A continuing crackdown by New York City prosecutors on fraud in the city’s interior renovation market has netted its latest results—the May 5 indictments of six area subcontracting firms and their owners, in a contractor bid inflation scheme that overcharged clients by at least $30 million in the last decade.

The firms and executives were charged with second-degree grand larceny for colluding with Manhattan-based Lehr Construction Corp. in the fraud. That construction management firm and four of its leaders were indicted on May 4 on charges that included fraud, corruption, grand larceny and money laundering.

“The defendants in this case cheated clients out of millions of dollars, and their honest competitors out of valuable construction jobs,” said District Attorney Cyrus R. Vance Jr. “Lehr would not have been able to operate its corrupt scheme without the participation of these subcontractors.”

The subs and owners named as defendants are: Godsell Construction Corp., Hicksville, N.Y., and owner Arthur Godsell, 53; JT Roselle Lighting Inc., Jericho, N.Y., and owner James Roselle, 53; Liberty Contracting Corp., North Bergen, N.J., and owners George Fotiadis, 37, and Kevin Fotiadis, 32; PJ Mechanical, New York, N.Y., and owner James Pappas, 46; Superior Acoustics Inc., New York, N.Y., and its owner Kenneth McGuigan, 49; Sweeney & Harkin Carpentry, Long Island City, N.Y., and its owner Michael Hayes, 43.

Lehr executives charged were Jeffrey Lazar, 43, executive vice president of operations; Todd Phillips, 52, finance director; Steven Halper, 67, finance director and Steven Wasserman, 58, chief of estimating and cost control.

Money laundering charges were also filed against the company and Halper. Lehr filed for bankruptcy protection on Feb. 22.

“This construction company was corrupt at all levels,” said Vance. Lehr executives developed and executed “an over-invoicing scheme to steal from their construction management... and then used general contractor jobs to recover the stolen funds,” he added.

Court documents add that Lehr had its subcontractors overcharge the CM clients on jobs where it was paid a percentage, and, in return, agree to perform work for less money, or even for free, on the GC �lump sum’ projects.

Vance added that the cost shifting “maximized Lehr’s profits on the GC work because subcontractors performed the work for less than its true worth.” He said clients “ultimately paid the inflated costs,” which ranged from 10% to 13% extra.

In a statement, William J. Schwartz, a partner at Cooley LLP, Lehr’s Manhattan-based attorney, confirmed the bankruptcy filing and said the company “is confident that it will complete all of its projects and be able to pay all of its creditors and subcontractors notwithstanding these charges.” It declined additional comment.

The Lehr indictments follow those in January 2010 of Manhattan-based interiors firm The Builders Group and three top executives for stealing nearly $7 million from five clients on condo conversions and office renovations through submission of false subcontractor bills between 2006 and 2009.

President George Figliolia and two other executives pleaded guilty April 15 to fraud charges and could be sentenced to jail terms of one to three years in June, according to a legal source close to the case, who asked for anonymity.

Howard Lazar and Gerald Lazar, the uncle and father of Lehr’s Jeffrey Lazar, had pleaded guilty to bribery charges in the 1990s and paid multi-million-dollar fines. Howard Lazar also served a short prison sentence. Both left the firm and were not named in the May 4 indictment.

Names of clients were not disclosed in the new Lehr indictment, but they are believed to include financial firms Warburg Pincus, Zurich North America and Ramius Capital Group, according to a published report. Builders Group clients had included firms such as AT&T, Tiffany’s and Merrill Lynch.

The legal source notes that the indicted firms’ overbilling schemes tended to focus on non-developer Fortune 500 clients that were not as sophisticated in their buying of interiors construction services. “The clients just expected them to do well,” he says.

The attorney source adds that the Lehr case was “deeper and more aggressive” than the one involving Builders Group. He says that Lehr’s bankruptcy filing will not be a barrier to a financial settlement.

“There is still personal liability among the executives. The corporate shield doesn’t protect them,” he says. “Guys like this have a lot of money, which they probably put offshore.”