Tuesday, September 20, 2011

Contractor, 2 developers accused of racketeering

In a highly unusual suit, New York unions accuse HRH Construction and two others of using dummy firms to cheat workers out of wages and benefits. Tip of the iceberg?

New York City construction unions filed a racketeering suit Tuesday alleging that a trio of two developers and one contractor illegally conspired to cheat workers out of millions of dollars in wages and benefits on several projects in Manhattan and Brooklyn. 

In the suit, filed Tuesday morning in federal court in White Plains, N.Y., Metallic Lathers Union Local 46 and the Mason Tenders District Council contend that Long Island-based Lalezarian Developers and Manhattan-based JMH Development colluded with HRH Construction to bilk workers out of $7 million in wages and benefits from 2007 through 2011. HRH Construction, once one of the city's largest contractors, went bankrupt two years ago. The complaint seeks triple damages that would boost the total to $21 million.

The suit alleges that the developers diverted payments that should have been made to HRH Construction—a unionized general contractor—to a non-union dummy corporation created by the developers and HRH Construction to help skirt expensive union contracts. In the projects at the center of the legal action, workers were paid $12 an hour without benefits, instead of the going union rate of about $55 an hour with benefits.

“It's about a union construction firm that, in an effort to avoid its contracts, created a phony alter ego and, put construction management contracts in the name of that alter ego, but continued to do the work themselves,” said Thomas Kennedy, an attorney with Kennedy Jennik and Murray, who brought the suit.

In an article last May, Crain's detailed how the unions inserted themselves into HRH Construction's bankruptcy case in order to gain access to documents and testimony that indicated Leviathan Construction was an alter ego of HRH Construction. Since then, lawyers for the unions have dug through reams of additional company documents and emails and discovered what they believe is evidence sufficient to bring the racketeering suit. Some details of the suit were reported in Tuesday's Daily News.

The complaint quotes one email in which a Lalazerian employee writes to HRH Construction executives and to her boss, Kevin Lalazerian, about payments for projects at 350 W. 37th St. in Manhattan and 235 Gold St. in Brooklyn.

“To clarify, you want no payments to HRH Construction for either project right now,” the email said. “You would like the payments made to Leviathan.”

In 2007, HRH Construction, the company that built Citicorp's headquarters and was Donald Trump's contractor of choice, placed No. 7 on Crain's list of top area contractors, with revenue of $455 and profits of $3.7 million.

In 2009, the 86-year-old company $1.2 million and filed for Chapter 11 bankruptcy protection. It hit bottom earlier this year, abandoning its reorganization and moving to a Chapter 7 liquidation.

HRH Construction's demise is a tale of skullduggery and alleged fraud. Its downfall was accelerated by Local 46, which suspected the firm had set up a nonunion alter ego to sidestep its labor contracts, a practice known as double-breasting. The union bought several claims, including one for $1,246.31 owed to a Yonkers exterminator, to gain standing in bankruptcy court, and then set out to prove its case.

Local 46 formed a labor committee with two other unions, subpoenaing documents from HRH Construction and its clients and deposing company executives, including CEO Brad Singer. A committee lawyer grilled Mr. Singer about his firm's relationship to Leviathan Construction. Mr. Singer at first said an old friend—an out-of-work insurance executive with no construction experience—started Leviathan Construction at his suggestion. Questioned further, Mr. Singer revealed even closer ties.

“Have you learned the names of any of the members of Leviathan Construction Management Services LLC?” asked the labor committee's lawyer, Thomas Kennedy, according to the transcript. Mr. Singer said that Avery Maya, named after his granddaughter, was the lone member.
“And who are the members of Avery Maya?” Mr. Kennedy asked.

“My wife ... Susan,” Mr. Singer answered. “I think it's [headquartered at] Susan's mother's house.” Further digging showed that HRH Construction paid health insurance premiums and office expenses for Leviathan Construction, and that its principal employees had all worked for HRH Construction. Documents revealed that HRH Construction had guaranteed Leviathan Construction's work. The unions believed HRH Construction had run money through Leviathan Construction to keep it from creditors.

In addition to the charges against Lalezarian Developers, the suit alleges that JMH Development also participated in the alleged racketeering scheme in its project at 184 Kent St. in Brooklyn.

Leviathan Construction did work at other projects, including one being built by Earvin “Magic” Johnson's Canyon Johnson Urban Funds. But Mr. Kennedy said that “Canyon Johnson is not in this suit at present.” He said the unions “would like to find a way to make a meaningful relationship with Canyon Johnson that would avoid any need to involve them in litigation.”

A Canyon Johnson spokeswoman declined to comment.

Racketeering suits filed by employers against unions are commonplace, but ones brought by labor groups against companies are highly unusual, legal experts said. Mr. Kennedy called the case “unprecedented” because of the level of detail on the inner workings of the companies the unions were able to dig up through HRH Construction's bankruptcy.

“We think that this case is merely the tip of the iceberg,” said Robert Ledwith, business manager of Local 46. “We know this kind of illegal activity is widespread throughout our industry.”

Calls to Lalazerian Developers, JMH Development and HRH Construction Attorney Arthur Goldstein, of Todtman Nachamie Spizz & Johns, were not returned. Jesse Schneider, of Davis & Gilbert, who has represented Leviathan Construction in the past, declined to comment.


  1. And these are the bastards that wanted a 4.25 give back screw them all we as workers should learn a lesson from this I've often wondered why if we are wiliest billions why we don't hire a good agent to represent us at contract talks just like a number one baseball player would it might be something to look into just a thought we need progressive thinking to deal with these unscrupulous contractors and out these theives and get our due monies


  3. NO WAY?


  4. Hi Daniel! Thanks for providing the news. I wasn't that updated recently about the latest news and updates in town. More power to you and your blog!

  5. This comment has been removed by the author.

  6. Island Paving Stones is a long island paver driveway contractor & paver driveway company installing paver driveway in both Nassau County and Suffolk county, LI, NY. Our paver driveway firm does the finest work across Long Island.
    Long Island Driveway Contractors


I would ask that if you would like to leave a comment that you think of Local 157 Blogspot as your online meeting hall and that you wouldn’t say anything on this site that you wouldn’t, say at a union meeting. Constructive criticism is welcome, as we all benefit from such advice. Obnoxious comments are not welcome.