A 47-year-old contractor from Latham pleaded guilty defrauding minority owned businesses, state and local contracting agencies and employees, according to the state Attorney General’s Office.
Michael Martin, former president of Albany-based Eastern Building & Restoration, faces from 3.5 to 12 years in prison and must pay $800,000 to his victims, said Acting Attorney General Barbara Underwood.
He pleaded guilty to “his role as the mastermind of a scheme to fraudulently obtain public construction contracts, willfully failing to pay over $400,000 in wages to dozens of employees, and stealing over $150,000 from a minority-owned business and over $200,000 from an insurance company by filing a false insurance claim on behalf of the minority-owned business,” according to the AG.
He pleaded guilty to the felonies of grand larceny in Schenectady County Court and scheme to defraud in Albany County Court.
“The defendant’s elaborate scheme defrauded minority-owned businesses and his own employees — all to game the system for his own benefit. Now he’s facing the consequences,” said Underwood in a statement. “My office will continue to prosecute fraudsters that take advantage of New York businesses, workers, and taxpayers.”
The case against Martin arose out of a joint investigation conducted by the Attorney General’s Criminal Enforcement and Financial Crimes Bureau, the state Office of the Inspector General, and the Department of Labor.
“The criminal schemes perpetrated by this top construction executive shamelessly abused his own employees and the companies that worked with him while exploiting and defrauding a laudable program meant to level the playing field for many small and disadvantaged companies,” said Inspector General Leahy Scott.
“This defendant was caught red handed stealing from his hard working employees and from New York state,” said Commissioner of Labor Roberta Reardon.
Martin served as president of the company from 2004 to 2014. The scheme included stealing the identity of two minority-owned businesses, Lorice Enterprises and Precision Environmental Solutions, as well as the theft of prevailing wage benefits from more than 50 of his employees.
Between April 2012 and September 2015, Martin admitted he and the company’s Comptroller Scott Henzel offered the two minority business enterprises the opportunity to partner with Eastern for the purpose of teaching the businesses how to successfully operate and bid on construction projects.
In reality, according to Underwood, they allegedly took over the two businesses, managing all day-to-day business activities, including staffing of laborers and bidding decisions, as well as all banking activity and financial decisions. The defendants then used the minority-owned businesses to fraudulently obtain millions of dollars in public works projects awarded to Eastern, which required a portion of funds awarded to be paid to minority contractors.
Once Martin and Henzel brought Lorice and Precision into Eastern, those firms allegedly ceased to be minority-owned business enterprises other than on paper, and were instead controlled exclusively by — and for the benefit of — Martin and Henzel.
Additionally, Martin admitted that he and Henzel systematically failed to pay over 50 laborers $6 per hour in pension funds, which Eastern was obligated to pay as part of their prevailing wage. Between 2012 and 2014, Martin and Henzel underpaid Eastern’s laborers over $400,000 in pension benefits, including over $100,000 on a single contract with the state Dormitory Authority.
To conceal their crime, Martin admitted that he and Henzel issued false paystubs to employees indicating that the payments had been made, and falsely certified on public works projects that the payments had been made when in fact they had not.
Martin also admitted that after Eastern went out of business, he embezzled over $150,000 from Precision by diverting over $9,000 per month pursuant to a phony lease agreement
Martin remains in Schenectady County Jail pending sentencing.
The charges against Henzel are pending.