Pursuing alleged crimes in which other prosecutors have shown little interest, Loretta E. Lynch, the U.S. attorney for the Eastern District of New York, has arrested Darius X. Johnson in Atlanta for alleged wire fraud and money laundering in selling fraudulent surety bonds. Johnson allegedly sold the bonds to American Architectural Inc., a Bensalem, Pa.-based contract glazier and metalwork firm that
worked on parts of the World Trade Center site in New York City. The value of the subcontract was only $6.2 million, but American Architectural paid one of the companies affiliated with Johnson, Diamond Indemnity Trust, a premium of $178,589. When American Architectural faltered and sought bankruptcy protection, the Skanska-led prime-contracting joint venture was unable to get Diamond Indemnity to fulfill its claim. Cost to replace: about $2 million.
ENR introduced Johnson, 48, to its readers in 2013 in reports that noted that American Architectural's phony Diamond Indemnity surety bonds had been accepted by other big construction managers, such as Lend Lease, on projects that included some of New York City's better-known addresses and institutions. According to the charges against him, Johnson had never worked in the surety business until 2010, after which he began representing himself as being Diamond Indemnity's managing director, general counsel, managing partner or administrative trustee.
Defending the Bonds
After American Architectural's bankruptcy, when Johnson faced questions about the bonds, he struck a dignified pose, appearing as if he were someone who was above the kinds of fraud that appeared to have occurred. "So, I'm here," he said he told one bond obligee at a meeting after American Architectural had defaulted. "I'm not going anywhere, and I'm pretty confident in the assets that's [sic] backing the bonds." But when questioned more specifically about the assets, Johnson became evasive and suggested that decisions about assets and escrows should be put to other Diamond Indemnity officials, including Melde Rutledge, a convicted felon. Rutledge shows up in Lynch's formal charges against Johnson but is identified only as "Co-Conspirator 1."
Neither Johnson nor Rutledge has been convicted of prior surety-related crimes. An attorney with the Federal Defender's Office declined to say whether Johnson would be entering a plea. Nevertheless, the question remains as to why surety fraud is such an inviting vocation. One obvious reason is the lack of a meaningful deterrence, so wrong- doers fear neither discovery nor prosecution.
We urge state and federal prosecutors to press forward and use whatever is learned from this case to help to clean up this entire wing in the house of fraud.