Federal prosecutors charged steel fabricator and erector Larry Davis, the owner of DCM Erectors Inc., with using front companies and a fraudulent joint venture to fulfill goals for hiring minority- and women-owned companies during construction of One World Trade Center and the adjacent transportation hub in New York City.
The charges were revealed by prosecutors in late July in U.S. District Court in Manhattan, where Davis was released on $100,000 bail.
Sanford Talkin, an attorney for Davis, denied the charges against his client. He did not say whether Davis would plead guilty or innocent when a formal indictment is made.
The charges follow a pattern common to other MBE and WBE fraud schemes that, in recent years, have been prosecuted more frequently in New York and other cities. In this instance, if the charges are true, the alleged fraud would have been carried out in close proximity to other companies and public officials at one of the most watched and symbolically significant projects in the country: Ground Zero in Manhattan.
The possible charges were first disclosed by The New York Times last fall.
Davis is the principal of a number of engineering and construction services companies based in Canada, several in the Toronto area. The services include steel fabrication, detailing, heating and ventilation.
Two Davis Group companies—Blue Lake/Federated J.V., which describes its services as "cranes/means & methods," and DCM Erectors Inc.—list New York City as their base.
Contracts originally held by DCM Erectors were valued at $256 million for One World Trade Center's steel frame and $330 million for the transportation hub. The contracts grew significantly during construction, and, in January 2012, The Wall Street Journal reported DCM was struggling financially and the Port Authority of New York & New Jersey advanced funds to the company and paid some of its subcontractors directly.
According to the charges, Davis arranged with the owners of two firms, Solera Construction Inc. and GLS Enterprises Inc., a minority- and woman-owned company, respectively, to hire the companies as subcontractors to fulfill goals set by the port authority.
Instead of each company actually performing the work, DCM managed or performed the subcontracted work, while DCM compensated the owners.
In January 2001, according to the charges, Davis formed a joint venture with Solera's owner, Johnny Garcia, and the port authority gave the joint venture $70 million of minority contracting credit on One World Trace Center. Federal prosecutors say Davis paid Garcia $150,000 a year and paid Solera a monthly lump sum of $12,500 on One World Trade Center and $9,500 for work on the transportation hub.
Solera's work involved mainly metal decking.
"In truth and in fact," say federal prosecutors in their charges, "the work was performed" by another contractor, described by the prosecutors only as "Subcontractor-1," to "make it appear as if Solera/DCM was performing the metal-decking work" on the projects.
Garcia has pleaded guilty to charges related to the alleged fraud and is cooperating in the investigation, say prosecutors.
Gale D'Aloia, the owner of GLF Enterprises Inc., also has pleaded guilty to charges related to the alleged fraud and is cooperating in the investigation, according to investigators.
Neither Garcia nor D'Aloia could be reached for comment.