Company News

B&B Contractors Rebuilds Amid Corruption Probe

YOUNGSTOWN, Ohio — The construction and development company caught in the crosshairs of an indictment that has charged two former Youngstown city officials and a downtown developer with more than 100 counts of public corruption finds itself with the difficult task of rebuilding after more than 60 years in business – and internal theft that it claims cost the company as much as $3.5 million.

Yet the principals of B&B Contractors and Developers Inc. say they are determined to recover, noting the long-time Mahoning Valley contractor is facing challenges few have endured as it moves its business forward.

“Having weathered a storm of setbacks, B&B is excited to grow its business and standing in the construction industry,” says B&B president Geno Leshnack.

Still, the company is reeling from the aftershocks of the indictments and a subsequent internal investigation that led to the controller of the company being escorted out of its offices by FBI agents.

The public corruption indictment alleges John Doe 1 – whom sources confirm is former B&B president Philip Beshara – paid bribes to public officials in an effort to secure work in Youngstown on key city development projects.

Beshara resigned from B&B in 2016. Meanwhile, new leadership at B&B has filed two civil complaints in Mahoning County Court of Common Pleas to reclaim money they say Beshara and others stole from the company, alleging theft and perpetuating kickback schemes from subcontractors on various jobs.

Leshnack says that the company has long been a close-knit family business that dedicated itself to providing “top-notch contracting and construction services. Unfortunately, for a period of time, several key employees, ex-officers and ex-agents of B&B lost sight of this mission.”

The company says these parties sought to enrich themselves through unscrupulous and unlawful methods, and B&B has “suffered greatly” as a result. “B&B has filed multiple civil lawsuits and is fighting vigorously to seek justice from those who’ve harmed it,” Leshnack says.

B&B has cooperated with both state and federal authorities in the matter as the investigation continues. But for now, the company is focusing all its attention on “restoring its reputation and refocusing on its mission,” Leshnack notes.

“It’s a new era of business for the company and the facts will bear out on our side,” adds Nicholas Sebastiano, B&B corporate counsel.

When the fraud was uncovered during the summer of 2016, the company was “stunned at first,” says attorney Martin Desmond, who along with Sebastiano represents B&B in the lawsuits against Beshara and other past employees of the company. “But, you regroup and start plugging forward. The company is rebounding nicely.”

On Aug. 30, a Mahoning County grand jury indicted former Youngstown finance director David Bozanich, former Mayor Chuck Sammarone, and developer Domininc Marchionda on 101 counts that include bribery, aggravated theft, money laundering and engaging in a pattern of corrupt activity. All three men have pleaded not guilty. The Auditor of State’s Public Integrity Assurance Team is leading the investigation with the assistance of the Mahoning County prosecutor’s office.

At the center of it all is Beshara and B&B’s former corporate counsel, Stephen Garea, who sources confirm is John Doe 2 in the state’s indictment. According to the charges, Beshara became involved in a scheme to pay benefits to Bozanich as early as 2006 in return for the city’s support for a large expansion project B&B was spearheading at the Exal Corp. plant in the city’s Performance Place industrial park on Poland Avenue. According to B&B’s website, the company was the lead contractor in three expansions at Exal totaling $17.3 million. MS Consultants of Youngstown was the lead architect.

According to court papers, Beshara and two other individuals identified as John Doe 6 – who is described in the indictment as an employee of a Company 2 – and John Doe 8, named as a former employee and officer of Company 1, whom sources confirm is B&B, formed a company called Exal Leasing LLC to manage construction of a new building there. Exal Corp. does not own Exal Leasing.

Company 2 has since been confirmed as MS Consultants, and a former employee, Raymond Briya, is believed to be John Doe 6 mentioned in the indictment.

Exal Leasing Corp. Inc. was incorporated in January 1993 and lists Garea as the incorporating agent, according to records on file with the Ohio secretary of state. The state tax commissioner notified Garea on Jan. 4, 2007, that the company’s failure to “file the necessary corporate franchise tax reports or pay any such taxes within the time prescribed by law” had resulted in the cancellation of the company’s articles of incorporation.

A mortgage document on file with the Mahoning County Recorder’s office dated Jan. 26, 1999, identifies B&B director and employee Donald D’Andrea as the president of Exal Leasing. D’Andrea, sources say, is John Doe 8 in the indictment. John Doe 8 “provided benefits or a benefit to David Bozanich” while B&B was doing business or seeking to do business in the city, prosecutors claim. Also signing the mortgage was Samuel DeCaria, the former controller at B&B who is widely believed to be John Doe 3 in the indictment.

The indictment says that John Doe 3 “assisted the business run by John Doe 1” and in addition assisted Dominic Marchionda in securing funding for The Flats at Wick and the Erie Terminal projects.

According to the indictment, the owners of Exal Leasing “worked in conjunction with David Bozanich with at least one of the owners paying David Bozanich a $100,000 bribe or kickback for the development project.” Papers filed with the court allege that John Doe 6 made payments totaling $100,000 to a travel agency Bozanich co-owned– the Village Traveler – between 2006 and 2013, but were intended for Bozanich’s personal benefit.

John Doe 6 also provided free golf benefits and meals to Bozanich while he was serving as finance director, the indictment states. John Doe 6 is also alleged in the indictment to have paid former Mayor Sammarone between $1,000 and $1,500 per month for up to 23 months to secure work in the city.

“Company 2 senior officials were not aware of John Doe 6’s activities,” the indictment stipulates.

The indictment further alleges that Beshara in 2009 sought city help to support The Flats at Wick project, a student-housing complex that Marchionda wanted to build just north of the Youngstown State University campus. B&B was to serve as a contractor on the project, and according to the indictment, needed the work to stay in business during the Great Recession. At that point, Garea met with Beshara about “making Dave happy,” or “taking care of Dave,” according to the indictment.

According to the state, Beshara met with Bozanich at a local restaurant and paid him between $20,000 and $25,000 in order to convince the city to help the project.

Initially, Bozanich was against providing any city help, but then changed his mind once the bribe was paid, the indictment says. The city provided the project with a $1.2 million water grant and Marchionda used $1 million of that money to pay the city for a fire station on the property, with a balance of $200,000 allegedly kept by Marchionda.

Another Marchionda project, Erie Terminal Place in downtown Youngstown, also used B&B as a contractor. Authorities say during the winter of 2012, Marchionda submitted a bogus invoice to the city that showed plumbing work at the building was substantially completed when in reality it was not. The invoice was used to secure the first draw of grant money the city provided to the project from its water/wastewater fund, the indictment alleges. The city and the plumbing company were not aware of Marchionda’s actions, the indictment says.

According to records obtained by The Business Journal, the city awarded the project a $350,000 grant based on the application for payment sent by B&B. DeCaria, then the controller for B&B, signed the application document on Jan. 31, 2012, and the city released $350,000 for the project on Feb. 29.

Another invoice submitted to the city by Marchionda, dated Oct. 18, 2012, on B&B letterhead, shows additional construction costs for the project that included “site work, basement and hillside draining, brush and tree removal, storm draining along Hazel Street and hydroseeding hillside” totaling $378,000. The bill resulted in the city paying Erie Terminal Place LLC $220,000 from the wastewater grant fund, according to documents.

However, according to a bill of particulars filed last year related to an earlier indictment involving Marchionda, the state alleges that the invoice included work that was unrelated to water purposes, which is one of the requirements necessary to obtain the funds. This work was “added to the invoice submitted to the city of Youngstown, jacking up the invoice so that Marchionda could receive the full amount of the water utility grant, $220,000,” the state alleges.

Beshara’s role was limited in Marchionda’s third project, the Wick Tower, but a lawsuit the company filed against the former company president, Garea, and DeCaria last year alleges that a company identified as “Business Entity B” used certain resources and employees of B&B, and the contractor was never paid for work on the project. Instead, Business Entity B convinced B&B to forego seeking immediate recovery or liens in return for “future business opportunities,” court papers say.

According to B&B’s website, the company acted as a consultant in the early stages of Marchionda’s Wick Tower project.

However, the indictment indicates that John Doe 1, who is Beshara, received money from an individual known only as John Doe 5 in order to secure work on the “specific project,” presumably Wick Tower. “John Doe 5 then put the cost of paying John Doe 1 into the work his company performed on the specific project,” the indictment alleges.

John Doe 5 is described in the indictment as an individual who “owns a business which performed services for the Flats at Wick, Erie Terminal, and Wick Tower project.”

The state’s characterizations are consistent with allegations that B&B has proffered through a second lawsuit the company filed in July against Beshara, D’Andrea, and former B&B employee Joseph Tahos. The lawsuit contends that Beshara accepted kickbacks from vendors on numerous unrelated projects over a period of 10 years.

The lawsuit states that Beshara and other agents of the company solicited money and in-kind services “in exchange for selecting the subcontractors for various jobs.” These subcontractors would submit artificially high invoices to B&B, receive payment, and then repay Beshara, according to documents.

Over a 10-year period, Beshara, while serving as president of the company, pocketed tens of thousands of dollars by shaking down subcontractors, documents claim.

One of these contractors, the lawsuit alleges, was Komar Plumbing in Boardman. Documents state that Beshara accepted kickbacks between 2010 and 2013 totaling $105,172 from Jim Grantz through two companies Grantz then had an interest in – Komar and Tri-County Plumbing and Hardware Inc. Between 2004 and 2016, Komar invoiced B&B for $6.184 million in services but there were no invoices from Tri-County. Komar Plumbing was sold to Anchor Plumbing and Drain Service in December 2016.

The complaint alleges that Beshara received kickbacks from Joseph Giangiuli totaling $200,075 between 2006 and 2016 from the bank account of D&G Mechanical Inc., a heating, ventilation and air conditioning contractor. Between 2005 and 2016, the company submitted invoices totaling $9.2 million, court documents show.

It’s unclear whether the kickback schemes alleged in the lawsuit involved any of Marchionda’s projects.

According to B&B’s complaint against Beshara filed in September 2017, B&B contracted with Business Entity B to serve as construction manager for the renovation of a building in Youngstown. On May 25, 2016, Beshara, with the help of Garea, created PMB, and Beshara resigned his position at B&B a month later, documents state.

B&B’s lawsuit alleges that Beshara and PMB were contracted by Business Entity B to serve as the new construction manager on the project, effectively interfering with the existing contract with B&B. On or about Oct. 24, 2016, Business Entity B terminated its agreement with B&B, court documents say.

Records obtained by The Business Journal show Marchionda and Youngstown Stambaugh Hotel LLC contracted with PMB and paid the company for work related to the DoubleTree project during this period.

A schedule of expenditures related to the renovation of the Stambaugh Building shows PMB was paid $45,000 for services between August and November 2016. Further, an agreement between the owner and contractor – in this case Youngstown Stambaugh Hotel LLC and Rubino Construction, two entities in which Marchionda has interest in – lists the contractor’s representative as Philip Beshara.

And, Beshara signed off on behalf of Rubino Construction for the project’s first application and certification for payment, dated Dec. 15, 2016, to draw on a loan from the Ohio Water Development Authority, documents show.

A cover letter signed by Marchionda dated Dec. 16, 2016, to Ken Heigel, chief program officer for the OWDA, requested a draw of $2.135 million to cover the initial costs of the project.

Attorneys for B&B say that Beshara’s actions led to widespread turmoil in the company, and a statement issued several weeks ago acknowledged that B&B was cooperating with both state and federal authorities, indicating that a federal investigation into their conduct is underway.

Indeed, in its lawsuit filed in September 2017 against Beshara, Garea and DeCaria, B&B alleges that “DeCaria continued to work at B&B until September 26, 2016, when he was escorted from B&B’s offices” by the FBI. The complaint alleges that the actions of the three led to the theft of between $2.5 million and $3.5 million from the company.

The cases – originally assigned to Judges Maureen Sweeney and R. Scott Krichbaum – are now to be heard by a visiting judge, attorneys learned during a pre-trial hearing Sept. 24.

Founded as B&B Construction Co. of Ohio in 1954, the company grew from development and construction of commercial strip plazas to design-build projects that include sports arenas and other commercial jobs in 20 states.

Among the major local projects B&B has contributed to include the Covelli Centre, the renovation of the Ohio Hotel for the Youngstown Metropolitan Housing Authority, Eastwood Field, and dozens of construction projects for major retailers such as Petco, Dick’s Sporting Goods, Walmart, Lowe’s, Petco and TJ Maxx all across the country.

Moreover, B&B has earned the reputation as a reliable union contractor that provided jobs to thousands of tradesmen over the years, Desmond says.

“They’re regrouping. They never stopped taking on business,” he says. “They have a good reputation in the industry, and people realize that they have done good work. Will they be the titans they once were? It’s possible.”

In the wake of the indictments and internal investigation, B&B had to sell off important assets, including its office building located at 2781 Salt Springs Road in Youngstown, which B&B sold to F.F.A.P. Ltd. for $719,000 in March 2017 and relocated to leased space in Liberty Township.

The B&B building, constructed in 1995, was among the early tenants in the Salt Springs Road industrial park, an economic development initiative spearheaded by the city of Youngstown and its former finance director, Bozanich.

Pictured at top: B&B was forced to sell the headquarters it built in 1995 and move to leased space in Liberty Township (inset).

RELATED:
MS Consultants Confirms It’s Cooperating in Corruption Probe
City Records Shed Light on Companies Caught Up in Corruption Probe

Published by The Business Journal, Youngstown, Ohio.