Skanska in US$ 20 million settlement

By Helen Wright01 April 2011

Skanska has reached a US$ 19.6 million settlement with New York authorities after an investigation into its practices involving hiring minorities and women.

Skanska USA Civil Northeast was being investigated for hiring a shell company, Environmental Energy Associates (EEA), in order to get round requirements for using disadvantaged, minority or women-owned business enterprises (D/M/WBEs) on projects.

Under US law, companies that receive federal support towards projects must make a good faith effort to hire D/M/WBEs for 10% of the work.

Skanska hired EEA as a certified D/M/WBE subcontractor to perform work on 10 projects, including a US$ 5.2 million demolition job related to the Fulton Street Transit Center in lower Manhattan.

But New York prosecutors argued that EEA had no employees or equipment, and was just a shell company fronted by owners Balu Kamat and Carmine Desio. The actual work was performed either by the general contractor or third-party companies.

Skanska did not admit any wrongdoing under the non-prosecution agreement, but Richard Cavallaro, president of Skanska USA civil, said, "We recognise, and regret, that we did not follow best practices with respect to our use of EEA as a D/M/WBE on certain projects.

"We've learned a tough lesson and we urge others in the industry to learn from it."

The investigation was conducted by the inspectors general from the Metropolitan Transportation Authority, the Port Authority of New York, the federal Transportation Department's Office of Inspector General and the federal Labor Department's Office of Labor Racketeering and Fraud Investigation.

The agreement with Skanska requires it to pay US$ 9.8 million to the United States attorney's office and US$ 9.8 million to the Metropolitan Transportation Authority, which hired Skanska eight projects cited in the indictment.

As a result of the investigation, Skanska said it had reinforced its efforts to meet best practices in contracting with D/M/WBEs.

Separately, Mr Kamat and Mr Desio have been federally indicted with charges of mail and wire fraud for their role in the scheme, and face up to 40 years in prison if convicted. They have entered not guilty pleas.

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