Con­trac­tor pleads guilty in $800K fraud

Scam artists is­sued fake pay stubs to un­wit­ting work­ers.

Albany Times Union - - AROUND THE REGION - Staff re­port

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.

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