Manhattan Construction Execs Charged With Fraud

By John Noel
|  Wednesday, May 4, 2011  |  Updated 4:23 PM EDT
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The indictment charges the company ripped off clients of at least $30 million over the past decade.

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A commercial-interior construction company that was entangled in a 1990s bid-rigging investigation has spent the last decade bilking banks, The Economist magazine and other clients out of more than $30 million through a pervasive overbilling scheme, prosecutors said Wednesday.

Lehr Construction Corp. "systematically defrauded clients out of millions of dollars in a company-wide scheme," Manhattan District Attorney Cyrus R. Vance Jr. said shortly before the company and four executives pleaded not guilty to racketeering and other charges. "This construction company was corrupt at all levels."

Lehr's lawyer, William Schwartz, would say only that the company "is confident that it will complete all of its projects and be able to pay all of its creditors and subcontractors notwithstanding these charges." The company filed in February for bankruptcy protection, telling Crain's New York Business that the DA's probe was partly to blame for a falloff in business.

Founded in 1979, Lehr specializes in fitting out the insides of stores, offices and other commercial spaces, according to its website.

The company first attracted Manhattan prosecutors' attention in 1998, as part of a broad investigation into allegations of bill-padding in the interior construction industry. Lehr principals and brothers Gerald and Howard Lazar pleaded guilty to commercial bribery; Howard Lazar was sentenced to one to three years in prison; his brother got no prison time. The company itself was not charged.

The new case includes a familiar name — Executive Vice President Jeffrey Lazar, a son of Gerald Lazar — and some similar allegations.

Manhattan-based Lehr had subcontractors inflate their bids and their purchase orders, then collected the difference between what clients paid and what the work actually cost, prosecutors said. Sometimes, to obscure the money trail, Lehr would have the subcontractors "hold" the cash netted in the scheme and give it to Lehr in the form of credit on a future job, prosecutors said.

"The money is laundered, having been washed, folded and pressed in this scheme," Vance said.

Subcontractors went along with it to keep getting work, he said, noting that the investigation is continuing.

Some law and investment firms were overcharged $250,000 or more each, prosecutors said.

Jeffrey Lazar, 43; Executive Vice President for Operations Todd Phillips, 52; finance director Steven Halper, 67; and cost-control chief Steven Wasserman, 58, were released on $100,000 bond.

Phillips "looks forward to being vindicated at trial, when a jury verdict will establish his innocence," said his lawyer, John "Rusty" Wing. The other men and their lawyers declined to comment.

If convicted of the top charge — enterprise corruption, New York state's version of racketeering — they would face at least a year and up to a quarter-century in prison.

Representatives for The Economist didn't immediately respond to email inquiries.

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