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Financial Crimes
11/23/2011

Consolidated Edison employees and private contractors sentenced for bribery scheme

NEW YORK – Fourteen former construction inspectors for Consolidated Edison Company of New York, Inc. were sentenced Tuesday on bribery charges.  The defendants were involved in schemes that solicited and accepted millions of dollars in kickbacks from contractors between 2000 and 2009 in connection with construction projects in Manhattan, the Bronx and Westchester County. Two contractors were also sentenced for paying kickbacks and the brother-in-law of one of the inspectors for laundering bribe payments to conceal their true nature and source. These sentences are the result of an investigation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI); Internal Revenue Service (IRS), Criminal Investigation Division; and the Port Authority of New York and New Jersey, Office of Inspector General.

"The individuals sentenced in this investigation masterminded an unscrupulous financial scheme that essentially defrauded critical projects aimed at improving New York City's infrastructure," said James T. Hayes, Jr., special agent in charge of ICE HSI in New York.  "HSI will pursue those who attempt to conceal their illicit gains and compromise the people's trust in public works projects."

"After 9/11, these defendants were tasked with the responsibility of helping rebuild our city's infrastructure," said U.S. Attorney Loretta E. Lynch, Eastern District of New York. "They focused instead on lining their own pockets at the expense of utility customers and residents of the metropolitan area. They have now been held to account."

"It is no secret that for years, kickbacks and bribes have been a part of the practice to win and dole out jobs in the construction industry," said Charles R. Pine, IRS special agent in charge for the Criminal Investigation Division in New York.  "What many people may not know is how many different governmental agencies can come together to investigate these crimes.   I am very proud of the efforts our Special Agents contributed to this investigation, not only to trace the flow of illegal monies, but to be part of a special law enforcement team that successfully brought to justice one criminal after another.  The sentences imposed send a strong message to the industry that those who engage in this type of criminal conduct are not safe from an investigation and prosecution that will land them in jail and forfeit what they stole.  Ultimately, crime does not pay."

"We work with our law enforcement partners to identify corruption within the construction industry, which ultimately hurts both the public and government during the best of times," said Robert E. Van Etten, Port Authority of New York and New Jersey inspector general.  "Its impact is more seriously felt during the current economic difficulties.   These Consolidated Edison and contractor prosecutions are an example of our joint efforts in this area."

Consolidated Edison is the main utility provider in the New York City-area for electric, gas and steam utility services.  As such, it is responsible for maintaining and repairing its electrical, gas and steam facilities, as well as installing new lines, and for rebuilding and rerouting existing utility lines when construction projects interfere with them.  Consolidated Edison contracts with private construction companies to perform this work, and Consolidated Edison inspectors monitor the projects to ensure that they are being performed safely and to engineering specifications. Additionally, inspectors ensure that that the company is not overpaying the contractors.

In the years following the attacks of Sept. 11, 2001, Consolidated Edison directed or took part in much of the subsurface construction in lower Manhattan, and received hundreds of millions of dollars in federal funds, mainly from the U.S. Department of Housing and Urban Development (HUD) to perform the work.  In connection with these projects, Consolidated Edison inspectors solicited bribes in exchange for approving contractor invoices that listed phantom pay items, allowing contractors to perform unnecessary additional work on the projects, and expediting Consolidated Edison payments to the contractors. 

In the aggregate, these schemes cost Consolidated Edison millions of dollars. The investigation became public with the first series of arrests of the Consolidated Edison inspectors on Jan. 14, 2009.  Since that time, officials at Consolidated Edison, especially those employed in its internal auditing unit, have provided assistance to the government's investigation.

All but two of the defendants arrested in connection with the investigation pleaded guilty. 

  • John Connelly, a contractor, was tried and convicted in August 2010 of paying bribes in separate schemes with various Consolidated Edison inspectors; and
  • Nathaniel Ham, a retired Port Authority of New York and New Jersey project contractor, was tried and convicted in March 2011 of conspiring with his brother-in-law William Shannon and two other Consolidated Edison inspectors to launder their bribe payments through Ham's credit union accounts.

The defendants include:

  • Paul Sanabria, 62, of New York, was sentenced to 27 month in prison, $15,000 in forfeiture to the government and $102,865.42 in restitution to Consolidated Edison;
  • James Coffin, 56, of Lynbrook, N.Y., sentenced to 30 months in federal prison, $214,250 in forfeiture to the government and $132,800.65 in restitution to Consolidated Edison;
  • Thomas Fetter, 63, of Middletown, N.Y., sentenced to 30 months in federal prison, $428,520 in forfeiture to the government and $112,708.59 in restitution to Consolidated Edison;
  • Richard Zebler, 52, of Bethpage, N.Y., sentenced to 24 months in federal prison, $50,000 in forfeiture to the government and $68,881.18 in restitution to Consolidated Edison;
  • Kevin Cook, 55, of Middletown, N.Y., sentenced to 27 months in federal prison, $80,000 in forfeiture to the government and $239,109.24 in restitution to Consolidated Edison;
  • Rocco Fassacesia, 57, of Carmel, N.Y., sentenced to 27 months in federal prison, $357,320 in forfeiture to the government and $339,149.08 in restitution to Consolidated Edison;
  • Richard Giannetto, 57, of Pelham, N.Y., sentenced to one month in federal prison, $5,000 in forfeiture to the government and $1,978.28 in restitution to Consolidated Edison;
  • Joseph Lioi, 59, of Patchogue, N.Y., sentenced to one month in federal prison, $9,000 in forfeiture to the government and $19,582.19 in restitution to Consolidated Edison;
  • Abraham Panagi, 58, of Queens, sentenced to 21 months in federal prison, $13,000 in forfeiture to the government and $54,350.26 in restitution to Consolidated Edison;
  • Brendan Maher, 32, of Massapequa, N.Y., sentenced to three years of supervised release, $10,000 in forfeiture to the government and $70,759.55 in restitution to Consolidated Edison;
  • William Shannon, 65, of Dix Hills, N.Y., sentenced to 36 months in federal prison, $250,000 in forfeiture to the government and $188,719.29 in restitution to Consolidated Edison;
  • John Connelly, 46, of Andover, N.J., sentenced to 18 months in federal prison;
  • Jack Palazzo, 58, of Carmel, N.Y., sentenced to 12 months and one day in federal prison, $150,000 in forfeiture to the government and $158,445.27 in restitution to Consolidated Edison;
  • Anselmo Saiz, 44, of White Plains, N.Y., sentenced to 21 months in federal prison and a fine of $100,000;
  • Nathaniel Ham, 59, of Dix Hills, N.Y., sentenced to 32 months in federal prison and $1,136,034 in forfeiture to the government; and
  • Leonard Diroma, 61, Mahopac, N.Y., sentenced to one month in federal prison, $7,000 in forfeiture to the government and $6,677.40 in restitution to Consolidated Edison.