A federal judge in New York City has ordered three construction executives found guilty in the Buffalo Billion development scandal to forfeit what federal prosecutors say could be as much as $40 million in proceeds their companies received from a scheme to rig bids on state-funded projects in western New York.
U.S. District Court Judge Valerie E. Caproni said if a consensus on the net profit amount owed by each defendant cannot be reached, hearings would begin Jan. 11.
Government lawyers are seeking forfeiture of profits that were derived from the fraud perpetrated by defendants Louis Ciminelli, founder and former chairman and CEO of Buffalo contractor LPCiminelli; Joseph Gerardi, former general counsel of Syracuse developer COR Development; and Steven Aiello, COR’s founder and CEO.
All were sentenced this month, to prison terms from 28 to 42 months, on fraud, conspiracy and related charges after convictions earlier this year.
Last to be sentenced, on Dec. 11, was Alain Kaloyeros, a former State University of New York official who channeled more than $850 million in contracts to the firms.
Contractor defendants also were fined $500,000 each, and Kaloyeros $100,000. All are free on bail as they appeal their convictions in federal appellate court in New York City.
The government is seeking an additional $25.2 million from Ciminelli and $8.4 million each from Gerardi and Aiello for what prosecutors claim are gross proceeds the firms gained from the fraud.
The sum could be reduced by the amount of direct costs incurred in providing the services, but defendants must prove those costs. Court documents do not specify forfeiture related to Kaloyeros.
While fraud proceeds went to the companies, defendants had control of the money, making them liable for their forfeiture, according to government lawyers. “The evidence firmly establishes that Ciminelli, Aiello, and Gerardi received and had authority and control over the state money paid to their respective companies under illegally obtained contracts,” prosecutors wrote in a letter to Caproni.
Lawyers for Gerardi and Aiello objected to the forfeiture, arguing that the government cannot prove the existence of any forfeitable proceeds. Caproni disagreed and issued a general order of forfeiture at their sentencing.
Ciminelli’s attorney also planned to challenge the profit forfeiture, he told The Buffalo News.
Forfeiture is a tool that the government uses to civilly collect proceeds from a crime. “It is a huge deterrent,” says Atlanta defense attorney William Dillon, managing partner of The Dillon Law Group and a former senior trial attorney for the U.S. Justice Dept. antitrust division in Atlanta.
He won convictions against construction firms and others for antitrust crimes such as bid rigging. In one case, Dillon was able to take back more than $100 million from a contractor that had its illegal profits in a Swiss bank account, he told ENR.
The Justice Dept. has an asset management policy used in cases when the government wants to be sure the accused doesn’t profit as a result of the scheme, Dillon says.
Forfeitures are put into a victims and witness fund. “A defendant can do three years [in prison] … if they know when they get out they will have millions of dollars in assets from the crime,” he says, but serving time with nothing to be gained in the end is the deterrent.
If the funds from an illegal scheme are commingled with a defendant’s assets, the government can “take it all,” Dillon explains.
The Buffalo Billion defendants were indicted in 2016 for conspiring with Kaloyeros, then president of SUNY Polytechnic Institute in Albany, to secretly rig bidding to be selected as preferred developers in Syracuse and Buffalo for certain state-funded projects.
With that preference, they could be awarded projects without more competition on price or quality.