H. Todd Bullard, Esq.(585) 419-8696© Harris Beach 2011

Disadvantaged Business EnterpriseCase Study: Zohrab Marashlian, former President of Perini Corporation

H. Todd Bullard, Esq.

September 14, 2011

2

H. Todd Bullard, Esq.(585) 419-8696© Harris Beach 2011

The Players

United States v. Zohrab Marashlian, Docket No. CR-08-900

• Perini Corporation- A leading building company consistently with over a billion dollars in annual revenue.

• Zohrab Marashlian- President of the Perini Corporation Civil Division from 1993 to 2007.

3

H. Todd Bullard, Esq.(585) 419-8696© Harris Beach 2011

Government Requirements

• Government contracts required builders to hire Minority or Disadvantaged Business Enterprises (DBE) to perform a specific percentage of work of an overall contract to promote the development of small minority owned contracting work.

• To fulfill the government requirement, the DBE subcontractor must perform a “commercially useful function”.

4

H. Todd Bullard, Esq.(585) 419-8696© Harris Beach 2011

What is a “Commercially Useful Function”?

A DBE performs a “commercially useful function” when they are:

• Responsible for the execution of a distinct element of a construction contract;

• Actually performing, managing, and supervising the work involved;

• Furnishing all supervision, labor, tools, equipment, materials, and supplies necessary to perform each distinct element of work.

5

H. Todd Bullard, Esq.(585) 419-8696© Harris Beach 2011

DBE Certification

• In New York, the New York State Department of Transportation (DOT) or the City of New York must certify a contractor to make them an official DBE contractor.

• Even if the DBE contractor is certified, the DBE must still perform a “commercially useful function” to fulfill the government requirements.

6

H. Todd Bullard, Esq.(585) 419-8696© Harris Beach 2011

The Scheme

Facts• Marashlian hired DBEs solely to fulfill the

government requirement of DBEs without knowing whether the DBE would perform a commercially useful function.

• In fact, Marashlian hired some “DBEs” knowing these “DBEs” did not perform any construction work. Instead, the “DBE” would serve as a front to “fulfill the government requirement”, but in actuality would these “DBEs” only skim a 3-5% commission from the project and then the “DBEs” would hire non-DBEs to complete the construction work.

7

H. Todd Bullard, Esq.(585) 419-8696© Harris Beach 2011

The Charges

• Marashlian made false representations, on behalf of Perini Corporation, to induce more than $284 million in Government contracts.

• Marashlian earned $14 million in additional salary and bonuses from the contracts because of the underlying fraudulent contracts.

8

H. Todd Bullard, Esq.(585) 419-8696© Harris Beach 2011

The Final Chapter

• A Federal Jury in Brooklyn found Marashlian guilty of fraud and conspiracy to launder money.

• He faced up to 20 years in prison, a $23 million fine, and criminal forfeiture of $11.5 million.

• Two days after he was found guilty, Zohrab Marashlian committed suicide.

9

H. Todd Bullard, Esq.(585) 419-8696© Harris Beach 2011

Recommendations

• Hire DBE contractors that have a history of performing “commercially useful functions” or the capability of performing such functions.

• If you cannot find a DBE contractor who can perform the work, then, inform the public agency upfront.

• If the public agency determines a “good faith effort” has been made to hire a DBE, then the agency may reduce the DBE goal to enable to complete the project.