Contractor Pleads Guilty To Wage Underpayments And Theft

State Attorney General Spitzer, New York City Department of Investigation Commissioner Rose Gill Hearn and the Special Commissioner of Investigation for the New York City School District Richard J. Condon today announced that a painting contractor and his corporation pled guilty to felony and misdemeanor charges stemming from the underpayment of hundreds of thousands of dollars in prevailing wages to thirteen workers who performed work at over 50 public schools. They also pled to separate charges arising out of their having filed fraudulent papers with the New York City Department of Education, which resulted in the theft of substantial amounts of public funds.

Earlier today, Michael G. Capous and MGC Restoration Services Inc., both of Bayside, Queens, entered guilty pleas before Queens County Supreme Court Justice Dorothy Chin-Brandt. Capous pled guilty to one count of Offering a False Instrument for Filing in the First Degree, a class E felony, and one count of Failure to Pay Wages in accordance with the state labor law, a Class A Misdemeanor. MGC pled guilty to one count of Grand Larceny in the Fourth Degree, a Class E felony, and one count of Failure to Pay Wages in accordance with the state labor law, a Class A Misdemeanor. The defendants had previously been arrested on January 5, 2005.

"This case is egregious because it involves both the theft of taxpayer monies from the New York City school system and the abuse of workers who are entitled to be paid what the law requires for their work," Spitzer said. "This case reaffirms my office's commitment to prosecute those who refuse to pay prevailing wages and steal funds from public agencies: you cannot reap profits at the expense of your workers or taxpayers."

"Firms working on public works contracts are legally mandated to pay their employees a fair and prevailing wage. This case should be a warning to all potential contractors that the City will not tolerate wage fraud or any other cheating on public contracts," said Commissioner Gill Hearn.

"This type of crime harms both the City and the workers involved. The City does not get the skilled service it has contracted for and the workers are deprived of their just wages," said Special Commissioner of Investigation for the New York City School District Richard J. Condon.

According to court papers, between November 27, 1999 and January 12, 2003, thirteen individuals were employed to perform painting work at various New York City public schools under MGC's contracts with the Department of Education. The work was subject to state prevailing wage laws, which dictate the hourly rates, as well as supplemental benefits, that must be paid employees working on public projects. The defendants failed to pay the thirteen workers the required wages.

A joint investigation by the Attorney General's office and the Special Commissioner of Investigation for the New York City School District revealed that in addition to violating the prevailing wage laws, Capous prepared, signed, and submitted false business records to the Department of Education. These records indicated the names of workers who, in fact, were never on the job sites. These "ghost" workers (those who appeared on payroll records but never worked on the sites) included one person who was on workers' compensation disability and unable to work and another who was out of the country when MGC listed him on the payroll records. Based on these fraudulent records, the Department of Education paid MGC. The Department of Education would not have paid the amounts requested by the defendants if it had been aware that Capous had filed false business reports.

Capous and MGC have signed a plea agreement. As a condition of the plea, the defendants have already paid restitution of $496,440.90 of which $331,819.96 will be paid to thirteen workers, $81,665.95 will constitute restitution to the City of New York, and $82,954.99 will be paid in civil penalties.

The case is being handled by Assistant Attorneys General Richard Balletta and James W. Versocki of the AG's Labor Bureau, which is under the supervision of Bureau Chief M. Patricia Smith, along with Special Counsel Eileen Daly, Senior Investigator Richard T. Werdann, Senior Investigator Joseph Piwowarski, and Assistant to the Special Counsel Anna Wong, all of the Special Commissioner's Office.