Over $3 Million In Illicit Proceeds Funneled To Pakistani Amusement Park
A criminal complaint was unsealed this morning in federal court in Brooklyn charging Muzaffar Nadeem, Afzaal Chaudry, and Zainul Syed with conspiring to defraud the New York City School Construction Authority (SCA) by falsely certifying that workers on the defendants’ SCA-funded construction projects received the legally and contractually mandated prevailing wage for their work.1 The complaint also charges Syed, as well as Irfan Muzaffar and Arun Gandham, an employee of a check-cashing business located in Jersey City, New Jersey, with structuring financial transactions in violation of federal law. The defendants arrested this morning have their initial appearances scheduled later today before United States Magistrate Judge Viktor V. Pohorelsky at the U. S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Eric T. Schneiderman, New York State Attorney General, Rose Gill Hearn, Commissioner, New York City Department of Investigation (DOI); Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation (IRS), New York; and Special Agent-in-Charge Robert Panella, New York Regional Office of the U.S. Department of Labor, Office of Inspector General (DOL IG), Office of Labor Racketeering and Fraud Investigations.
As alleged in the complaint and other court filings by the government, Nadeem operated a construction company, SM&B Construction Co., Inc. (SM&B) in Brooklyn, which has been awarded over $72 million in contracts by the SCA since 1997 and has received over $32 million in fraud-induced payments from the SCA since 2008. Chaudry and Syed worked as a foreman and office manager, respectively, at SM&B. Both New York State Labor Law and the terms of its contracts with the SCA required SM&B to pay workers on SCA-funded projects a prevailing wage rate, which was set by the New York City Comptroller. In fact, SM&B paid workers on its projects, including bricklayers and laborers, in cash at rates far below the prevailing wage and then falsely certified to the SCA that the workers had been paid the prevailing wage. For example, bricklayers renovating a Brooklyn elementary school were paid $250 for each eight-hour day, rather than the $580 daily wage to which they were legally entitled. Laborers on the same project were paid about $125 per day, rather than the $460-$540 daily wage to which they were legally entitled. As alleged in a detention memorandum filed today by the government, more than $3 million of SM&B’s proceeds from the charged fraud scheme were laundered through shell companies and then sent to Pakistan to fund an investment in an amusement park and resort complex there.
To conceal the charged fraud scheme from law enforcement, and to obtain cash to pay the illegally low wages to workers, Syed, Muzaffar, and Gandham allegedly engaged in illegal structuring, specifically, cashing multiple checks, each for less than $10,000, on a single day, for a total amount of more than $10,000, and thereby avoiding the required filing of Currency Transaction Reports (CTRs). According to the complaint, since January 2008, more than $3.6 million in structured checks were written on SM&B’s account.
“As charged in the complaint, the defendants promised workers a fair wage for a day’s work - work that was often difficult manual labor, but shortchanged them to line their pockets. They also defrauded the taxpayers by falsely stating to the School Construction Authority that they were paying a full day’s wages for a full day’s work. Their lies resulted in the awarding of contracts they were not entitled to, tens of millions of taxpayer dollars obtained by fraud, and the exploitation of workers," stated United States Attorney Lynch. “They will now be held to account for their actions." Ms. Lynch expressed her grateful appreciation to the New York City School Construction Authority Office of the Inspector General, the New York State Office of the Attorney General Organized Crime Task Force, the New York City Police Department, and the New York County District Attorney’s Office for their assistance in the investigation.
Attorney General Schneiderman stated, “My office will not tolerate employers who violate New York’s labor laws, steal taxpayer dollars and violate the public trust. Instead of complying with the law and paying their employees the fair and legally required wages, these unscrupulous business owners cheated their workers and stole tens of millions of dollars from New York City schools."
DOI Commissioner Gill Hearn stated, “The defendants were well schooled in cheating their workers, according to the charges, and even sent millions they skimmed overseas to fund an amusement park. But defrauding the City’s school construction program is a serious crime that no one in law enforcement finds amusing. DOI thanks our partners in this case for their enduring commitment to rooting out fraud in our City’s construction industry."
IRS Special Agent-in-Charge Weirauch stated, “Structuring financial transactions to avoid currency reporting requirements is a criminal violation of federal law under the Bank Secrecy Act. Such investigations are important because structuring is essentially a form of money laundering. The structuring activities alleged in this complaint not only hid a major fraud, but they provided the means to deprive hard working individuals of honest wages."
DOL IG Special Agent-in-Charge Panella stated, “Today’s charges serve as a deterrent to those who would allegedly defraud unions and workers by falsifying payroll records to conceal their crimes. The Office of Inspector General will continue to work closely with our law enforcement partners to investigate these types of allegations."
If convicted, the defendants charged with conspiracy to commit mail fraud each face a maximum sentence of 20 years’ imprisonment. If convicted, the defendants charged with illegally structuring financial transactions each face a maximum sentence of five years’ imprisonment.
The government’s case is being prosecuted by Assistant United States Attorneys Paul Tuchmann, Lan Nguyen and Claire Kedeshian.
The Defendants:
MUZAFFAR NADEEM
Age: 57
Residence: Brooklyn, NY
AFZAAL CHAUDRY
Age: 46
Residence: Brooklyn, NY
ZAINUL SYED
Age: 38
Residence: Brooklyn, NY
IRFAN MUZAFFAR
Age: 28
Residence: Brooklyn, NY
ARUN GANDHAM
Age: 44
Residence: Jersey City, NJ
1The charges in the complaint are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
Source: U.S. Department of Justice, Office of the United States Attorneys
