Prosecutors: School construction watchdogs bribed
THE ASSOCIATED PRESS, November 16, 2005

Six current or former officials of the agency that oversees New York City school construction have been arrested and charged with accepting tens of thousands of dollars in bribes, authorities announced Wednesday.

Prosecutors said the six project officers with the School Construction Authority were supposed to be acting as fiscal watchdogs who authorized payments to contractors but on several occasions accepted payments from the builders they were monitoring.

Two of the officials, Neron Holder and Paul Nair, were accused of taking $40,000 over four months in 2000 from a contractor working on a public school in the Bronx. The pair also conspired to have a contractor do work on their private homes, prosecutors said.

Winston Davis was charged with accepting an undisclosed amount of cash in 2004 from a contractor in exchange for approving payments that the business shouldn't have received.

Former SCA project officer Melvin Porterfield was charged with accepting payments in 2004 in exchange for providing a contractor with confidential internal information about a school building project that ostensibly could have helped the company land government work.

Prosecutors said Tosif Siddiqi solicited bribes of electronic equipment worth $10,000 from a contractor when he was an SCA officer in 2001 and 2002. They said James Keller accepted a cash payment last September related to construction at a high school in Brooklyn.

All six defendants, in custody and unavailable for comment, were scheduled to be taken before a federal magistrate later Wednesday.

One of the contractors who accepted payments secretly cooperated with investigators, prosecutors said.
Copyright © 2005, Newsday, Inc.

School Construction Officials Charged
They Allegedly Accepted Bribes
Eyewitness News' Jim Dolan

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(New York - WABC, November 16 , 2005) - They were supposed to be fiscal watchdogs. But now, six current and former officials with the School Construction Authority -- the agency that oversees building
public schools -- are charged with accepting tens of thousands of dollars in bribes.

Jim Dolan is in Lower Manhattan with the story.
Paul Nair and his wife and lawyer stood outside federal court tonight stunned and a little afraid about the sudden turn his life took today and facing a decade in prison if he's convicted.

Jim Dolan: "Are you involved in any of this at all?"

Paul: "I plead not guilty."

Jim: "Are you aware of any of the crimes they are talking about?"

Paul: "No, I really don't."

Anthony Ricoh, defense attorney: "Paul Nair's a family man, a hard worker, grew up in New York and never been arrested in his life, he's 45-years-old, he's a family man as you can see he's here with his wife and he plans to fight the charges."

Nair is one of six school construction authority employees arrested today and charged with various corruption charges, including soliciting and accepting kick-backs of as much as forty thousand dollars from contractors, approving fraudulent payments to contractors and getting additional kickbacks from those, and finally, selling insider information on bidding specifications to contractors.

Some of the allegations go back to 2000.

Lou Aidalla, defense attorney: "Five and a half years and there is something inherently wrong."

Aidalla represents Eric Holder who lives in Elmont, Long Island, where he is alleged to have had free construction work done by a schools contractor.

In a statement, the department of education said today: "The actions of these individuals are deplorable. The SEA inspector general through this investigation, has once again given notice that such acts will not be tolerated."

If convicted, the defendants face up to 10 years in prison.

Six present and former school construction authority employees charged with accepting bribes

Federal, state and New York City authorities yesterday announced the arrests of six persons, including three present and three former project officers with the New York City School Construction Authority, for soliciting and accepting bribes from contractors working on SCA public school construction projects. According to four criminal complaints and one indictment filed in federal court and unsealed yesterday in Manhattan, Paul Nair, Neron Holder, Winston Davis, Melvin Porterfield, Tosif Siddiqi, and James Keller, each held positions at the SCA in which they were responsible for monitoring new construction and renovation projects for New York City Public Schools and for approving payments to contractors.

The defendants were each responsible for reviewing and approving all requests for payments, change orders, certified payrolls and other required submissions to the SCA by contractors working on construction projects under their supervision.

Bribery Alleged In City School Construction
By JACOB GERSHMAN - NY Sun, November 17, 2005

Six current and former employees of the city agency responsible for public school construction were arrested yesterday for accepting tens of thousands of dollars in bribes from contractors between 2000 and 2004, authorities said.

The indictments unsealed in federal district court in Manhattan sent a message to Mayor Bloomberg that the anticorruption safeguards he instituted after taking over the troubled School Construction Authority in 2002 may have fallen short.

While calling the alleged bribery "deplorable," a senior education department official, Deputy Chancellor Kathleen Grimm, said the construction authority has boosted its anti-corruption effort since the alleged incidents took place, making it significantly more difficult for employees to commit such crimes.

Authorities said the indictments were the result of an investigation that had lasted more than two years. The city's Department of Investigation, the state attorney general's office, and FBI officials in New York conducted the probe.

Many of the allegations against the employees stem from the June 2004 arrest of a construction authority contractor who was charged with wire fraud and income tax evasion. In a plea deal, the contractor, unnamed in the indictments, told officials of numerous cases of project officers demanding cash for processing payments. The contractor then tape-recorded meetings with the defendants, during which they are heard offering their services, discussing previous bribes, and accepting cash.

One project officer for the School Construction Authority is said to have complained to a contractor that his "pockets were empty" and accepted a bribe before embarking on a vacation to Australia.

Federal prosecutors accused two other employees, one of whom ran the authority's change order unit, of taking more than $40,000 in bribes and then conspiring in demanding that the contractor perform work on their homes.

In another case, a project officer allegedly exchanged money for confidential engineering estimates for upcoming competitive bids on five public schools.

Five of the six arrested were either current or former project officers whose responsibilities included reviewing requests for payment and change orders, which are issued when a contractor seeks approval for a modification in a building contract. Department of Education officials said the authority employs about 120 project officers and committed to more than $2 billion in contracts in fiscal year 2005.

The defendants who currently are employees at the authority are project officers Neron Holder, Winston Davis, and James Keller. The former employees are Paul Nair, who was the director of the change unit order in 2000, and project officers Melvin Porterfield and Tosif Siddiqi.

In exchange for engineering estimates for bids on five public schools in Manhattan, Mr. Porterfield allegedly accepted from the cooperating contractor who pleaded guilty a total of $5,000 in two sting operations. The contractor told investigators that Mr. Porterfield had previously demanded "numerous" cash payouts before approving and processing requests.

The contractor estimated Mr. Keller received $100,000 in bribes for payments on projects involving Sheepshead Bay High School in Brooklyn. In the case of Mr. Davis, prosecutors charged that he instructed a contractor to submit a fraudulent payment request and took for himself a portion of the money. That was the only fraudulent payment request mentioned in the separate indictments.

Messrs. Holder and Hair were the only defendants said to have conspired together. Each defendant faces a maximum sentence of 10 years and a $250,000 fine. The defendants, who made court appearances yesterday, and their attorneys could not be reached for comment.

William Goldstein, the president of the School Construction Authority, told The New York Sun that its inspector general, Barbara DiTata, who led the investigation, "did a great job" in "ferreting out" the alleged corruption.

School officials defended the safeguards against corruption already in place. In a statement, Ms. Grimm said the construction authority had strengthened audit procedures by hiring an outside auditor, KPMG, and by installing a computerized system that tracks the change order records.

"The SCA Inspector General, through this investigation, has once again given notice to those who work for or do business with the SCA both now and in the past that such acts will not be tolerated," Ms. Grimm said.

School officials said that under rules that were put in five months, project officers must get approval from supervising officers for all change orders. Before, they could approve change orders of up to $25,000. Officials said the change was not related to the investigation.

In the first year of his administration, the mayor gave the authority responsibility over planning and executing school projects, eliminating the education department's facilities division. The restructuring came months after a stinging report by a commission the former chancellor, Harold Levy, established said school construction in the city was hampered by "overlapping bureaucracies and not enough accountability."

The report found that it was costing $425 to $450 a square foot to build schools, almost three times the national average. The mayor also cut jobs and did away with antiquated construction rules in an effort to bring costs down.

The case below lists some of the problems that exist within the SCA:

ABIELE CONTRACTING, INC., APPELLANT, v. NEW YORK CITY SCHOOL CONSTRUCTION AUTHORITY, &C., RESPONDENT. (AND A RELATED ACTION.)
91 N.Y.2d 1, 689 N.E.2d 864, 666 N.Y.S.2d 970 (1997).
October 28, 1997
2 No. 163
(97 NY Int. 0177)
Decided October 28, 1997
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This opinion is uncorrected and subject to revision before publication in the New York Reports.
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Peter L. Agovino, for appellant.
Alan G. Krams, for respondent.
Surety Association of America, amicus curiae

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The primary issue presented on this appeal is whether a municipal agency's determination of default and subsequent termination of contract with its general contractor was reviewable only in an article 78 proceeding, and therefore not subject to a plenary action instituted by the general contractor. We hold that since the municipal agency had neither statutory nor contractual authority to render a quasi judicial determination, it was not empowered to issue a final and binding determination of default reviewable only in an article 78 proceeding. Thus, a plenary action sounding in contract is not precluded under the circumstances presented here.

I.
On May 17, 1990, plaintiff Abiele Contracting Inc. was awarded a contract by defendant, the New York City School Construction Authority (the SCA), to renovate and modernize the facilities at Samuel J. Tilden High School in Brooklyn for approximately 16.4 million dollars. Abiele commenced performance under the contract soon thereafter. Over the course of two years, the renovation of Tilden High School was plagued with complications including staff turnover, multiple site and design conflicts, and numerous changes in scheduling and in the scope of work. The SCA attributed these problems to Abiele's lack of planning, failure to follow instructions and inadequate staffing. Abiele, in response, traced the problems to the SCA's lethargic response to expressed concerns and its failure to grant Abiele access to certain work areas. Not surprisingly, conflicts arose between the parties over costs and payments.

In November 1992, the SCA proposed that the construction contract be closed out "on consent" and offered to pay Abiele 2 million dollars to achieve that end. Abiele rejected the offer on the ground that it was owed more than 5 million dollars for unpaid work and materials. The parties met in early January 1993 to continue negotiations and to review the status of Abiele's performance. When negotiations failed, the SCA's Chief Project Officer directed Abiele, by letter dated January 14, 1993, to cease all work at the site pending a scheduled meeting of the SCA's Default Committee. letter asserted eleven proposed grounds for termination and stated that the Committee would convene to consider whether Abiele should be terminated for cause pursuant to Article 9 of the contract and whether it would be barred from bidding, contracting and subcontracting on future contracts with the SCA. Abiele was advised that it could attend the meeting, with counsel, to present its position.

The Default Committee and Abiele met on January 29, February 11, 18, and 19, 1993. During those sessions, Abiele contested virtually all of the SCA's allegations of its sub standard performance. Both parties submitted numerous memoranda and exhibits in support of their respective positions and both parties called several witnesses. No transcript or record of the proceedings exists.

On April 23, 1993, Abiele was notified that its contract with the SCA had been terminated for cause and it would be barred from bidding, contracting or subcontracting on any SCA contracts for three years. An attached decision enumerated the grounds for termination while also finding some claims against Abiele to be unsubstantiated. Abiele appealed its termination and debarment to the president of the SCA, but on June 10, 1993, Abiele's appeal was denied.

On October 22, 1993, Abiele commenced a plenary action against the SCA seeking money damages for breach of the contract. In moving for summary judgment, the SCA argued that since plaintiffs had failed to challenge the administrative finding of default in an article 78 proceeding, they were bound by that determination and could not attempt a collateral attack upon the default determination by instituting a plenary action. Supreme Court granted SCA's motion for summary judgment. The court concluded that an article 78 proceeding was the appropriate mechanism by which to contest the SCA's default determination and a failure to do so "precludes a plenary action for damages and has res judicata effect."

The Appellate Division affirmed and held that the initiation of an article 78 proceeding was a prerequisite to recovery. The court also reasoned that since the plenary action was "framed...in terms of wrongful termination of contract" it was nothing more than a collateral attack on the Default Committee's finding, and was therefore barred. This Court granted leave to appeal.

II.
We have recognized that "there are circumstances in which the same governmental action may constitute a violation of contract and also be of a character that would support a claim for article 78 relief" ( Goodstein Constr. Corp v Gliedman , 117 AD2d 170, 176 [Sandler, J.P., concurring]), affd 69 NY2d 930). However, the issues presented in a contract action differ significantly from those presented in an article 78 proceeding. When the damage allegedly sustained arises from a breach of the contract by a public official or governmental body, then the claim must be resolved through the application of traditional rules of contract law. On the other hand, when a petitioner asserts that the determination of a governmental body or public official is "in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion" and seeks nullification of same, then an article 78 proceeding is the appropriate vehicle through which the claim may be addressed ( ).

Thus, where the language of the complaint asserts violations of a plaintiff's rights under a contract and the primary thrust of the allegations is in contract, a plenary action sounding in contract is the appropriate remedy. Stated differently, where the focus of the controversy is on an agency's breach of an express contractual right, or on the agency's violation of the implied obligations of good faith, fair dealing and cooperation, a contract action is the recommended remedy.

Abiele's complaint contains allegations of a breach of an express contractual term requiring notice and an opportunity to cure as well as allegations of conduct on the part of the SCA which sufficiently raise the spectre that the agency violated its obligation to act in good faith. or not Abiele ultimately prevails on its claims, clearly the nature of the allegations here indicates that a plenary action sounding in contract is the appropriate remedy.

III.
A municipal agency's finding that a general contractor has defaulted on its performance under the contract will not bind the general contractor, and foreclose a plenary action, unless the agency is endowed with contractual or statutory authority to render a quasi judicial, final and binding determination. While defendant correctly notes that judicial review of administrative actions is generally achieved through an article 78 proceeding, the administrative action must, as a prerequisite, be authorized ( see , Foy v Schechter , 612; Allied Chem. v Niagara Mohawk Power Corp ., , 276, cert. den. ). We conclude that the SCA had neither statutory nor contractual authority to render a binding administrative determination in this case, and thus, Abiele was not precluded from challenging the default finding in a contract action.

The SCA relies primarily on terms within the written agreement between the parties which, it claims, granted it the requisite authority to render a final and binding determination. Specifically, the SCA points to Section 9.01 of the standard form construction contract, entitled "Termination for Cause," as the source of its power. This provision states, in relevant part, that if "a substantial violation of a material provision hereunder shall have occurred due to the fault of the Contractor and the Contractor shall fail to cure such default within ten (10) days after receipt of Notice from (the SCA) specifying the nature of such default ...then the SCA] may, in addition to all other rights (the SCA) may have as provided by law, terminate the contract by giving not less than ten (10) days' Notice of termination to the Contractor, whereupon the Contract shall be deemed terminated at the end of such Notice period."
Unless statutory language or public policy dictates otherwise, the terms of a written agreement between parties define the rights and obligations of the parties to the agreement ( see , Westinghouse v New York City Trans. Auth. , , 55). We have long held that the fundamental objective when interpreting a written contract is to determine the intention of the parties as derived from the language employed in the contract ( see , Morlee Sales Corp. v Manufacturers Trust Co. , , 19). Similarly, where the parties have agreed to conduct themselves in accordance with the rights and duties expressed in a contract, a court should strive to give a fair and reasonable meaning to the language used ( Aron v Gillman , 309 NY 157, 163; Sutton v East Riv. Sav. Bank , , 555).

The above quoted contractual provision is an unambiguous statement of the SCA's right to terminate the contract, its obligation to allow the contractor an opportunity to cure once it has concluded that provisions of said contract were breached, and its right to contract with another, at the breaching party's expense, to continue the work. It is a simple default provision. There is no evidence that by agreeing to thelanguage of this provision, Abiele unequivocally declared its intention to surrender substantive or procedural rights to seek redress in a plenary action ( see , e.g. , Thomas Crimmins Contracting Co. v City of New York , , 171; Naclerio Contracting Co. v City of New York , 116 AD2d 463, affd for reasons stated below 69 NY2d 794).

This conclusion is supported by reference to other provisions of the contract ( Rentways, Inc. v O'Neill Milk & Cream Co. , 308 NY 342, 347 contract provision or clause must be read in the context of the entire contract). Specifically, in Section 19.11, "Waiver of Remedies," the parties agreed that "the Contractor hereby waives any and all rights and remedies to which the Contractor might otherwise be or become entitled to because of any wrongful act or omission of the (SCA) saving only the Contractor's right to money damages." Thus, the contract itself contemplated Abiele's right to seek money damages. The SCA's assertion that the contract limits Abiele to money damages in a special proceeding is unpersuasive.

IV.
The SCA also argues that since the Public Authorities Law, and a related regulation, granted it the power to disqualify firms from bidding on SCA contracts, the SCA also had the requisite adjudicatory authority to make binding determinations regarding Abiele's contract performance. The SCA's reliance on the statute and regulation is misplaced.

As a general rule, "the jurisdiction of an administrative board or agency consists of the powers granted it by statute, (and thus) a determination is void...where it is made either without statutory power or in excess thereof" ( Foy v Schechter , supra ). As a "creature of statute" ( see , et seq. ), the SCA "lacks powers not granted to it by express or necessarily implicated legislative delegation" ( Flynn v State Ethics Comm'n , , 202).

The provisions of the Public Authorities Law cited by the SCA do not expressly or impliedly grant the necessary authority to render quasi judicial determinations. Section 1734 of the statute establishes internal procedures for the making and administration of contracts by the SCA, ( see (1)(a)) and Section 1728 articulates the powers and duties of the SCA including the power to "make and execute contracts" (7). The agency may also "do any and all things necessary or convenient to carry out and exercise the powers given and granted by this section" (17). Yet, the narrow grant of power "to make and execute" contracts and the general exhortation to do all that is necessary or convenient does not create authority to finally determine legal issues arising under the contract and to bind the contracting agency. Any other interpretation is unsupported by the plain meaning of the statute. Moreover, this interpretation is in accord with theterms of the contract which, as we have previously stated herein, clearly evinces the intent of the parties to allow a claim for money damages.

Similarly, the regulation cited by the SCA offers no support for the agency assertion of authority ( see , 21 NYCRR § 9604.1). It merely establishes an internal process to be followed before a contract may be terminated for cause. Moreover, the SCA cannot confer upon itself, through the promulgation of a regulation, authority to render quasi judicial and binding determinations ( see , Tze Chun Liao v New York State Banking Dep't , , 510 "An agency cannot create rules, through its own interstitial declaration, that were not contemplated or authorized by the Legislature and thus, in effect, empower themselves to rewrite or add substantially to the administrative charter..."). Therefore, since we have concluded that the regulation's enabling statute, , does not address or envision the exercise of adjudicatory powers by the agency, the SCA cannot point to the regulation as the source of such power.

V.
The SCA next urges this Court to find that Abiele is precluded, on the theory of collateral estoppel, from commencing a plenary action, even where defendant's actions were not authorized by statute or contract, because Abiele fully participated in a "detailed and vigorously contested hearing" of its alleged breach where it presented evidence, asserted legal arguments, and had a fair opportunity to rebut contrary assertions.

While issue preclusion may arise from the determinations of administrative agencies these administrative decisions must be "'quasi judicial' in character" ( Allied Chem. v Niagara Mohawk Power Corp. , , 276, cert. den. ). To ascertain whether an agenc y's proceeding was "quasi judicial," a court must engage in a multi faceted inquiry, beginning with "the threshold determination that the agency has the statutory authority to act adjudicatively" ( id. ; Ryan v New York Tel. Co. , , 499). As previously discussed herein, the SCA was not granted authority to render a final, binding and quasi judicial determination of default. Thus, the SCA's contention does not survive even this threshold inquiry.

In sum, we conclude that the SCA was not authorized to render a final and binding determination of default against Abiele that was subject to review only under article 78. The contract action instituted by Abiele may proceed. The plenary action was instituted within the six months limitation period provided in the contract and therefore is not time barred.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the case remitted to the Appellate Division for consideration of issues raised but not determined on the appeal to that court.

Order reversed, with costs, and case remitted to the Appellate Division, Second Department, for further proceedings in accordance with the opinion herein. Opinion by Judge Smith. Chief Judge Kaye and Judges Titone, Bellacosa, Levine, Ciparick and Wesley concur.

Decided October 28, 1997

Notes
*construction contract is silent on the subject of the Default Committee. The relevant contractual provision, Section 9.01, which outlines a process for termination for cause, makes no mention of such a committee. Instead, the Default Committee was established by regulations intending to provide "the means and methods of Terminating for Cause poor or nonperforming contractors" ( see , 21 NYCRR § 9604.2(e), (f) amended 1995).

* the first, second, third, eighth and ninth causes of action allege that Abiele was owed the balance of the contract price as well as a significant amount of monies due for extra and additional work approved by the SCA and already expended. The fourth cause of action alleges that the SCA improperly and arbitrarily terminated the contract and also violated same by the failing to follow specific provisions therein. In its fifth and sixth causes of action, Abiele enumerates a number of acts allegedly taken by the SCA to frustrate, impede or interfere with the performance of the contract.

* provision of the contract further provides that "in the event the (SCA) determines that there has been a material breach by the Contractor of any of the terms of the Contract and such breach remains uncured for thirty (30) days after service on the Contractor of Notice thereof, the (SCA), in addition to any other right or remedy it might have, may terminate this Contract and the (SCA) shall have the right, power and authority to complete the services provided for in this Contract, or contract for their completion, and any additional expense or cost of such completion shall be charged to and paid by the Contractor."