Subcontractors Charged in Scheme

Six subcontractors and their owners were charged Thursday with allegedly participating in a scheme that overcharged business clients for interior construction projects.

The indictments on grand larceny charges were the second part of a case that was uncovered as part of a widening Manhattan District Attorney probe into fraud and corruption in the construction industry, prosecutors said.

On Wednesday, Lehr Construction Corp. and four of its top executives pleaded not guilty to hatching and executing a billing model that overcharged clients for work by secretly agreeing with subcontractors it hired to inflate their costs in return for guarantees of future contracts with Lehr.

The scheme allegedly resulted in $30 million being siphoned over 12 years from clients that include investment banks, law firms and the Economist Magazine, prosecutors said.

Six of the subcontracting firms and their owners were arraigned in State Supreme Court Thursday. The owners of the companies pleaded not guilty to grand larceny and were each released on $50,000 bail.

They were identified as Arthur Godsell of Godsell Construction Corporation, who were charged with grand larceny in the second degree.

James Roselle of J.T. Roselle Lighting Inc.; George and Kevin Fotiadis of Liberty Contracting Corporation; James Pappas of P.J. Mechanical; Kenneth McGuigan of Superior Acoustics Inc.; and Michael Hayes of Sweeney and Harkin Carpentry were charged with grand larceny in the third degree.

Their attorneys entered not guilty pleas on behalf of the owners and their companies.

According to Manhattan District Attorney Cyrus Vance Jr., the companies did not keep any of the illicit funds they collected from clients, but instead held it and transferred it to Lehr by allowing Lehr to underpay them on future jobs guaranteed to them by Lehr.

"The defendants in this case cheated client out of millions of dollars, and their honest competitors out of valuable construction jobs," Mr. Vance said in a statement. "Lehr would not have been able to operate its corrupt scheme without the participation of these subcontractors."

The six companies indicted Thursday did work for four of eight clients named as victims in the Lehr case.Officials said the investigation is continuing and more subcontracting firms are being probed.