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 NEW YORK, June 25 /PRNewswire/ -- In the wake of today's announcement that the owners of an asbestos abatement firm had been indicted for defrauding the New York City School Construction Authority (SCA) of approximately $500,000, the SCA's trustees, Schools Chancellor Joseph A. Fernandez and Meyer S. Frucher, praised the extraordinary cooperation between federal law enforcement and the SCA which made the indictment possible. The trustees particularly noted that it was the SCA itself which first discovered the illegal activity, investigated its scope and impact and helped design the criminal investigation and prosecution of the defendants. With the early detection of this criminal activity, the SCA was able to terminate the contract and save the Board of Education in excess of $600,000.
 The two trustees joined together in stating: "More important than the indictment itself is the process which produced it and the responses which shall follow -- criminal prosecutions of the defendants, a civil racketeering suit to recover stolen tax dollars, and institutional reforms to prevent recurrence of the fraudulent activities.
 The indictment (described in detail in the release below from United States Attorney Otto Obermaier) charged Kenneth Charles and Saundra Webb, the owners of Sandaq Engineering, Inc., with racketeering, conspiracy and 28 counts of mail and wire fraud for their role in an alleged scheme to defraud the SCA. It is alleged that Sandaq, a New Jersey firm, misled the SCA by submitting documents it had obtained fraudulently from licensing agencies and by claiming that it was a duly licensed asbestos air monitoring and consulting firm with licensed employees and laboratory testing facilities. Based on those frauds, Sandaq received five SCA contracts or subcontracts totalling almost $1 million between May of 1990 and May of 1991. The indictment alleges that after securing these contracts, the defendants defrauded the authority of approximately held a million dollars through a variety of illegal schemes.
 "First, we want to express our gratitude to Mr. Obermaier for his thorough and vigorous action resulting in this indictment," said Chancellor Fernandez. "His office and the Federal Bureau of Investigation are to be commended for the job they have done, which is reflected in the scope and complexity of the indictment itself. We are also pleased that it was the SCA Inspector General who initiated this investigation and are greatly relieved by his report that the investigation disclosed that no children and school personnel were exposed to asbestos by the defendants."
 Trustee Frucher stated: "This indictment and the other remedial actions being pursued by the SCA reflect the high priority the Trustees have consistently attached to corruption prevention. We gave substantial resources and unique powers to our Inspector General's Office and the investment is paying off."
 The School Construction Authority was created in 1989 to assume the critical job of both building new schools and renovating existing structures. The SCA was given a five year capital construction plan and an initial budget of $4.3 billion to undertake this task. In this fiscal year alone, the SCA has committed over a million dollars in school construction contracts. Since its creation, the SCA has already completed 33 major construction projects and today has 71 other major projects under management. It additionally is managing over 400 smaller improvement projects.
 When the authority was created, Gov. Mario Cuomo had just released a report on Corruption and Racketeering in the New York City Construction Industry. That report not only documented an industry infected with pervasive and systemic criminality and unethical conduct but went further to propose a variety of crime control strategies. The report's findings presented a challenge to the SCA.
 "Because the trustees were charged with designing an authority that would be pumping close to $1 billion annually into an industry rife with criminality," Frucher noted, "we were determined to design a structure that ensured taxpayer dollars went into school buildings, not into mob coffers or the pockets of corrupt industry participants. To that end we created an Office of Inspector General with unique powers and resources."
 Thomas D. Thacher, II, executive director of the project that produced the report for the governor and director of the Construction Industry Strike Force (an investigative/prosecutorial tasks force at one point comprised of over 100 state, local and federal personnel), was appointed vice president and inspector general of the authority with a mandate to implement as many of the recommendations in Gov. Cuomo's as were practicable and cost effective.
 "The philosophy underlying our efforts is simple: systemic corruption, whether it is in an industry such as construction or an institution like the fish market or in a governmental agency such as a police department, can never simply be prosecuted away," Thacher said, "It can only be controlled by institutional reforms targeted to reduce the incentives and opportunities to engage in corrupt activities."
 Thacher pointed to several examples of institutional reforms adopted by the SCA: a rigorous prequalification process that has disqualified over 60 firms from doing business with the SCA; a unique requirement that certain construction contractors retain an investigative auditing firm, at their own expense, as a condition for doing business with the SCA; a contractor certification process that has exposed past corrupt activities and facilitated the termination of contracts with contractors later found to be in noncompliance with SCA standards; and an aggressive field associate program.
 Trustee Frucher and Chancellor Fernandez stated that they look forward to the results of an ongoing study of the office of Inspector General by Harvard University's John F. Kennedy School of Government. That study, funded by a grant from the National Institute of Justice, is to determine whether the design and operations of the office should be replicated by the federal government as a model for innovative crime control.
 Inspector General Thacher outlined how the Sandaq investigation reflected the organizational approach of the Inspector General's office. "Wherever feasible, we undertake investigations with three objectives in mind: first, to determine if any fraud or other crime has been committed and, if so, to develop evidence necessary to support criminal prosecutions; second, to develop sufficient evidence and information to support appropriate civil or regulatory remedies, such as civil RICO (racketeering) lawsuits to recover damages or disqualification from future SCA work; and, third, to analyze how the SCA was defrauded and to design reforms and measures to block anyone from doing so again."
 In the case of Sandaq, the criminal indictment represents the product of the first effort -- a traditional criminal investigation and prosecution. Restitution will be pursued later this week when the SCA files a civil RICO lawsuit seeking treble damages from Charles and Webb, damages in excess of one and a half million dollars. Finally, Arthur Bates, the president and chief executive officer of the SCA, has already undertaken a number of significant steps to prevent a recurrence of this kind of fraud.
 According to Mr. Thacher, this case was complicated by the overriding need to assure protection of the public's health and safety. "Because Sandaq's work involved asbestos, we were compelled to make every effort to determine that no one, particularly school children and staff, was exposed to asbestos fibers as a result of Sandaq's actions. We suspended Sandaq from doing business with the SCA shortly after the investigation began. When the scope of their frauds became evident, we undertook, together with the SCA's Health and Safety Units, to conduct extensive retesting of those areas where Sandaq worked. I am relieved to report that every one of those areas was found to be in a safe condition."
 Bates briefly summarized some of the steps taken to prevent the kind of fraud alleged in this case from recurring. "The Sandaq case revealed the difficulty of verifying asbestos contractor qualifications and of monitoring asbestos contractor performance and payment requests. We have nonetheless taken several steps to address these areas."
 Among the new measures undertaken by the SCA are:
 1 an expanded contractor prequalification process that includes a more rigorous, up front review of all licenses and laboratory accreditation;
 2 time consuming but necessary site inspections of contractor offices and facilities prior to the award of contracts;
 3 adoption of a standardized list of all tasks and responsibilities for asbestos contractors, an approach that will make SCA oversight easier and more effective;
 4 assignment of additional inspectors to oversee contract compliance and integrity;
 5 rotation of consultant assignments to reduce potential for improper collusion between abatement contractors and consultants as well as to provide greater checks and balances on the whole process;
 6 enhanced monitoring of all asbestos contractors by SCA industrial hygienists through increased staffing and more tightly defined better management responsibilities; and
 7 more exacting final inspection and closeout procedures to insure that all work is properly and satisfactorily performed and that all payments are audited.
 "It must be remembered," Bates said, "that the SCA's former practices in the area of asbestos abatement were modelled on procedures employed by most other public agencies; indeed, many SCA procedures were even tighter. Perhaps, our experiences and reforms may now prove to be a model for others to examine."
 Outline of Indictment and Guilty Pleas
 United States Vs. Kenneth Charles and Saundra Webb, et al.
 The owners of an engineering firm and laboratory providing consulting, monitoring and compliance testing services in connection with asbestos abatement and removal in public schools in all five boroughs of New York City have been indicted on charges of racketeering, racketeering conspiracy, and 28 counts of mail and wire fraud by a federal grand jury in Manhattan. The indictment, which was unsealed today, alleges that Kenneth Charles (Charles) and Saundra Webb (Webb), respectively the chief executive and president of the Sandaq Engineering company, (Sandaq) Inc. located at 11 South Burnet Street, East Orange, N.J., engaged in a pattern of racketeering, racketeering conspiracy and fraud in the conduct of Sandaq's business. Both Charles and Webb were arrested early this morning by Special Agents of the Federal Bureau of Investigation (FBI) and investigators for the Inspector General's office of the New York City School Construction Office (SCA).
 The indictment alleges that Charles and Webb defrauded the SCA and the public through a variety of schemes, in obtaining and performing approximately $1 million worth of asbestos-testing and monitoring contracts, and the receipt of approximately $500,000 in payments related to the defendants' submissions of allegedly inflated and fictitious contractual claims.
 According to Otto G. Obermaier, United States Attorney for the Southern District of New York, Thomas D. Thacher II, the SCA's vice president and inspector general, and James M. Fox, assistant director of the Federal Bureau of Investigations, the defendants are charged with fraudulently obtaining asbestos safety technician licenses for unqualified and untrained SANDAQ employees. The indictment charges that defendants Charles and Webb obtained these licenses by falsely representing in numerous sworn filings with public agencies the qualifications and training of Sandaq's employees to perform asbestos sampling and analysis. The defendants Charles and Webb are further alleged to have fraudulently obtained certification for Sandaq's testing laboratory by falsely representing to public agencies both the qualifications of Sandaq's laboratory personnel to analyze asbestos samples and the true ownership of Charles' and Webb's laboratory. As additionally set forth in indictment, defendants Charles and Webb induced the SCA to rely upon these false and fraudulent representations in the award of contracts to perform asbestos monitoring and testing in New York City Public Schools.
 Defendants Charles and Webb are also charged with receiving approximately $500,000 in payments based upon their submissions of allegedly inflated and fictitious time-charge and test billings to the SCA with respect to these contracts. The indictment further charges that Charles and Webb submitted fictitious laboratory results "that were purported to have been obtained from asbestos samples taken from public schools that were undergoing renovation projects. In reality, the samples were never taken and no tests were performed." Indictment P 33(j).
 According to Mr. Obermaier, the indictment charges that (a)s a result of obtaining...contracts from the SCA through false and fraudulent representations and then performing asbestos-related work pursuant to those agreements that Sandaq and its employees were not qualified to perform, Charles and Webb, the defendants, placed various individuals, including school children school personnel, construction workers and Sandaq employees at risk of being exposed to asbestos." Indictment P 32. For this reason, Mr. Thacher noted that the Inspector General's Office of the SCA already has taken the remedial steps of reviewing Sandaq's work and conducting follow-up field testing at the schools where Sandaq performed work. These reviews failed to disclose any actual or continuing asbestos exposure, resulting from defendants Charles and Webb's allegedly fraudulent activities.
 Additionally, the indictment seeks the forfeiture of numerous assets of Charles and Webb, including real estate and bank accounts, constituting the proceeds of the defendants' alleged racketeering activities. Defendants Charles and Webb are presently restrained from selling, transferring or otherwise disposing of these assets, pursuant to a restraining order issued by the Honorable Milton Pollack, United States District Judge, Southern District of New York.
 Kenneth Charles, age 54, resides at 26 Florence Place in West Orange, N.J. Saundra Webb, age 33, resides at 146 South Center Street in South Orange, N.J. Arraignment has been scheduled for today at 3 p.m. before United States Magistrate Judge Leonard Bernikow, in Room 318 of Manhattan Federal Court.
 The charges contained in the indictment are accusations and the defendants are presumed innocent unless and until proven guilty. If convicted, each defendant may be sentenced to a maximum of 20 years imprisonment on each of the two racketeering counts and a maximum of five years imprisonment on each of the additional 28 mail and wire fraud counts, as well as a fine on each count of the greater of $250,000, or twice the gross gain or loss incurred.
 In separate but related court actions, it was announced that Dr. Robert Olcerst (Olcerst), age 43, a certified chemist and industrial hygienist who specialized in the field of asbestos analysis and who resides in Baltimore, Md., and Michael Harris (Harris), a former managerial employee and Sandaq and resident of East Orange, N.J., have each pleaded guilty in Federal District Court in Manhattan to conspiracy to commit mail fraud in connection with their roles in the Charles and Webb's fraudulent schemes. Olcerst pleaded guilty on May 15, 1992, before the Honorable Charles M. Metzner, United States District Judge, Southern District of New York. Harris pleaded guilty on June 2, 1992, before the Honorable Louis L. Stanton, United States District Judge, Southern District of New York. Both Olcerst and Harris face a maximum of five years imprisonment, and a fine of the greater of $250,000 or twice the gross gain or loss incurred. Sentencing dates have yet to be set for Olcerst or Harris.
 Mr. Obermaier praised the SCA's Office of Inspector General for their extensive efforts and the assistance of the FBI in the investigation leading to the indictment and pleas in this case. (A listing of the 61 New York City Public Schools in which the defendants performed asbestos testing and monitoring services follows.)
 1. P.S. 4 Bronx
 2. P.S. 6 Bronx
 3. P.S. 28 Bronx
 4. I.S. 28 Bronx
 5. P.S. 29 Brooklyn
 6. P.S. 60 Bronx
 7. P.S. 62 Queens
 8. I.S. 74 Queens
 9. P.S. 86 Bronx
 10. I.S. 88 Manhattan
 11. P.S. 105 Brooklyn
 12. J.H.S. 117 Bronx
 13. J.H.S. 118 Manhattan
 14. P.S. 118 Manhattan
 15. P.S. 154 Brooklyn
 16. P.S. 169 Manhattan
 17. I.S. 183 Bronx
 18. I.S. 201 Manhattan
 19. I.S. 211 Brooklyn
 20. I.S. 214 Queens
 21. I.S. 223 Brooklyn
 22. J.H.S. 234 Brooklyn
 23. I.S. 320 Brooklyn
 24. Adlai Stevenson H.S. Bronx
 25. August Martin H.S. Queens
 26. Aviation H.S. Queens
 27. Bayside H.S. Queens
 28. Brooklyn Tech H.S. Brooklyn
 29. East New York H.S. Brooklyn
 30. Evander Childs H.S. Bronx
 31. Fashion Industries H.S. Manhattan
 32. McKee H.S. Staten Island
 33. Phillip Randolph H.S. Manhattan
 34. Staten Island Tech Staten Island
 35. Susan Wagner H.S. Staten Island
 36. Telecommunication H.S. Brooklyn
 37. Theodore Roosevelt H.S. Bronx
 38. P.S. 12 Bronx
 39. P.S. 15 Bronx
 40. P.S. 20 Bronx
 41. P.S. 41 Bronx
 42. P.S. 52 Staten Island
 43. P.S. 76 Queens
 44. P.S. 108 Bronx
 45. P.S. 113 Bronx
 46. P.S. 134 Queens
 47. I.S. 145 Bronx
 48. P.S. 158 Manhattan
 49. P.S. 164 Queens
 50. P.S. 165 Queens
 51. P.S. 182 Brooklyn
 52. P.S. 186 Bronx
 53. P.S. 199 Manhattan
 54. P.S. 235 Brooklyn
 55. P.S. 247 Brooklyn
 56. P.S. 721 Brooklyn
 57. Linden Learning Center Brooklyn
 58. Clara Barton High School Brooklyn
 59. Erasmus Hall High School Brooklyn
 60. George Washington H.S. Manhattan
 61. Old Boys High School Brooklyn
 -0- 6/25/92
 /CONTACT: Thomas D. Thacher II, vice president and inspector general of the School Construction Authority, 212-901-6680/ CO: New York City School Construction Authority ST: New York IN: CST SU:

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Date:Jun 25, 1992

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