A.G. Underwood Announces Sentencing of General Contractor in $800k Fraud Scheme
New York, NY - December 7, 2018 - Attorney General Barbara D. Underwood today announced the sentencing of Michael Martin, 47, of Latham, for his role as the mastermind of a scheme to fraudulently obtain public construction contracts, willfully fail to pay over $400,000 in wages to dozens of employees, and steal over $150,000 from a minority-owned business and over $200,000 from an insurance company by filing a false insurance claim on behalf of the minority-owned business. Martin pleaded guilty to Grand Larceny in the Second Degree (a class C felony) in Schenectady County Court and Scheme to Defraud in the First Degree (a Class E felony) in Albany County Court. Today, Martin was sentenced to 3 ½ to 12 years in state prison, and executed confessions of judgment to pay approximately $800,000 to the victims of his crimes.
“Those who scheme to defraud minority-owned businesses and their own employees must face the consequences of their actions,” said Attorney General Underwood. “My office will continue to prosecute scam artists that try to take advantage of New Yorkers.”
As part of his plea, Martin admitted that he served as President and owner of Eastern Building & Restoration, Inc., a general contractor headquartered in Albany, from 2004 to February 2014. Martin further admitted that co-defendant Dr. Scott Henzel is the former Controller for Eastern Building & Restoration, Inc. (“Eastern”).
Martin further admitted that the scheme was devised to enrich themselves at the expense of laborers, minority-owned businesses, and numerous state, county, and local agencies. The scheme included the identity theft of two minority-owned businesses, Lorice Enterprises, Inc. and Precision Environmental Solutions, Inc., as well as the theft of prevailing wage benefits from over 50 employees of Eastern.
According to documents filed by the prosecution and Martin’s admissions in court, between April 2012 and September 2015, Martin and Henzel allegedly offered two minority business enterprises, Lorice Enterprises, Inc. (“Lorice”) and Precision Environmental Solutions, Inc. (“Precision”), the opportunity to partner with Eastern for the purpose of teaching the businesses how to successfully operate and bid on construction projects. In reality, Martin and Henzel allegedly took over the two businesses, managing all day-to-day business activities, including staffing of laborers and bidding decisions, as well as all banking activity and financial decisions. The defendants then used the minority-owned businesses to fraudulently obtain millions of dollars in public works projects awarded to Eastern, which required a portion of funds awarded to be paid to minority contractors pursuant to Article 15-A of the Executive Law.
The purpose of Article 15-A of the Executive Law is to promote employment and business opportunities on state contracts for minorities and women, so that when public dollars are spent on construction projects, a portion of those funds are used to promote the growth of minority or women owned businesses.
In reality, once Martin and Henzel brought Lorice and Precision into Eastern, those firms allegedly ceased to be minority-owned business enterprises other than on paper, and were instead controlled exclusively by – and for the benefit of – Martin and Henzel.
Additionally, Martin admitted that he and Henzel systematically failed to pay over 50 laborers $6 per hour in pension funds, which Eastern was obligated to pay as part of their prevailing wage. Between March 1, 2012 and February 6, 2014, Martin and Henzel underpaid Eastern’s laborers over $400,000 in pension benefits, including over $100,000 on a single contract with the Dormitory Authority of the State of New York. To conceal their crime, Martin admitted that he and Henzel issued false paystubs to employees indicating that the payments had been made, and falsely certified on public works projects that the payments had been made when in fact they had not.
Martin also admitted in Schenectady Court that beginning in 2014, after Eastern went out of business, he embezzled over $150,000 from Precision by diverting over $9,000 per month pursuant to a phony lease agreement with a company called Delta Land Holdings, LLC, which was controlled exclusively by Martin. In reality, Delta Land Holdings had no ownership or possessory interest in the property Precision was operating in, and Precision was already paying $1,800 in rent for the property to the true landlord.
On October 11, 2018, Martin pleaded guilty to Grand Larceny in the Second Degree in Schenectady County before Hon. Matthew J. Sypniewski, in connection with his theft from Precision Environmental Solutions. Martin was sentenced today to 3 ½ to 12 years in state prison and entered a judgment in favor of Precision Environmental Solutions for over $150,000.
On October 12, 2018, Martin pleaded guilty to Scheme to Defraud in the First Degree in Albany County before Hon. Peter A. Lynch, in connection with his scheme to defraud employees, contracting agencies, and insurance companies through his operation of Eastern Building & Restoration, Inc. Martin will receive a sentence of 1 to 3 years in state prison to run concurrent with his term on the Schenectady conviction. Martin also agreed to enter nearly $650,000 in judgments in favor of former Eastern Building & Restoration employees, insurance companies, and other victims defrauded. Martin will be sentenced in Albany County on December 10, 2018.
On November 13, 2018, Henzel pleaded guilty to the crime of Failure to Pay the Prevailing Rate of Wage or Supplements over $100,000 (a class D felony) before Hon. Peter A. Lynch in Albany County Court. Henzel will be sentenced on January 8, 2019 and has agreed to enter over $70,000 in judgments in favor of the victims of his crimes.
The case against Martin arose out of a joint investigation conducted by the Attorney General’s Criminal Enforcement and Financial Crimes Bureau, the New York State Office of the Inspector General, and the New York State Department of Labor.
The Office of the Attorney General thanks the following agencies for their assistance on the case: the New York State Office of the Inspector General, the New York State Department of Labor, the New York State Office of the Comptroller, the New York State Office of General Services, the Dormitory Authority of the State of New York, the New York State Division of Minority and Women’s Business Development, the New York State Tax Department’s Criminal Investigations Division, the New York State Police, the United States Bankruptcy Trustee for the Northern District of New York, and the Schenectady County District Attorney’s Office.
The criminal cases against Martin and Henzel are being handled by Special Counsel Benjamin S. Clark of the Attorney General’s Criminal Enforcement and Financial Crimes Bureau, with the assistance of Legal Support Analysts Kira Russom and Joseph Conniff. The Criminal Enforcement and Financial Crimes Bureau is led by Bureau Chief Stephanie Swenton and Deputy Bureau Chief Joseph D’Arrigo. The Division of Criminal Justice is led by Executive Deputy Attorney General Margaret Garnett.
The Attorney General’s investigation was conducted by Investigator Mark Terra, under the supervision of Deputy Chief Antoine Karam. The Investigations Division is led by Chief Investigator Dominick Zarrella. Audit work was performed by Principal Forensic Auditor Jason Blair. The Forensic Audit Section is led by Chief Auditor Edward J. Keegan and Deputy Chief Sandy Bizzarro.