FBI and IRS investigating the Carabetta Organization in Meriden

By Mary Ellen Godin, Record-Journal staff

MERIDEN - Federal agents from the FBI and the Internal Revenue Service Criminal Division raided the offices of the Carabetta Management Co. at 200 Pratt St. early Wednesday morning as part of an ongoing federal investigation.

All employees except upper management were sent home, witnesses said, and agents were seen loading boxes of documents and computers into a van parked at the rear of the building. Agents sitting in cars with license plates from Massachusetts and Rhode Island entered and left the parking lot, while others conversed quietly with members of the Carabetta family who remained on site.

Also raided were the adjacent offices of SRC Construction Co. Another company headquartered at 200 Pratt St. is Carabetta Enterprises Inc.

FBI and IRS officials would not say what prompted the search except that it was part of an ongoing federal investigation into Carabetta companies. Authorities would not confirm whether the search and seizure was related to Carabetta's involvement in billions of dollars' worth of failed federal military housing contracts.

Attorney William Baldiga, who represented Carabetta during negotiations with the military, was not aware of Wednesday's search and seizure when reached by a reporter, and quickly said he had to contact Carabetta officials. He did not return a second phone call.

In August 2008, the U.S. Department of Justice began an investigation into how Carabetta Enterprises Inc. landed $3.3 billion in military housing contracts in six states and how every one of them collapsed. The projects were with the U.S. Navy in the Pacific Northwest for more than 600 homes; with the U.S. Air Force at bases in Florida, Georgia, Arkansas and Massachusetts; and at a U.S. Army base in Missouri.

At Moody Air Force Base in Valdosta, Ga., only two of 400 new homes were built and hundreds of subcontractors claimed SRC Construction, owned by Salvatore R. "Sammy" Carabetta, was not paying them for millions of dollars in work already completed. A Georgia Superior Court judge placed the entire project into receivership until it was sold to Hunt Pinnacle.

The contractors' complaints led to calls from U.S. Sen. Saxby Chambliss, R-Ga., and from Sen. Mark Pryor, D-Ark., that the Defense Department blacklist Carabetta companies from federal contracts. Pryor sponsored a bill seeking more scrutiny of military contracts with private firms. Chambliss said in 2008 that he might call for a congressional investigation, depending on the findings of the Justice Department probe.

Military housing

In 2004, American Eagle Communities - led by Kathryn Thompson, Carabetta Enterprises Inc. and Shaw Infrastructure - entered into a 50-year deal to build, rehabilitate, own and manage housing at Air Force bases in Arkansas, Florida and Massachusetts. Shaw was not involved at Moody Air Force Base.

Operations at the six bases fell behind schedule within two years and hundreds of subcontractors filed non-payment complaints and lawsuits. Project lenders and the military put the contracts up for sale and the Hunt Pinnacle Corp. took over to finish construction on 2,617 Air Force housing units at four bases.

The Seattle-Post Intelligencer newspaper investigated American Eagle after the Navy project in the Northwest failed. With the help of a former project manager-turned-whistleblower, the newspaper reported that Thompson was in the midst of a bankruptcy and owed millions to federal and California tax authorities.

It also reported that Carabetta hired a retired Air Force general for $200,000 to secure the first contract.

Carabetta's financial problems were well known after a failed waterfront development in Asbury Park, N.J., sent the company into bankruptcy reorganization. In the 1990s, Carabetta was also found to have improperly diverted millions from federal housing projects and was suspended from government contracts for two years.

The military contracts were seen as a way for the Carabetta family to rebound from the bankruptcy and enter another realm of government contract work.

Instead, the cost overruns at the projects and numerous delays uncovered flaws in the way the government investigates private firms doing government work. After the delays and complaints from contractors, lawmakers and even a Georgia sheriff began questioning how the government missed the numerous red flags associated with Thompson and Carabetta. They also started asking where the money Carabetta had been paid wound up.

At the time, Carabetta's attorney, Baldiga, told the Record-Journal that Carabetta companies were carefully checked and provided extensive documentation. A U.S. Air Force spokesman said the military was aware of Carabetta's bankruptcy, but the company cleared a review of its past business practices.

Milford attorney Genevive Salvatore, who represented Carabetta as the company fought the receivership takeover in Georgia, said Wednesday that she had severed ties with Carabetta in 2008. She wouldn't say why.

In Florida, Norman Moody, a reporter for Florida Today, said contractors at Patrick Air Force Base had lawsuits three or four years back that sparked a look into American Eagle and Carabetta.

"When they first came here, years ago, I did an investigation ... about their dealings back then," Moody said Wednesday. "Questioned why was the Air Force going with them. There were questions here in the community."

Kay Harris, managing editor of the Valdosta Daily Times, quoted Chambliss in a 2008 article on the sale of the projects.

"The Air Force should have been more proactive to fix this problem before it got to this point," Chambliss said. "In my opinion, this issue is ripe for an Inspector General investigation to figure out what went wrong, why the contractor was awarded a $3.3 billion contract for privatized housing, covering five states, work on all of which has been halted."