New York’s $10 billion legalized fraud machine is coming for your tax dollars

The Trump administration has correctly identified fraud in government programs as a critical issue. Given the federal deficit, it is incumbent on the government to take a hard line on rampant COVID-era spending fraud and well-documented rip-offs of the Medicaid system.At the same time, Washington shouldn’t ignore “legalized” fraud ripping off taxpayers.A perfect example of this is an 1885 New York law known as the “scaffold law.” Despite its nickname, the law has nothing to do with scaffolding and is instead a legal standard conferring absolute liability on contractors and property owners for construction-site accidents. Such laws were common in many states prior to the adoption of federal and state safety codes to protect workers. Today, every other state has abandoned that standard in favor of comparative negligence to assign fault in construction accident litigation proportionately. Illinois was the only other state with a similar law, and it was repealed in 1995.New York’s absolute liability law means property owners and contractors are on the hook for damages even if the injured worker was 99% responsible for the accident. This causes New York insurance costs to be significantly higher than in the rest of the nation.A study commissioned by the Building Trades Employers Association, a group of unionized contractors in New York City, found that insurance consumes 2% to 4% of construction costs across the country. However, in New York, insurance typically represents 8% to 10% of construction spending.This disparity means everything built in New York, including federally funded projects for transportation and housing, is inflated by approximately 6% to 8%.The BTEA study found that preempting the law on federally funded projects would save taxpayers significantly. The Penn Station redevelopment, estimated at approximately $6 billion, would see costs reduced between $280-560 million.The law has also encouraged staged construction accident fraud.A report from ABC News identified numerous instances of workers staging accidents. It also cited a law firm with 30 plaintiffs living in a single Bronx apartment building and multiple plaintiffs residing in another location in Queens. Coincidence? Hardly. That firm later dropped approximately 300 suspicious cases after the ABC News report.On Long Island, Newsday has extensively reported medical fraud where doctors have performed unnecessary surgeries on people to boost recoveries in court. A recent expose in the New York Times about the litigation finance industry highlighted a worker whose staged accident was seen on a surveillance camera.Some construction trade unions defend the law, calling it the “scaffold safety law,” despite federal data that show that workers in New York are no safer than workers in other states.Like many other situations, one needs to follow the money. Plaintiff lawyers routinely sponsor union conferences, golf outings, and are among the largest campaign contributors to legislative campaigns in Albany. Over the past 40 years, the trial lawyer lobby has blocked every repeal effort.THE BIGGEST FRAUD IN CIVIL JUSTICE HAPPENS BEFORE THE LAWSUIT IS EVEN FILEDThis means that a 19th-century law causes federal taxpayers to pay unnecessarily for every federally funded project in New York. Our coalition estimates that the Highway Trust Fund could save up to $2.3 billion over the next five years if Congress preempts the law on federally funded projects. Over the next 10 years, federal taxpayers could save between $8 to $10 billion on all federally funded construction in the Empire State.Taxpayers are rightfully upset by revelations of theft and fraud in federal programs. Similarly, they should also demand repeal of laws that amount to little more than an invitation to the legalized theft of taxpayer dollars. Congress has an opportunity to do so in the pending reauthorization of the Surface Transportation bill.John J. Faso, a former member of Congress, represents the Build More New York Coalition.