathan, the district’s attorney general, said in a statement on May 9 that Forrester had engaged in a pattern of using EEC of D.C., a certified, minority-owned company, to gain preference points that helped the joint venture win three recent major projects. The projects include the $49-million Anacostia High School renovation, for which Forrester had requested a major payment.”

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Beware the ‘Conditions of Coverage’ Endorsement

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“Exhibit A: A New York appellate court last fall upheld a carrier’s denial of coverage based on the insured’s failure to comply with policy conditions. The carrier’s endorsement listed a number of conditions relating to the use of subcontractors, including:

The insured had to obtain certificates of insurance showing liability limits equal to or greater than the insured’s from all subs prior to the commencement of work
The insured had to verify prior to the commencement of work that the sub’s policies had not been cancelled
The insured had to obtain hold harmless agreements from all subs
The insured had to verify that all subs’ CGL policies named the insured as an additional insured
The insured had to give notice of claim to all potential insurers as soon as practicable

Faiulre to comply with these conditions entitled the carrier to void the policy with regard to a particular claim.

A construction worker fell off a ladder and was injured. He sued the general contractor, who in turn submitted a claim to its CGL carrier. The carrier denied coverage on the grounds that the GC failed to comply with the conditions in the endorsement. The GC sued and won in trial court, but the appellate court reversed the verdict. “(T)he conditions to coverage outlined in endorsement 102A are clear and unambiguous,” the court said. “Each of the requirements in endorsement 102A is an express condition precedent to coverage, and the failure to comply with any one of them is a sufficient basis to disclaim coverage.”

These endorsements are out there, being sold to contractors who are desperate for liability insurance and who can’t get standard coverage. The people who work for carriers are not stupid. They can understand the implications of the seven-figure liability settlements resulting from violations of New York’s scaffolding law as well as anyone, and they are acting accordingly. One way not to pay seven-figure settlements is to attach endorsements like this one. In this case, the carrier got the result it wanted.

The court’s decision doesn’t identify the GC’s insurance broker, but I think it’s highly probable that the broker is now having regular contact with the GC’s lawyer. Hopefully, the broker has good documentation to help defend against the inevitable lawsuit. Regardless, who needs this? Be very afraid of these endorsements, folks.”

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NTSB Faults Cargo-Ship Pilot, Owner, Coast Guard and Kentucky for 2012 Collision

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”The Delta Mariner cargo-ship bridge crew relied on a contract pilot’s direction and didn’t use all the written and electronic navigation charts available before the ship collided with the Eggner’s Ferry Bridge near Aurora, Ky., the National Transportation Safety Board says.

The agency’s investigation of the January 2012 incident found fault with Foss Maritime Co., the Seattle-based owner of the ship, and its crew; the U.S. Coast Guard; and the Kentucky Transportation Cabinet (KYTC), which maintains the bridge that carries U.S. 68/state Route 80 over the Tennessee River.”

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