Construction giant found guilty of fraud to pay €55m

Pat Donaghy's Structure Tome admits overcharging clients by deliberately inflating invoices

A New York construction company, co-founded by Co Tyrone businessman

Pat Donaghy

, has agreed to pay a settlement of $55 million (€

40 million) and pleaded guilty to defrauding clients by arranging for subcontractors to falsely inflate bills.

Structure Tone, one of the biggest building companies in the United States with annual revenues of $3 billion, admitted overcharging clients by deliberately inflating invoices for electricians, plumbers and other subcontractors working on construction projects between 2005 and 2009.

Manhattan district attorney Cyrus Vance Jnr announced Structure Tone's guilty plea for falsifying purchase orders with intent to defraud clients in a settlement of a long-running investigation.

“Structure Tone’s felony plea and forfeiture of $55 million – one of the largest forfeitures ever imposed on a construction company – sends a clear message that this type of activity will not be tolerated,” said Mr Vance in a statement on Wednesday.

The District Attorney’s office said it overcharged customers by forcing subcontractors working on projects it managed to add in many cases “unnecessary contingencies” in an addendum to their contracts known as “the Rider B,” without the knowledge of the clients.

The company would then recover these overpayments by inducing the subcontractors to provide discounts on fixed-price contracts on other Structure Tone projects.

Structure Tone said t the matter was now resolved and that current projects were not affected. “The record-keeping issues, which form the basis of this agreement, date back to the period from 2005 to 2009, and we have fully co-operated with the authorities from the beginning,” the company said.

The company, which has offices in Ireland, has worked on Avoca's store in Malahide, Co Dublin, the Dublin Business School and Merck Sharp & Dohme's offices. Projects in Manhattan include St Patrick's Cathedral and the Federal Reserve Bank of New York.

This is not the first time Structure Tone has been in trouble with authorities. The firm paid $10 million and pleaded guilty in 1998 in a $2 billion bid-rigging and bribery scandal involving the payment of a bribe to win a $500 million contract to renovate Sony’s former headquarters.

Mr Donaghy, who retired from Structure Tone in 1999, emigrated to the US from Carrickmore, Co Tyrone, in 1959 and set up the firm with partner Lewis Marino in 1971. Their families still own the company.

A long-time supporter of Sinn Féin, the company donated $10,000 to the party’s US wing Friends of Sinn Féin in the year to October 2013, according to US federal returns.

Simon Carswell

Simon Carswell

Simon Carswell is The Irish Times’s Public Affairs Editor and former Washington correspondent