By William K. Rashbaum New York Times
The owner of a company that has done nearly $1 billion in work on the steel skeletons of two World Trade Center towers and a transit hub is expected to be implicated in a criminal fraud case that would be among the largest to involve the misuse of funds designated for minority- or women-owned businesses, according to people with knowledge of the matter.
A federal and state investigation of Larry Davis, the owner of DCM Erectors Inc., has focused on allegations that he defrauded government programs by evading requirements that he hire a certain percentage of minority- or women-owned subcontractors, the people said.
The total losses from the misconduct, which deprived legitimate businesses of lucrative work on the multibillion-dollar projects, was in the millions of dollars, the people said.
With the inquiry nearing an end after over 18 months, federal prosecutors in Manhattan are expected to charge Mr. Davis with mail and wire fraud and money laundering, the people said.
The allegations focus on DCM’s work on the office tower at 1 World Trade Center, which its Web site boasts is America’s tallest building, and the World Trade Center Transportation Hub, designed by Santiago Calatrava. DCM fabricated and erected the steel superstructures for both projects, which are being developed by the Port Authority of New York and New Jersey.
The frauds of which DCM is suspected were carried out with the help of several other companies that served as fronts or pass-throughs, the people said. They all spoke on the condition of anonymity because the investigation is continuing and no charges have been filed.
Two of the people with knowledge of the matter said charges would allege that Mr. Davis set up a joint venture of DCM and another company, Solera Construction, a minority-owned enterprise in Ossining, N.Y., to meet government contract requirements that DCM hire a certain percentage of minority- or women-owned contractors or those certified by government agencies as disadvantaged, two of the people said.
The work was not done by the joint venture, the person said, but by a New Jersey company, AC Associates, which is not a minority business enterprise, those people said.
Another company, GLS Enterprises of Manhattan, which was set up by a woman who had once worked for Mr. Davis, was also involved, as a subcontractor that received money but performed no work, the two people said.
Mr. Davis is the only person expected to be arrested.
A spokeswoman for the Port Authority, Lisa MacSpadden, said in a statement that its officials were “very concerned about these serious allegations and we will continue to cooperate fully with the U.S. attorney and to closely monitor DCM’s work and progress.” The statement added that because the projects were in the final stages of construction, “we do not expect this development to have a significant impact on our progress there.”
DCM’s work on the two projects has been mired in financial problems, and the Port Authority has taken over paying the company’s subcontractors on both jobs, several of the people said.
DCM’s original contracts for the work at 1 World Trade Center, formerly known as the Freedom Tower, and at the transit hub were for $276.48 million and $338.8 million, but both have grown to a total of roughly $810 million, officials said.
DCM is also doing the steel work at 4 World Trade Center, a private project being developed by Silverstein Properties, under a $136 million contract, but the charges were not expected to involve that job, the people said.
The contract for the transit hub required DCM to fabricate and erect 22,305 tons of structural steel, almost twice the amount of steel used for the new Yankee Stadium. The contract for 1 World Trade involved almost double the amount of steel in the transit hub.
DCM is a New York subsidiary of the Davis Group, based in Canada, and worked on a number of local projects, including the steel superstructures for the AOL Time Warner Center at Columbus Circle and the Bloomberg Tower on the Upper East Side, as well as the installation of the communications antennas atop The New York Times Building near Times Square.
Mr. Davis’s lawyer, Sanford N. Talkin, declined to comment. Officials at Solera, AC Associates and GLS Enterprises did not respond to messages seeking comment.
Spokesmen for the office of Preet Bharara, the United States attorney in Manhattan, which would prosecute the case; the Internal Revenue Service; and the inspectors general of the Port Authority, the federal Department of Labor, and the federal Transportation Department, which took part in the inquiry, declined to comment or did not respond to requests for comment.
The inquiry began after suspicious activity was uncovered by a private integrity monitor hired by the Port Authority to examine the practices of contractors at the Trade Center site.
In recent years, such cases involving public works projects have been common.
In one, Skanska USA Civil Northeast Inc., which is a subsidiary of one of the nation’s largest construction companies and is part of a joint venture that is also working on the World Trade Center Transportation Hub, admitted no wrongdoing but paid $19.6 million to avoid criminal prosecution on allegations regarding unrelated projects.
Another large contractor, Schiavone Construction Company L.L.C., admitted in late 2010 that it had defrauded government programs over the course of five years on $691 million worth of public projects and agreed to pay $20 million to avoid prosecution.
A version of this article appears in print on October 17, 2013, on page A26 of the New York edition with the headline: Trade Center Contractor Is Said to Be Focus of Inquiry Into Misuse of Funds.