MANHATTAN (CN) – Two contractors said they will pay $7.5 million to settle fraud charges, filed the same day, related to a project that will connect two commuter rails across New York City.
The East Side Access Project is a widely anticipated tunnel that will connect the Long Island Railroad to Grand Central Station. Metro-North, which services greater New York and Connecticut, terminates in Grand Central, but the LIRR terminates across town at Penn Station.
Though federal law required Dragados USA and Judlau Contracting to hire disadvantaged business enterprises for the job, the companies did not require their subcontractors to meet that standard, according to the complaint.
Nevertheless they falsely representing to the Metropolitan Transit Authority that they were paying these disadvantaged business enterprises millions of dollars, federal prosecutors say.
On Wednesday, U.S. District Judge Laura Taylor Swain approved a settlement that requires Dragados and Judlau to pay $7.5 million. Most of that fund goes to the United States, but $1 million goes to the MTA Office of the Inspector General.
Dragados/Judlau JV, the companies’ joint venture, admitted and accepted responsibility for violating the disadvantaged business enterprise regulations governing their MTA contract.
The U.S. Department of Transportation has funded 42 percent of the total cost of the East Side Access, which is scheduled to open in 2018 with a total estimated cost approaching $8 billion.
Disadvantaged business enterprises were supposed to perform about $22 million worth of the work in subcontracts, under the terms of that federal funding.
Prosecutors say Dragados and Judlau have been misrepresented that qualified businesses had received $17 million between 2006 and 2008. In reality, they had paid less than $5 million to disadvantaged business enterprises, according to the complaint.