07/23/2006
NY Waterway to pay feds $1.2M
Ferry service accused of submitting 'false bills' for service post 9/11
Hoboken Reporter  

New York Waterway, the ferry service based in Weehawken, has agreed to pay $1.2 million to settle civil fraud charges brought by the United States Attorney's Office for the Southern District of New York.

The charges were brought in connection with the federal government's reimbusement to the ferry service after Sept. 11, 2001.

After the terrorist attacks destroyed part of the PATH train tunnels, the Port Authority of New York and New Jersey contracted with Waterway for ferry services to replicate the PATH service that was interrupted. The Department of Homeland Security agreed to pay Waterway for the cost it incurred.

According to the government's complaint, Waterway submitted false bills to the Port Authority and obtained payments from Homeland Security funds to which Waterway was not entitled under the contract.

"Federal 9/11 funds were allocated to help the city recover and build anew," said U.S. Attorney Michael Garcia in a statement. "This office is committed to recouping those funds from any company that took more than its fair share of profit from business it did as a result of those tragic events."

As part of the settlement, Waterway did not admit to any wrongdoing or liability.

In a statement, Arthur Imperatore Sr., Waterway's founder, said that the matter was a "billing dispute" and praised Waterway employees for providing a temporary transportation alternative in the days following Sept. 11.

"We strongly deny any and all allegations with respect to these billing issues," Imperatore's statement read. "I am certain that we conducted ourselves honestly and with integrity in all of our dealings with the government in those distressing times. ...It is less expensive to settle this matter than litigate it to a conclusion."

Details of the accusations

In April 2003, it became public that federal investigators were looking into whether Waterway submitted inflated bills to the Port Authority of New York and New Jersey for ferry services it provided to replace the PATH train service to and from Exchange Place in Jersey City and lower Manhattan.

Waterway had been receiving approximately $1.4 million monthly in federal subsidies supplied by the Department of Homeland Security.

The government alleged that Waterway submitted false bill to the Port Authority "to gain reimbursements for charter boat expenses that Waterway did not incur."

For example, said the complaint, Waterway contracted with Seastreak America, Inc. to use one of its boats. But during the Major League Baseball Season, Waterway returned Seastreak's boat on 13 separate Friday afternoons to allow Seastreak to ferry passengers to Yankees games. Although Waterway only paid Seastreak for the use of its boat for half days on these Fridays, Waterway allegedly billed the Port Authority for full day use of the boat. The Department of Homeland Security then paid Waterway for 13 full days.

Inflated profit margin

Additionally, the complaint charged that in Waterway's agreement with the Port Authority, Waterway was to earn the same profit margin that it earned for its ferry service before starting the service for the Port Authority. However, Waterway overstated its ferry service profit margin, the government charged.

The inflation was the result of Waterway's inclusion of those profits earned from non-ferry activities.

Finally, the complaint alleged that Waterway inflated its incremental costs, and that based on these costs, Waterway overstated its per hour charges. Although Waterway claimed that these charges were for replicating the PATH service, the complaint alleged that the charges were identical to the total global costs incurred by Waterway for all of its business endeavors prior to the terrorist attacks.

Waterway has agreed to pay $1.2 million in monthly payments over the next seven years at 5 percent interest, according to the settlement approved by U.S. District Judge Naomi Reice Buchwald.