From Ground Zero to Deutsche Bank, Private Watchdogs’ Record is Uneven

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Integrity monitors played a complex role in a concrete testing scandal involving the new Yankee Stadium and other projects.

Steve Lichtenthal at Yankeesrule

Integrity monitors played a complex role in a concrete testing scandal involving the new Yankee Stadium and other projects.

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This is the second part in our three-part series on the successes, failures and questions that surround the integrity monitoring industry in New York.
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It was in the immediate aftermath of the World Trade Center attack in 2001 that the use of private sector integrity monitors for the construction trade in New York City really took off. Despite dozens of successful criminal prosecutions, organized crime still had traction in the waste-carting and construction industries as well as in the unions that supported both.

As federal and state prosecutors in both New Jersey and New York zeroed in on the mob dominance of carting and construction, players in these cartels morphed into so-called recyclers capable of skillfully exploiting loopholes in existing laws related to the dumping of construction and demolition material. Efforts at regulating the industry hit a major wall when in 1994 the U.S. Supreme Court ruled in Carbone vs. Clarkstown that any efforts by governments to direct the flow of non-hazardous waste violated the U.S. Constitution’s Commerce Clause.

After September 11th cleaning up the millions of tons of construction debris could have been a major windfall for elements within the demolition and carting industry that had enduring mafia ties. The City was in a hurry to clear the site it invoked its emergency powers which permitted the City’s Department of Design and Construction to suspend competitive bidding if using it was deemed impractical. Such an high stakes imperative could no doubt be the perfect opportunity for nefarious folks to get a piece of the action.

Toby Thacher, a leader in the city’s integrity monitoring industry, says he suggested to Mayor Rudolph Giuliani that because of the vastness of the Ground Zero clean-up independent integrity monitors would be critical to oversee the project. Giuliani put the City’s Department of Design and Construction in charge of the massive operation. Riding shotgun was the city’s Department of Investigation.

“The last thing Rudy Giuliani wanted to see was racketeers exploiting this essential project,” recalls Ed Stier, a pioneer of the integrity monitoring sector. Stier’s company and Thacher’s were two of the four integrity monitoring firms responsible for insuring that mafia linked companies did not get a foothold and that the companies that did the work did not ripoff the City off in the process.

Some got through. In 2005 the Daily News published the investigative story “Towers Fell and Mob Schemes Began” which documented how organized crime managed to get millions of dollars our of the multi-billion dollar federally funded site cleanup.

But a 2006 Congressional staff report put out by an oversight subcommittee of the Committee on Homeland Security had high praise for the role played by Stier and his colleagues in the WTC site clean-up in keeping it to a minimum. “Private integrity monitors had never previously been deployed on such a large scale and, by all accounts, their deployment in the debris removal context was an overwhelming success,” the Congressional fact-finders wrote. “Private integrity monitors identified a number of contractors with ties to organized crime which were subsequently removed from the site, found trucks cooping while on the clock, flagged several attempted frauds that were referred for prosecution, recovered $47 million in over-billing by contractors and subcontractors, and saved immeasurably more money by deterring fraud.”

The House staff report documented that 1.63 million tons of debris, equivalent to 100,000 truck loads, was trucked out in less than half the time and for half the cost projected. In the process prosecutors, with help from the monitors, ferreted out instances where individuals in key positions of public trust tried to enrich themselves by taking bribes from Ground Zero contractors. In this mix was a former Port Authority engineer who was criminally convicted for looking the other way while an asbestos abatement contractor stole tens of thousands of dollars from the bi-state agency by systematically over billing for work at Ground Zero. He was sentenced to one to three years.

A scandal in concrete

After the WTC site was cleared of debris, the task turned to rebuilding it. In fact, around the city, building projects public and private began popping up in the middle of last decade. The construction binge meant one thing above all else: concrete. Whether it’s a one-story home or a water tunnel or a professional sports arena being built, that mixture of cement, water and sand is essential—and whether or not its been properly mixed is critical to the stability of the places we live, work and watch.

Hence the importance of the discovery in 2008 by Stier and his colleagues of irregularities related to the concrete and its testing at both the site of the new Yankee Stadium and the One World Trace Center tower, aka Freedom Tower. “Yankee management told me to do whatever I needed to do to make sure the job was done right,” recalls Stier. “In the course of our monitoring we found out that Testwell Laboratories was falsifying the tests results for the concrete being used on the job.”

This discovery sent shock waves throughout the entire New York City construction industry raising serious concerns about the soundness of the city’s most iconic structures and critical transportation infrastructure.

Stier’s discovery prompted District Attorney Robert Morgenthau to launch an investigation into the City’s concrete testing industry that was carried on by his successor Cyrus Vance Jr.. Testwell Lab’s President V. Reddy Kancharia was sentenced to up to twenty years in jail. The New York Times quoted the presiding judge, the Hon. Edward McLaughlin at sentencing, as saying “a skillful person can steal more with a pen and a smile than with a gun.”

As it turned out it just wasn’t one lab falsifying construction material tests but several. The phrase “everybody was doing it” comes to mind. Several people were convicted and sent to jail.

The list of concrete foundations and installations that needed careful re-inspection included ones we rely on everyday; the Lincoln Tunnel, the air traffic control tower at La Guardia, the Fulton Street transit hub, Memorial Sloan-Kettering Cancer Center and scores of other public and private construction projects throughout the region.

As a consequence of the massive testing scandal the City’s Department of Buildings called for the establishment of city-owned and -operated concrete testing laboratory as well as the creation of a unit within the DOB that focused exclusively on concrete. Millions had to be spent to go back and check the concrete signed off on by this local cartel of corrupt concrete testers.

But integrity monitors’ role in the story goes beyond Stier’s team blowing the whistle. The New York Times in June of 2008 quoted Testwell’s lawyer saying in defense of the lab that “in recent years,” before their prosecution, they had employed Ronald Goldstock as an “independent integrity monitor.” Goldstock, the Waterfront Commissioner who works as a private inspector general for corporate clients, was reluctant to comment on the record to City Limits about his Testwell assignment and would only confirm he had indeed had such an assignment and reported his findings to the government.

What characterizes the monitoring of the World Trade Center debris cleanup and the concrete scandal is that integrity monitors were able to sound warning bells in time. This was not the case at Deutche Bank.

Cutting corners, and pipes

Much has been written about the 2007 Deutsche Bank fire that killed two firefighters and injured more than 100 others but little about the efficacy of the integrity monitors. The site at 130 Liberty Street was adjacent to the World Trade Center complex, in whose destruction it was damaged, and its demolition was pivotal to the redevelopment of the entire complex including the 9-11 Museum and Memorial. Throughout its sorry saga it was under the close scrutiny of integrity monitors that were charging millions of dollars to act as backstops against exactly the kind of dysfunction and corruption that ultimately consumed the project.

The lead integrity monitor was Stier. Starting in 2005 Stier was under contract with the Lower Manhattan Development Corporation to oversee the decontamination and deconstruction by Bovis Lend Lease of the 41-story Deutsche Bank building.

The Lower Manhattan Development Corporation bought the building from the bank for $90 million dollars. The Port Authority needed the badly damaged building to come down so it could access the parcel’s subsurface to build the new vehicle security screening check point, a linch pin for the entire World Trade Center complex and 9-11 Memorial. “There was enormous pressure to get that building down,” recalls Stier.

The US EPA said the building was so severely contaminated the WTC dust would have to removed using stringent asbestos remediation methods before the building could be deconstructed.

It was during the process of trying to decontaminate the basement in 2006 that the fire standpipe was cut and disabled in the building’s basement by Bovis sub-contractors who already attracted bad press for alleged ties to organized crime and a company banned from doing work in the city’s public schools.

As a direct consequence of the sub-contractors cutting a 42 foot length out of the standpipe when the fire broke out on the 17th floor of former bank building that next August of 2007 there was no water in the building to fight the fire which grew to engulf several stories.

It took more than hour from when the firefighters got in the building for them to establish a pressurized fire hose to put on what was by then a raging fire multi-floor fire. All the while the flames sent out thick black toxic smoke. Firemen Robert Beddia and Joseph Graffagnino died of smoke inhalation on an upper floor of the building.

A grand jury probe revealed a total compliance breakdown at the site that implicated the private and public sector. Never mentioned in the DA’s released statement summing up the grand jury’s findings was the fact that the Deutsche Bank project had from its very inception been under the scrutiny of a team of private sector integrity monitors that included Stier and even a former assistant district attorney who had previously worked for Morgenthau for nine years.

Stier concedes in the case of Deutsche Bank he was unable to have the impact necessary to head off the tragedy.

“We wrote memos and nobody responded to us at meetings,” says Ed Stier of his efforts before the fire to try and change the project’s culture.

Warnings ignored

Stier was not alone in expressing concerns about the lack of proper management controls at the site before the fire. Sixteen months before the deadly fire. on April 18, 2006, it was the members of Lower Manhattan’s Community Board 1 that passed a resolution warning officials about the poor conditions at the site. In their resolution they referenced the serious injury of two workers at the site and the checkered history of the firm working the project as well reported in the Daily News.

On August 3rd, more than two weeks before the fatal blaze, Stier’s colleague Jamie Daniels, with URS, an engineering firm also overseeing Bovis, issued his own dire warnings. In a letter to the LMDC which owned the site Daniels wrote, “As you are aware, this site is a serious accident waiting to happen due to the lack of Bovis’ attention to general housekeeping, fire watch and overall management.”

A Bovis safety official was indicted for manslaughter as were two officials with the John Galt Corporation, Bovis’s subcontractor on the botched demolition job. Galt the company was also indicted. Ultimately all three men were acquitted but Galt was found guilty of second degree reckless endangerment, a misdemeanor.

District Attorney Robert Moregenthau also blasted the Fire Department for failing to ever inspect the Deutsche Bank building and the Department of Buildings for dereliction of duty. DOB actually had inspectors stationed on the site but failed to act on any of the major code violations that were contributing factors to the site conditions that led to the death of the firefighters.

In December of 2008 Manhattan, sixteen months after the fire, Morgenthau announced that Bovis had agreed to enter into a “non-prosecution” agreement in exchange “for taking remedial actions”. One of those actions: Yet another “independent integrity monitor” would get to collect a paycheck as a monitor assigned specifically to the multinational contractor.

Stier concedes that what happened at the Deutsche Bank tragically illustrates that having an integrity monitor in of itself won’t prevent corruption and negligence from getting a foothold if the integrity monitor doesn’t have the clout to back up their observations. Stier says monitors work most effectively when they are reporting directly to a sitting judge or a prosecutorial outfit like DOI. He says his team’s scrutiny did result in the LMDC not paying Bovis $12 million dollars for wages of workers who had fraudulently billed for when they were not actually on the Deutsche Bank site.

Read part three.

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