ITHACA, N.Y. — Imagine you hired a contractor for your house. You checked their references, reviews, all looked good and you hired them. Then, after they begin work, you find out that they’re involved in a fraud of something you strongly care about. This is the position Ithaca Neighborhood Housing Services (INHS) has found itself in this month.

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INHS had hired Syracuse-based Hayner Hoyt Corporation as construction manager for their 210 Hancock affordable housing project on the city’s Northside. The Department of Justice (DoJ) announced this month that the construction company has agreed to pay over $5 million to settle government claims that it had set up a shell company to falsely claim contracts intended to be awarded to firms run by disabled veterans. Rather than compromise their ethics, INHS has decided to part ways with Hayner Hoyt.

“We mutually agreed that we would end our relationship. It was in the best interests of us and them. Hayner Hoyt is helping us by giving us information for other general contractors,” said Paul Mazzarella, Executive Director of INHS.

According to the Syracuse Post-Standard, the lawsuit was first filed by a “whistle-blower” and former vice president of the firm in July 2014, not long after INHS acquired the Neighborhood Pride site. The lawsuit was further complicated when the white-blower was arrested on grand larceny charges two months later, accused of stealing from the company. The Post-Standard article from October 2014 does not mention anything about the lawsuit; the first public mention of it comes from the DoJ announcement.

A quick legal check indicates that the DoJ investigation and settlement negotiation were “under seal“. This means that none of the parties involved could publicly discuss the legal issue until the settlement was formally announced, and all legal proceedings were strictly confidential.

“We only became aware of this when the DoJ issued their press release a few weeks ago. We were shocked,” said Mazzarella.

“When we selected Hayner Hoyt, it was a competitive process; we solicited proposals from 3 different contractors from [within] a larger pool that we seriously considered, and were qualified. This was early in the design process, we were looking for a construction manager at the time; a construction manager assists in both the design and construction phases. They helped INHS with value engineering and design issues, and they were highly qualified to do that.”

With Hayner Hoyt removed from the project, the build-out of 210 Hancock, which consists of 54 apartments and 12 townhomes (7 for-sale), is in jeopardy. 210 Hancock is the only affordable housing project currently underway in Tompkins County, and a potential suspension of plans would be a major setback in the affordable housing crisis. Talks are underway to locate and hire a new contractor, so that the project may be able to continue construction.

“We don’t have a construction manager and we don’t know what the construction costs will be,” said Mazzarella. “We’re doing our best to move it forward, but it’s in a state of limbo.”

For Mazzarella and INHS, the revelation has stunned them. “We selected a contractor that’s been in business for over 50 years, they’ve had a long record of successful projects. Before we selected them, we went through an expensive vetting process, we had looked at their past records and other clients they had worked with, and this did not turn up at that time. This totally just came out of the blue for us, it was a complete surprise. ”

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Brian Crandall

Brian Crandall reports on housing and development for the Ithaca Voice. He can be reached at bcrandall@ithacavoice.com.