The Real Deal New York

Teamster’s pension fund sues HRH Construction, others

December 21, 2011 02:11PM
By Adam Pincus

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From left: 184 Kent Avenue and 235 Gold Street

The battle between one-time industry powerhouse HRH Construction and
unions that work in the building trades opened another front this month, adding
to a larger clash between developers seeking lower building costs and unions
struggling to keep their members employed.

The trustees of the International Brotherhood of Teamsters Local 282 pension
fund filed a complaint Dec. 10 in U.S. District Court for the Southern District of
New York in White Plains claiming HRH used shell corporations
to avoid making payments they say are required through industry-wide collective
bargaining agreements.

The complaint does not specify the amount of money allegedly unpaid, but is
seeking a judgment from the court ordering HRH and other defendants to make
such payments, including interest and damages.

However this is not the first development in a saga that has been unfolding for
a couple of years, following HRH’s filing for bankruptcy protection in September
2009. Since then the industry has gotten a rare peek into the inner workings of
one firm that may have tried to save money for itself and its developer clients.

In a related case, this September, two New York City construction unions filed
suit in federal court in White Plains claiming that they were cheated out of $7
million in wages and benefits. That case said construction projects of HRH’s
allegedly bogus front company, Leviathan Construction Management Services,
paid nonunion workers $12 per hour without benefits, a steep savings from the
$55 union rate, that calls for benefits as well.

The Teamsters suit names as defendants HRH and its principals including CEO Brad Singer, as well as six other individuals and six development corporations. The firms include Lalezarian Development companies Tower 37 LLC, which built the Townsend at 350 West 37th Street); and Brooklyn Gold LLC (development entity of Brooklyn Gold at 235 Gold Street) and the affiliated Brooklyn Tillary LLC. In addition, the suit names 184 Kent Fee LLC (which developed 184 Kent Street in Williamsburg), and JMH Development, a development firm with offices in the West Village.

The filing says HRH was a signatory to the collective bargaining agreement
between the Contractors Association of Greater New York and the city’s
unions including Teamster’s Local 282, which requires HRH to work with union
subcontractors.

The agreement requires all parties to make contributions to the funds based on
the number of covered employees.

The complaint alleges that in March 2007, HRH CEO Brad Singer and his
wife Susan, in an effort to skirt union wages, schemed with developer Frank
Lalezarian and others to create Leviathan, “as an alter ego of HRH to engage in
construction management operations in knowing violation of labor agreements.”

The Teamsters declined to comment, and an attorney for HRH was not
immediately available for comment. Lalezarian did not respond to a call seeking
comment.

Leviathan took on the critical role of the construction manager, tasked with,
among other things, negotiating and signing contracts with subcontractors, the
suit says. At the same time, HRH was hired as the “owner’s representative,”
a simpler and generally less lucrative job that does not involve negotiating or
administering contracts, the complaint says.

But, the suit alleges, HRH employees, acting under Leviathan, were performing
the work of the construction manager, but managing the work with non-union
workers, providing a huge cost savings to the developer.

But to skirt the union wages, the complaint says HRH affiliate Leviathan worked
as construction manager for several projects including Tower 37 (the name was
later changed to Townsend], 235 Gold Street and 184 Kent Avenue.

The complaint alleges that before the March 2007 meeting, Singer met with
representatives of the Contractors Association of Greater New York, which said
HRH could not operate as a construction manager if it hired non-union workers or
firms, but that it could operate as an owner’s representative.

“For every hour worked on the Gold Street and 37th Street projects… Lalezarian
Developers knew they would save a substantial amount of money,” the complaint
says.

The defendants agreed that they would not report hours worked by Leviathan
employees, and that subcontractors would also not report their hours worked to
the pension fund, as they would normally do for a union job, the complaint says.

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