Contractor pleads guilty in $800K fraud
Scam artists issued fake pay stubs to unwitting workers.
One of two local men accused of exploiting and defrauding minority-owned businesses in an $800,000 scheme has pleaded guilty and agreed to pay back his victims, Attorney General Barbara Underwood announced Friday.
After pleading guilty to felony grand larceny and scheme to defraud in Schenectady and Albany county courts this week, Michael Martin, 47, of Latham, is expected to receive a sentence of 3 1/2 to 12 years in state prison, Underwood said. He has also agreed to pay back the roughly $800,000 he stole from minority-owned businesses, employees and an insurance company.
Martin and his business partner, 52-year-old Scott Henzel of Albany, were arrested in July following a joint investigation by the Attorney General’s Office, state Inspector General’s Office and the state Labor Department. According to investigators, Martin was the crime’s mastermind.
“The defendant’s elaborate scheme defrauded minorityowned businesses and his own employees — all to game the system for his own benefit. Now he’s facing the consequences,” Underwood said.
“My office will continue to prosecute fraudsters that take advantage of New York businesses, workers and taxpayers.”
As part of his plea, Martin admitted that he served as president and owner of Eastern Building & Restoration, a general contractor headquartered in Albany, from 2004 to 2014.
Henzel, he said, served as controller.
In those roles, he said, they offered two minority business enterprises — Lorice Enterprises and Precision Environmental Solutions — a chance to partner with Eastern to learn how to successfully .
In reality, the pair took over the two businesses, Martin said, managing all day-to-day business activities, including staffing of laborers and bidding decisions, as well as all banking activity and financial decisions.
They then used the businesses to fraudulently obtain millions of dollars in public works projects, which required a portion of funds awarded to be paid to minority contractors.
Once Martin and Henzel brought Lorice and Precision into Eastern, however, those firms ceased to be minorityowned business enterprises other than on paper, and were instead controlled exclusively by and for the benefit of Martin and Henzel, the Attorney General’s Office said.
Martin also admitted that he and Henzel systematically failed to pay more than 50 laborers $6 per hour in pension funds, which Eastern was obligated to pay as part of their prevailing wage. Between March 2012 and February 2014, Martin and Henzel underpaid Eastern’s laborers more than$400,000 in pension benefits, including more than $100,000 on a single contract with the Dormitory Authority of the State of New York.
To conceal the crime, Martin admitted that he and Henzel issued false pay stubs to employees indicating that the payments had been made, and falsely certified on public works projects that the payments had been made.
Martin also admitted that beginning in 2014, after Eastern went out of business, he embezzled more than $150,000 from Precision by diverting more than $9,000 per month using a phony lease agreement with a company called Delta Land Holdings, LLC, which he exclusively controlled. Precision was already paying $1,800 in rent for the property to the true landlord.
Martin will receive a sentence of one to three years in state prison to run concurrent with his term on the Schenectady conviction.
He also agreed to enter nearly $650,000 in judgments in favor of former Eastern Building & Restoration employees, insurance companies, and other defrauded victims. He will be sentenced in Schenectady County on Dec. 7, and in Albany County on Dec. 10.
Charges against Henzel remain pending.