The Baupost Group is the eighth largest hedge fund in the world. Baupost is investing in a 761-unit luxury residential construction project at 626 First Ave in New York City being developed by JDS Development Group.
Institutional Investors should be aware that JDS Development Group has decided to contract with a number of irresponsible construction contractors at this project whose track records of illegal behavior could put their investment at risk.
JDS has hired Thomas Auringer’s US Crane and Rigging, as well as Michael Mahoney’s SSC High Rise, at 626 First Ave. The principals of these contractors have long and troubling histories of unscrupulous, unethical and illegal behavior which you should be aware of.
- SSC High Rise
Michael Mahoney is a principal of SSC High Rise, a concrete contracting firm that has been hired to perform work on 626 First Ave. Mahoney was previously the principal of EMC Contracting, among other firms. In 2009 then Attorney General Andrew Cuomo sued Mahoney, EMC and his other companies for $4 million in back wages for forcing his employees to work as many as 70 hours a week with no overtime and, most shockingly, for instituting a three-tiered wage rate in which Irish workers were paid $25 an hour, African-Americans about $18 and Latino employees $15. In 2011, Mahoney and his companies were ordered to pay more than $1.6 million, plus interest, in this matter.
In 2011, Mahoney was also sued by the US Attorney for the Southern District for tax fraud by paying his employees illegally in cash off the books in order to limit his tax liabilities. Mahoney pled guilty in 2012, was placed on two years of probation and was ordered to pay more than $300,000 in restitution.
- US Crane and Rigging
Thomas Auringer is the principal of US Crane a Rigging, a contractor hired to perform work on 626 First Ave. Auringer is also the principal of a number of related construction firms, including NY Hoist and Rigging. Workers at Auringer’s companies say they are subjected to rampant exploitation and abuses including wage theft, racism, discrimination, mistreatment, and frequent retaliation by supervisors. Some workers are out on strike to protest these abuses.
Thomas Auringer, as well as a number of his companies, is currently facing a class action lawsuit by employees of his companies who allege systematic violation of minimum wage and overtime laws. In 2008, employees of Auringer’s SSB Hoist filed a class action complaint alleging massive violations of federal and state overtime law. The suit was settled in 2009.
Mr. Auringer was previously the President of Cavalier Construction company that was debarred from public works projects in 2003 for a period of five (5) years by the NYS Department of Labor after the Company pled guilty to a felony for providing false information to the NYC School Construction Authority.
Auringer’s workers also allege rampant safety violations, a lack of proper safety training equipment and unsafe practices on Auringer’s job sites. Since 2009, Auringer’s companies have been involved in two crane collapses, Auringer’s companies and employees have been cited for almost 5 dozen Class 1 — immediately hazardous — safety violations and have amassed over $250,000 in penalties imposed by the NYC Department of Buildings for unsafe practices. In the last decade alone, Auringer’s companies have received more than $300,000 in initial fines from Occupational Safety and Health Administration (OSHA) for unsafe practices.
Institutional Investors Should Insist on Responsible Contractors