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TRENTON
– Attorney General Anne Milgram and
Criminal Justice Director Gregory A. Paw
announced today that suspended Department
of Corrections administrator Gerald T. Kennedy
has been indicted for allegedly taking kickbacks
on $518,000 in state contracts that he awarded
to a company he secretly controlled and
a second company owned by a friend.
Kennedy
allegedly received more than $75,000 in
kickbacks from those contracts, funneled
to him through various transactions designed
to conceal that the money was derived from
criminal activity. He was arrested early
this morning at his home.
Another
friend was indicted with Kennedy on charges
that he conspired with Kennedy to falsify
information in connection with an additional
$160,000 in contracts that Kennedy awarded
to a third company. Kennedy awarded the
$678,000 in contracts to the three companies
between 2003 and 2005.
According
to Director Paw, the Division of Criminal
Justice obtained a state grand jury indictment
charging Kennedy, 46, of Red Bank, with
official misconduct, pattern of official
misconduct, bribery, money laundering, theft
by deception, contract fraud, misconduct
by a corporate official, and conspiracy,
all in the second degree. Kennedy’s
company, Pro General Contracting Inc., aka
Pro Painting & General Contracting Inc.,
is named in seven of the counts against
Kennedy. Pro Painting is owned by a friend
of Kennedy’s, but Kennedy actually
controlled the company, the state’s
investigation revealed.
“Mr.
Kennedy stole from state taxpayers and corrupted
the integrity of the government contracting
process he was supposed to oversee,”
said Attorney General Milgram. “He
and his circle of friends treated Department
of Corrections contracts like their own
private party. Today the party is over.”
Kennedy,
as Assistant Director of the DOC Division
of Operations, in charge of the Capital
Planning & Construction Unit, had control
over soliciting bids and selecting contractors
for small capital projects costing under
$41,100. Although he was required to seek
bids from at least three pre-qualified contractors,
he frequently solicited bids exclusively
from companies he and his friends controlled,
and he often allegedly dictated the amount
of each bid so he could award the contract
as he desired. The contracts were for masonry,
painting, "skirting" of a trailer,
and roofing repairs.
The
indictment also charges Kennedy’s
friend Mark Stermer, 41, of Red Bank, and
his company, SteelGrey LLC, with official
misconduct, theft by deception, contract
fraud, misconduct by a corporate official,
and conspiracy, all in the second degree.
“We
need to be able to rely on the honesty and
integrity of those who administer government
contracts, because large sums of taxpayer
money and important public projects are
at stake,” said Director Paw. “Mr.
Kennedy piled deception upon deception,
but our investigators, aided by the Department
of Corrections, exposed his schemes and
followed the money to his door.”
Attorney
General Milgram noted that the Department
of Corrections reported suspected irregularities
in the bidding process on small capital
projects to the Division of Criminal Justice
in early 2006. The Department of Corrections
provided investigative assistance to the
Division of Criminal Justice throughout
the investigation, including the assignment
of a DOC Special Investigations Division
investigator.
Three
men have already pleaded guilty to paying
kickbacks to Kennedy: Ronald Hayes, 47,
of Oceanport, pleaded guilty on Nov. 26
to a third-degree charge of offering an
unlawful benefit to a public servant for
official behavior; Alfred “Buddy”
Canale, 53, of Point Pleasant, pleaded guilty
on Dec. 21 to second-degree bribery; and
Delfim Rodrigues, 45, of Wayside, pleaded
guilty on Feb. 28 to third-degree offering
an unlawful benefit to a public servant
for official behavior.
Pro
Painting was awarded 18 contracts for a
total of approximately $348,000. A friend
of Kennedy’s is listed in corporate
records as the owner of Pro Painting, but
Kennedy allegedly controlled Pro Painting
in reality and prepared the bids for the
contracts. Ronald Hayes, another friend
of Kennedy’s, was put on the payroll
of Pro Painting and received weekly checks
from the company that typically ranged from
approximately $500 to $600.
The
state’s investigation revealed that
Hayes received checks totaling approximately
$50,000 from Pro Painting between 2003 and
2005. Hayes did not actually perform any
work for Pro Painting, and in pleading guilty
in November, Hayes admitted that he would
keep just 5 to 10 percent of the amount
of each check and give the rest of the money
directly to Kennedy. In addition, Kennedy
allegedly had Hayes create a sham corporation,
Hayes General Contractors, Inc., that bid
on DOC contracts but was never awarded a
contract. Kennedy allegedly filled out the
bid paperwork for Hayes.
SBC
Construction Inc., which is owned by Alfred
“Buddy” Canale, was awarded
eight DOC contracts for a total of approximately
$170,000. SBC subcontracted six of the contracts
to DEL ROD, Inc., which is owned by Delfim
Rodrigues. In pleading guilty, both Canale
and Rodrigues admitted that they provided
kickbacks to Kennedy for the contracts.
In one instance, Canale provided a $9,000
cashier’s check from his personal
account to a boat dealer toward the purchase
of a $21,000 boat for Kennedy. That boat
was seized when investigators executed a
search warrant at a property owned by Kennedy
in Neptune in May 2007. The state’s
investigation revealed that Canale paid
more than $30,000 in bribes to Kennedy,
including $9,000 in bribes that went through
Rodrigues.
Stermer’s
company, SteelGrey, was awarded seven contracts
worth approximately $160,000. The charges
against Stermer and SteelGrey relate to
allegations that Stermer conspired with
Kennedy to submit a fraudulent financial
statement and false information about past
projects of the company on an application
by SteelGrey to the state Division of Property
Management and Construction for approval
to work on state contracts. The DPMC approved
the application, permitting SteelGrey to
bid on the DOC contracts.
The
theft and contract fraud counts against
Kennedy and Pro Painting relate to allegations
that Pro Painting also submitted an application
to the DPMC that included fraudulent information
about project experience.
Bail
for Kennedy was set at $75,000 by Superior
Court Judge Paul F. Chaiet in Monmouth County.
As conditions of posting bail, Kennedy must
surrender his U.S. passport and have no
contact with any witnesses in this case.
Kennedy
has been employed by the DOC since 1994.
He became assistant division director in
October 2003. He has been suspended without
pay since November.
Stermer
was not arrested. He and the corporate defendants
were charged by complaint summons and will
be ordered to appear in court in Monmouth
County at a later date to answer the charges.
The
investigation was conducted and coordinated
by Sergeant Keith Lerner, Detective Paul
Marfino and Deputy Attorney General Steven
J. Zweig of the Division of Criminal Justice
- Corruption Bureau, assisted by Senior
Investigator Manuel Alfonso of the Department
of Corrections, Special Investigations Division,
who was sworn in as a special investigator
for the Division of Criminal Justice. Deputy
Attorney General Zweig presented the case
to the state grand jury.
The
indictment was returned yesterday but was
sealed until after Kennedy’s arrest
today. The indictment was handed up to Superior
Court Judge Linda R. Feinberg in Mercer
County, who assigned the case to Monmouth
County.
Second-degree
crimes carry a maximum sentence of 10 years
in state prison and a criminal fine of $150,000.
On the theft, contract fraud and corporate
misconduct charges, the corporate defendants
can be fined up to triple the aggregate
amounts of the contracts they received.
The
indictment is merely an accusation and the
defendants are presumed innocent until proven
guilty. A copy of the indictment is available
with this press release at www.njpublicsafety.com.
Attorney
General Milgram noted that the Division
of Criminal Justice - Corruption Bureau
has established a toll-free Corruption Tipline
for the public to report corruption, financial
crime and other illegal activities. The
statewide Corruption Tipline is 1-866-TIPS-4CJ.
Additionally, the public can log on to the
Division of Criminal Justice Web site at
www.njdcj.org
to report suspected wrongdoing. All information
received through the Division of Criminal
Justice Corruption Tipline or Web page will
remain confidential.
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