MANHATTAN (CN) - A contractor who was awarded nearly $600 million for World Trade Center projects made tens of millions of dollars illegally by forming fraudulent joint ventures that he told the Port Authority were minority- or women-owned businesses, federal prosecutors said Thursday in a two-count indictment.
Canadian citizen Larry Davis, 63, the CEO of DCM Erectors, faces up to 40 years in prison if convicted of wire fraud and conspiracy to commit wire fraud.
After pleading not guilty in Thursday afternoon, Davis was released on a $100,000 personal recognizance bond, guaranteed by his 47-acre home in Ontario.
U.S. Attorney Preet Bharara said in a statement that Davis and his company "had the special privilege of working on the World Trade Center Project, which is not only a major project, but is also one that holds a special place in New Yorkers' hearts."
In 2007, DCM landed a roughly $256 million contract for work on One World Trade Center, previously known as the Freedom Tower, according to the criminal complaint.
DCM allegedly received an approximately $330 million contract two years later for the World Trade Center Transportation Hub.
Since 1988, Port Authority regulations have required that recipients of its contracts make a good faith effort to achieve a goal of including at least 12 percent minority- and women-owned enterprises, also known as the M-WBE program.
To qualify, a minority or woman must own at least 51 percent of the company.
To gain an M-WBE credit, Davis created a joint venture between his company and Johnny Garcia's company Solera Construction, Inc. in 2001, according to the complaint.
Their joint venture, Solera/DCM, claimed credit for $70 million of metal decking work that actually was performed by an unidentified subcontractor, the complaint states.
"In exchange for allowing DCM to use Solera/DCM to obtain MBE credit, Davis agreed to pay Garcia $150,000 as annual salary and a monthly lump sum payment of $12,500 for One WTC and a total of $9,500 for the WTC Hub," the complaint states. "Garcia's $150,000 annual salary was paid through Solera/DCM's payroll service via wire transfer and the monthly lump sum payments were paid by check drawn on a Solera/DCM bank account to Solera. Since in or about 2008, the total amount of Garcia's $150,000 annual salary and the lump sum payments is at least two million dollars."
Another alleged fraud involved GLS Enterprises, Inc., a company wholly owned by Gale D'Aloia and whose only client was DCM, according to the complaint.
Through this arrangement, DCM allegedly claimed credit for $6.3 million in surveying and payroll management work.
Garcia, 48, and D'Aloia, 66, both pleaded guilty to their charges, forfeited hundreds of thousands of dollars and agreed to cooperate with the government, prosecutors say.
Most of the hearing late Thursday afternoon ironed out Davis's bail terms.
Davis has houses and businesses in New Jersey, Ontario and the Bahamas, his lawyer Sanford Talkin said in court.
Talkin, of New York-based Talkin, Muccigrosso & Roberts LLP, urged the judge to let his client continue making weekend trips to see his family in Canada.
Assistant U.S. Attorney Carrie Cohen opposed the request, for fear that Davis would not be extradited from Canada or the Bahamas, if he refused to return to court.
Talkin replied that Davis had been traveling back and forth from Canada throughout the course of his very public criminal investigation.
The New York Times confirmed the inquiry in an article on Oct. 16, 2013, after an inspector general's report accused Davis of misconduct.
Davis has an additional interest in staying in New York because his company DCM is suing the Port Authority for $40 million, Talkin said.
"He's looking forward to his day in court," Talkin added.
U.S. Magistrate Judge Debra Freeman agreed to consider allowing him to make visits to Canada if he can agree upon a waiver with prosecutors and Canadian courts foregoing extradition.
She set a pretrial hearing for Sept. 2.