Brooklyn, N.Y. Contractor Sentenced for Role in Building Cost Overrun Scheme
The massive scandal surrounding the renovation of New York Metropolitan Transportation Authority (MTA) headquarters in Lower Manhattan continues to reverberate. The latest casualty in this union-connected ghost-worker and money-laundering scam is Constantine Vafias, 70, a Brooklyn-based construction contractor. On April 7, Vafias was sentenced in U.S. District Court for the Eastern District of New York to three years probation and ordered to pay $1 million in restitution and $100,000 in forfeiture. Those sums, substantial as they are, represent only a fraction of the total funds siphoned off into the pockets of the lead contractor, two major local unions, various shell companies and the Gambino crime family.
Roughly a decade ago, Vafias' company, Links Construction, signed a contract to provide elevator workers for major renovation work at the new MTA facilities at 2 Broadway. The authority, eager to consolidate its existing operations at some two dozen locations, signed a lease with the building landlord, Zar Realty Management Inc., in July 1998. Zar would perform a full renovation on the 32-story structure and the MTA would reimburse Zar for expenses up to $55 million. Early in 1999, developer Frederick Contini took over the project, though Zar remained liable for potential cost overruns. That's when the problems started.
Vafias' work force came from Local 1 of the International Union of Elevator Constructors (IUEC) and Local 14 of the International Union of Operating Engineers (IUOE). At least that was the agreement. In reality, noted Acting U.S. Attorney Alan Vinegrad in April 2002 when the initial indictments were handed down, "the Links agreement - which was not signed by anyone at the MTA or Zar, but which in effect made them financially responsible for the costs incurred - was a sham method to funnel money to the conspirators through the use of cash kickbacks and shell companies." Contini, Vafias and several other persons billed the authority for tens of thousands of hours of work that either had not been done or were, but were performed by nonunion labor. Also named in the indictment were IUEC Local 1 members Matthew Joseph Downey and David Coakley; IUOE Local 14 treasurer and shop steward James Roemer and Morris DiMinno; and contractor John Vitiello, who knowingly allowed his companies to be used for money-laundering.
The Gambino crime family helped bring this about. A Gambino made man, Edward "Cousin Eddie" Garafola, reportedly used his mob clout to keep labor "peace." In November 2004, fresh from pleading guilty in Manhattan federal court to unrelated charges of murder and attempted murder, pleaded guilty in Brooklyn federal court to money laundering, fraud and other charges in the MTA case. Garafola received weekly cash tribute payments of $12,500 from Contini in exchange for ensuring the filing of phony union time sheets. He showered some of that money upon representatives and associates of the two unions. Contini already had pleaded guilty to conspiring with Vafias to billing the MTA $14.3 million to cover labor costs, about $10 million more than the actual sum paid to elevator operators. The whole project, originally estimated at between $39 million and $55 million, by 2002 had exceeded $190 million, a figure not including bond financing costs. Vafias, by then physically ailing, pleaded guilty to three counts of a 55-count indictment in June 2003. Garafola and his son, Mario, also pleaded guilty to various offenses.
Cost overruns are an unfortunate reality in large-scale public works projects. All too often, political pressure to please constituents takes precedence over discipline to reign in costs, setting in motion participation by unsavory players. Tracing the movement of financial assets takes on paramount importance in such cases. The IRS proved instrumental in this one. "IRS Special Agents often investigate cases involving union corruption," said Joseph Foy, spokesperson for the IRS's criminal investigation unit in New York. "Kickbacks, extortion and off-the-books cash payroll are just some of the activities which lead to filing false personal and corporate tax returns. To hide money that should be reported on tax returns, criminals may turn to money-laundering activities. Whether it is tax evasion and/or money laundering, IRS Special Agents play an integral part by following complex money trails to prove criminal activity." Constantine Vafias knows first-hand the results of such diligence. (New York Times, 4/19/02, 5/29/02; New York Daily News, 11/24/2004; U.S. District Court, 4/7/09; other sources).