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Financial Crimes
01/14/2009

10 supervisors and 1 former Con Ed employee charged in kickback scheme

Defendants accepted over $1 million to inflate payments, approve unnecessary work, and expedite payment of invoices

Ten current supervisors of the Consolidated Edison Corporation of New York, Inc. ("Con Ed") and one recently retired Con Ed employee have been arrested for soliciting and accepting more than $1 million in kickbacks from a contractor in connection with construction projects in New York City and Westchester County. The 10 Con Ed supervisors arrested today work at Con Ed offices in Manhattan, Queens, and the Bronx, as well as in Westchester County.

According to the complaints unsealed this morning, since 2004 the defendants solicited and accepted more than $1 million in kickback payments from the president and co-owner of a construction company ("the Contractor") that performed gas line and electrical work for Con Ed on construction projects in New York City and Westchester County. In exchange for those Kickbacks, the defendant Con Ed supervisors in many instances approved payments to the Contractor for work that was never performed.

In addition, the defendants also often demanded as a kickback a percentage of the "extras," or unearned payments made to the Contractor. In one instance, the "extra" amount added to a contract payment for work that was never performed totaled $500,000. On other occasions, certain defendants demanded monthly kickback payments in exchange for ensuring that the Contractor's invoices would be paid promptly, and that the payments requested in the invoices would not be cut. On still other occasions, certain defendants agreed, in exchange for bribe payments, to direct additional work to the Contractor that was not necessary or required. Some of the defendants also demanded non-monetary payoffs, such as tickets to a New York Giants/Dallas Cowboys football game, a Blackberry Curve, a watch, and sunglasses.

"ICE investigates financial crimes that exploit vulnerabilities within the U.S. financial, trade, and transportation sectors that could be used by criminal organizations," said ICE Special Agent-in-Charge Smith. "I commend the El Dorado Task Force, an ICE-led financial investigative component of the Department of Homeland Security that identified these public utility employees that defrauded residents of New York for years."

"These defendants used their positions at Con Ed to line their own pockets at the expense of utility customers and the residents of the New York City metropolitan area," stated United States Attorney Campbell. "This case demonstrates our commitment to holding those who place their own interests ahead of the public they serve accountable for their actions." Mr. Campbell expressed his grateful appreciation to the investigating agencies and added that the investigation is continuing.

During the investigation, the Contractor, under the supervision of law enforcement agents, wore a recording device while meeting with nine of the defendants and made payoffs to them ranging from $1,000 to $5,000. Two retired Con Ed employees, one a supervisor, also wore recording devices and under the supervision of law enforcement agents recorded incriminating conversations with three of the defendants. The investigation produced 60 hours of undercover recordings, 51 meetings with the defendants monitored by law enforcement agents, and approximately $80,000 of monitored bribe payments.

Con Ed is a New York-based public utility that provides electrical, gas, and steam utility services in New York City and Westchester County. As a provider of such services, it is responsible for the maintenance and repair of its electrical, gas, and steam lines, as well as the installation of new lines, as needed. Con Ed is also responsible for rebuilding and rerouting existing utility lines when construction projects interfere with those lines.

The arrests were announced by Benton J. Campbell, United States Attorney for the Eastern District of New York; Peter J. Smith, special agent in charge of the ICE office of investigations in New York; Patricia J. Haynes, Special Agent-in-Charge, Criminal Investigation, Internal Revenue Service, New York; and Robert E. Van Etten, Inspector General, The Port Authority of New York and New Jersey, Office of the Inspector General.

If convicted, each defendant faces a maximum sentence of 10 years' imprisonment and a $250,000 fine. The government's case is being prosecuted by Assistant United States Attorneys Sarah Coyne and Monica Ryan.