Taxpayers milked in LendLease’s cosy work deal

Only a few years ago, in New York City, after a three-year inquiry by the FBI, managers in a construction firm confessed to a deliberate and complex criminal act. For more than a decade, on public works and building sites, the company had been defrauding the American taxpayer of significant funds. The company had used a range of methods, for example, it paid subcontractors for one or two hours of overtime every day that was not worked and passed this cost on to their client, the government, while taking its cut on the way.

Even though the FBI perused millions of documents and conducted hundreds of interviews, the amount of money pilfered from the American public was almost impossible to calculate. It would have meant an unachievable record recovery and analysis. For example, somebody would have had to go through the wage records of individual employees for all of that time, and more.

Perhaps for this reason, the authorities allowed the company to make a one-off payment of $US56 million in a settlement deal. This deal meant criminal charges against the business were dropped.

At the time, many saw the payment as a bribe, an arrangement to let government officials avoid the embarrassment of a trial, where shocking information about the company’s behaviour and government incompetence would likely emerge.

The details of the fraud, and the payment made, were announced by prosecutor Loretta E. Lynch, a US attorney, in Brooklyn, in 2012.

The New York Times said the company had admitted to “overbilling city, state and federal agencies for fictitious work including the new federal courthouse in Brooklyn, where the charges against the company and its former leader were filed” and “the projects also included the renovation of Ms. Lynch’s offices in Brooklyn and the demolition of the Deutsche Bank building at ground zero, where a blaze in 2007 killed two firefighters”.

The company also confessed to evading government rules about which subcontractors it must hire on building projects. A specified percentage of these smaller businesses were supposed to be owned by minorities and women, but the company ignored that requirement.

The settlement deal was described by Lynch as the largest construction-fraud settlement in New York City history. The business relies on public contracts for much of its profits and because the settlement deal was struck, it was allowed to keep bidding on public work. It should have been prosecuted and banned. However, Lynch said their decision was based on the fact the company co-operated with the FBI, agreed to put reforms in place, and “the hundreds of New York jobs it would save”.

How embarrassing all of this is right now, for us, because the company concerned is an Australian company; Lendlease. You see the name plastered on projects all around this nation. They appear to be controlling members of the Master Builders Australia, the employer group in the construction sector and its managers hobnob with our leaders in Canberra. This week Lendlease made headlines again, for making an enterprise bargaining agreement that is seen as overly generous, with the CFMEU.

The EBA delivers pay rises of 20 per cent over four years, a 36-hour week, domestic violence leave and more. Lendlease say the deal is “industry standard”. I don’t see any problem with the generosity of the deal, providing it is limited only to those employees that Lendlease directly hires. But, of course, this may not be the case. This deal will be imposed on other smaller businesses by Lendlease, and that is the real problem with it.

This EBA will now set the standard for every sub-contractor on every Lendlease site. If history is anything to go by, no smaller business will be given any work by Lendlease unless it signs up to it, and pays its own staff everything in it, too.

In this way, Lendlease can control the income, and the expenditure, of all the small businesses it engages. This is a great way to suppress competition and maximise profit. The beauty of this scheme, too, for Lendlease, is that it gets to stand by and sigh, while the untouchable unions, its partners in the arrangements, take all the blame.

Now, if this is not Lendlease’s intention, and it is willing to allow subcontractors to work on its jobs without signing up to the EBA, I invite the company to correct me. I would love this to happen, but I won’t hold my breath.

Despite this history — collusion with its labour force to defraud the taxpayer — and its terrible reputation here for forcing subcontractors into union arrangements, Lendlease routinely wins government contracts. I don’t understand why this happens; in fact, I don’t understand why anyone in government gives Lendlease the time of day. Why doesn’t the government invite some decent, ethical construction firms in from overseas? Now that you know all this, seriously, is there anyone out there who thinks it is a sensible idea to hire Lendlease to build anything ever again?