unnamed

Framingham construction company fined nearly $1 million for wage theft

Posted by National Alliance for Fair Contracting on

Eric Casey
November 2, 2023

PI Construction Management, a Framingham-based company, has been fined $926,898 by the Massachusetts Office of the Attorney General for violations of the Massachusetts False Claims Acts.

The violation stems from the failure of a BPI subcontractor, Superior Carpentry of Framingham, to pay prevailing wages to employees working on two public construction projects in Westport and Middleborough. This led to a complaint against the company being filed in December 2021, according to a press release released by AG’s office on Wednesday.

The fine was the result of litigation between BPI and the attorney general’s office, in which BPI argued that they were relying on the accuracy of the forms submitted by Superior. BPI denied any knowledge of the fraud being committed by Superior, according to the release, but admitted that it did not take steps to ensure that the payroll information was accurate.

This is the first case under the False Claims Act that affirms that contractors are liable for facilitating misconduct by subcontractors, according to the press release.

The AG’s office estimated that workers on the project were underpaid by a combined total of $256,539.

Read More

unnamed

Former Missouri construction company owner sentenced to 18 months in prison, fined $100,000 for fraud scheme

Posted by National Alliance for Fair Contracting on

KTTN News
June 16, 2023

U.S. District Judge Henry E. Autrey on Thursday sentenced a former construction company owner to 18 months in prison and a $100,000 fine for committing fraud to qualify for tax abatements designed to encourage minority-owned businesses in St. Louis.

Brian Kowert Sr. “engaged in an elaborate ‘pass through’ fraud scheme where he used an elderly Black contractor solely to pass company checks through to the non-minority subcontractors who Kowert hired to do the actual work and supply the actual materials on the project,” Assistant U.S. Attorney Hal Goldsmith wrote in a sentencing memorandum. Kowert also knew what he was doing was wrong, as he committed a similar Minority Business Enterprise fraud 17 years ago, Goldsmith wrote.

Kowert was co-owner and chief operating officer of Clayton, Missouri-based HBD Construction Inc. at the time, and was acting as the project manager for the renovation and redevelopment of a building for Greater Goods LLC on Chouteau Avenue in St. Louis. Kowert and Charles Kirkwood, the owner of Midwestern Construction, a company that was a Minority Business Enterprise, agreed to falsely list Kirkwood’s company as providing materials and performing work on the project. Kirkwood’s participation allowed the project to satisfy St. Louis requirements for 25% participation by MBEs to qualify for a 10-year tax abatement.

The MBE participation requirements seek to address historical social and economic disadvantages experienced by minority group members and to reduce minority-based barriers to and foster participation by minority-owned businesses in city contract opportunities.

Kowert issued duplicate subcontracts to Kirkwood’s company for work that was performed and materials that were supplied by two other non-MBE companies. Kowert also issued a duplicate HBD purchase order to Kirkwood’s company for materials provided by a third non-MBE company. Kowert submitted a false chart of projected costs for the redevelopment project to the St. Louis Development Corporation, the city agency charged with reviewing, approving and recommending tax abatements. The chart falsely listed Kirkwood’s MBE company as providing labor and materials valued at approximately $198,000 on the Greater Goods redevelopment project and concealed the involvement of the three non-MBE companies.

Beginning on August 4, 2020, Kowert caused 14 HBD checks worth a total of about $220,000 to be issued to Kirkwood’s company for the work performed and materials provided by the three non-MBE companies. Kirkwood deposited those checks into his company bank account and then issued checks to the three non-MBE companies, at Kowert’s direction.

Kirkwood was paid approximately $2,000 by Kowert for his role in the criminal scheme.

Kowert and HBD then caused a false application for tax abatement on behalf of the Greater Goods redevelopment project to be submitted to the St. Louis Development Corporation. The application falsely represented that Kirkwood’s MBE company had performed about $224,361 in project costs, comprising about 6 ½ % of the required 25% MBE participation in the project.

Greater Goods and its employees had no knowledge of Kowert’s scheme. His actions cost the company, which donates a significant share of its sales revenues to charities, a tax abatement of approximately $400,000 over ten years. As a result, the company was not able to carry out various projects and meet certain charitable goals, Goldsmith wrote in the memo.

The scheme also had consequences for the MBE program.

“Mr. Kowert’s actions have harmed SLDC, undermined the City of St. Louis’ MBE Program, and caused substantial injury to the duly certified and struggling minority-owned firms in the St. Louis region,” Neal Richardson, president, and CEO of SLDC wrote in a letter to Judge Autrey.

Kowert pleaded guilty in January to two counts of wire fraud.

The case was investigated by the FBI. Assistant U.S. Attorney Hal Goldsmith is prosecuting the case.

(View Article)

unnamed

UC Davis housing contractor gets 10 years in prison for fraud (CA)

Posted by National Alliance for Fair Contracting on

Nov. 17, 2019

DAVIS, Calif. – A 56-year-old Colorado man who fraudulently became a UC Davis housing contractor has been sentenced to 10 years in prison for insurance fraud, wage theft, perjury and grand theft, officials said. …

Thompson then secretly ran the business using the fraudulent license, officials said.

His business was able to obtain a contract with UC Davis to build student housing. During construction, he stole more than $633,000 of his employees’ wages, defrauded the California State Compensation Insurance Fund and committed perjury to conceal his fraud. In all, he caused a total loss of more than $2 million, according to the district attorney’s office.

(Read More)

Nashville is being built on a pyramid of payroll tax fraud | Opinion (TN)

Posted by National Alliance for Fair Contracting on

According to some estimates, $2.6 billion in payroll tax fraud is lost annually, while Nashville construction projects add up to more than $2 billion.

Victor White, Guest columnist
Dec. 30, 2019

In November, a seldom-covered but far too common crime surfaced in Nashville’s news media: the case of wage theft at a Metro Nashville Public Schools-funded construction site.

A subcontractor working on the project allegedly refused to pay a local group of concrete workers, robbing them of $43,000 in wages for their work at a local school. These laborers have been calling attention to the theft for weeks and finally brought their case to MNPS at a school board meeting.

Members of the Southeastern Carpenters Regional Council were proud to stand with our brothers fighting for fair wages at the meeting, but the problems we face in the construction industry go well beyond one case of wage theft in Nashville.

Fraud is rampant across construction industry

The construction industry today is fundamentally built to allow rampant payroll tax fraud, wage theft, workers’ compensation premium fraud and worker misclassification. At each construction site a general contractor hires a subcontractor to manage different jobs: laying drywall, putting down concrete, or installing plumbing and lighting. Each of those subcontractors hires a labor broker to recruit a team of workers to get the job done. Each subcontractor competes for bids, promising they can get the job done for the least amount of money.

Many subcontractors recruit labor brokers they know will cut corners and trim costs. Sometimes, as in the case of the concrete workers, the subcontractor will fail to pay laborers and outright steal their wages. Other times subcontractors will classify workers as independent contractors, committing payroll tax fraud by avoiding paying taxes on their employees. These schemes cause law-abiding construction employers to suffer as they are underbid by rivals who keep costs down through breaking the law. …

Beyond the rampant fraud that is allowed to continue, the lack of oversight and regulation on construction sites in Nashville led to the largest rise in construction-related deaths over a 2-year period than any time in the last 30 years.

(Read More)

unnamed

Construction Company Operators Plead to Fraud, Labor Theft (CA)

Posted by National Alliance for Fair Contracting on

by Construction Citizen
May 27, 2019

A brother and sister who run a construction company in Paramount have admitted to their roles in a $6 million workers’ compensation fraud and labor theft scheme, the Los Angeles County District Attorney’s Office announced on April 24.

They both admitted an allegation of committing fraud and embezzlement that resulted in a loss of more than $500,000 to the State Compensation Insurance Fund (SCIF).

Sentencing is scheduled for Oct. 22, 2020, in Department 37 of the Foltz Criminal Justice Center.

Under the terms of a negotiated plea agreement, the defendants must pay restitution of $6.3 million and more than $5,000 in investigative costs to SCIF. They also are required to pay $30,000 in fines, have one year of electronic monitoring, complete 500 hours of community service, and comply with SCIF in future business dealings.

(Read More)

Man defrauds feds $346M through sham construction firms (MO)

Posted by National Alliance for Fair Contracting on

Author – Kim Slowey
Published – June 6, 2019

Dive Brief:
-The U.S. Attorney’s Office for the Western District of Missouri announced June 3 that a Kansas contractor has pleaded guilty to defrauding the federal government by bidding on and accepting payment for construction contracts set aside for small businesses and for service-disabled veterans and minorities. Through two sham companies, Olathe, Kansas, contractor Matthew McPherson and his co-conspirators received a total of $346 million through more than 200 federal set-aside contracts.

-Prosecutors said McPherson set up the first sham company, Zieson Construction Co., in July 2009 with African-American and service-disabled veteran Stephon Ziegler, who served as a figurehead while McPherson and others actually ran and profited from the ill-gotten projects. Then, in 2014, McPherson and a Zieson employee created another company, Simcon Corp., to bid on work intended for small businesses after Zieson grew too big to do so. Zieson and Simcon shared office space, equipment and other resources.

-McPherson faces up to five years in prison with no possibility of parole, and would have to forfeit more than $5.5 million in fraud proceeds. Ziegler pleaded guilty to making a false statement to the U.S. Department of Veteran Affairs.

Dive Insight:

Even though Ziegler was qualified to enter into those federal set-aside contracts, he didn’t run the day-to-day operations of Zieson nor did he wield significant control over deciding which projects to bid on or what subcontractors and material suppliers to use, which is also a condition of doing work with the federal government as a minority, service-disabled or certified small business. This same goes for contracts set aside for women-owned businesses.

And whether it’s due to a shortage of qualified firms or just plain greed, contractors continue to get caught trying to fake their way through the set-aside requirements of publicly funded work.

Nichter Construction Inc of New York, for instance, pleaded guilty in February to making false statements about minority participation on the $350,000 renovation of a Buffalo, New York, psychiatric facility. Nichter hired all non-minority subcontractors for the project, even though it carried a 13% minority requirement. Instead, Nichter engaged a minority contractor to falsely assert that it had performed work on the project. Nichter faces a maximum fine of $10,000.

(Read More)

Union: Construction tax fraud costs governments $450B annually (PA)

Posted by National Alliance for Fair Contracting on

Bob Bauder
Monday, April 15, 2019 3:37 p.m.

Several hundred carpenters’ union members and public officials rallied Monday in Downtown Pittsburgh to call for an end to construction industry fraud.

Union officials said unscrupulous contractors and labor brokers rob the public of federal and local tax revenue by paying workers cash “under the table,” misclassifying them as independent contractors and failing to pay such benefits as workman’s compensation and unemployment.

The fraud costs local governments across the United States an estimated $450 billion annually in lost tax revenue, officials said.

“When you talk about tax fraud, it’s about people that are cheating,” said Bill Waterkotte, eastern district vice president of the Keystone Mountain Lakes Regional Council of Carpenters. “They’re not paying taxes. They’re paying cash. Four hundred and fifty billion (dollars), in evading taxes. That could go to building our roads and bridges, our schools, our veterans, helping the people who need help, and they’re stealing it.”

The union estimates fraud costs Pennsylvania governments about $200 million each year, but offered no specifics for the Pittsburgh region.

…

Pittsburgh City Council late last year approved a resolution proposed by Councilman Corey O’Connor that created a task force to investigate the issue. O’Connor said the members plan to offer future legislative remedies to council and the mayor.

…

“We are going to go after those bad workers, those people that take our tax money, that take your jobs because subcontractors and contractors are undercutting city bids. We have to stop that,” O’Connor said.

(Read More)

Financial Fraud and Wage Theft Continue to Plague Construction Industry

Posted by National Alliance for Fair Contracting on

Cases of fraud and wage violations continue to soil the image of the construction industry during this labor shortage

FEBRUARY 28, 2019

Every week there seems to be yet another item in the news about contractors being charged with fraud, wage theft and more. This week is no different, unfortunately.

…

Meanwhile in Massachusetts, a state that has been under scrutiny for construction wage theft, Attorney General Maura Healy issued 165 civil citations against 66 construction companies in 2018. According to a press release from the Attorney General, restitution in 2018 exceeded $1.47 million for more than 1,030 employees, and the companies were fined more than $1.23 million.

Wage Theft Big Problem in Massachusetts Construction Industry

Violations included:

  • Failure to page proper wages
  • Failure to pay overtime
  • Retaliation
  • Failure to furnish records for inspection
  • Failure to pay prevailing wage
  • failure to submit true and accurate certified payroll records
  • Failure to register and pay apprentices appropriately

“Workers in the construction industry are particularly vulnerable to wage theft from dishonest contractors who cheat their workers,” said AG Healey. “As Massachusetts undergoes a historic construction boom, my office will continue to fight for exploited workers and ensure they are paid the wages they earn.”

(Read More)

Council passes resolution to examine construction industry fraud (PA)

Posted by National Alliance for Fair Contracting on

Ashley Murray
December 27, 2018

Allegations of widespread fraud in the construction industry led Pittsburgh City Council on Thursday to vote 8-0 to create a new task force, but there wasn’t unanimity on the nature and degree of the problem.

“Basically we know that this activity is happening and we’re losing tax revenue from it,” said the bill’s sponsor, councilman Corey O’Connor, though he did not have specific figures.

The resolution, co-sponsored by councilwoman Darlene Harris, directs the mayor to convene representatives from council, and the offices of the city controller, Allegheny County district attorney, as well as trade unions and the state’s Department of Labor and Industry. It would explore tax fraud – sometimes referred to as paying people under the table – and other “unfair” practices within the city’s construction industry.

Past approaches to construction industry fraud – and even some recent pronouncements by advocates for the task force – have referenced undocumented workers. Thursday, though, backers emphasized that the bill isn’t about immigration.

Members of the United Brotherhood of Carpenters gathered in Council Chambers Thursday to support the bill’s passing.

“We have people getting paid cash on the job sites, and that’s not fair,” said Steve Mazza, representative for the Keystone Mountain Lakes Regional Council of Carpenters, based in Collier. “I have to pay taxes. Everybody should be paying taxes. Why is that being unchecked?”

Mr. Mazza’s union claims that Pennsylvania has lost hundreds of millions of dollars in taxes because of industry fraud, though it did not detail that figure Thursday.
The scope of loss for the city is unclear.

(Read More)

unnamed

Two New York firms implicated in minority contractor fraud (NY)

Posted by National Alliance for Fair Contracting on

By Kim Slowey
Oct. 17, 2018

Dive Brief:

Bell Mechanical and Kaplan Schmidt Electric have been named in an alleged minority contractor scheme in Rochester, New York, that resulted in the arrest of Orville Dixon, head of Journee Construction, earlier this year, according to the Democrat and Chronicle. The two local contractors were named after an analysis of Rochester City School District contracts and complaints by the FBI and U.S. attorney general.

Bell and Kaplan Schmidt allegedly needed to hire a certain percentage of minority- or women-owned subcontractors to meet the requirements of the school district’s modernization program. Instead, the two supposedly used Dixon, who is African-American, and Journee as a “pass-through” to make it appear as if Journee was doing the work. Bell allegedly created a fake purchase order in 2013 that showed it bought $600,000 worth of HVAC equipment from Journee and put Bell’s workers on Journee’s payroll to make it appear that Journee was staffing the project. Kaplan Schmidt also supposedly falsely claimed it purchased material from Journee and allegedly agreed to pay Dixon’s company 2.5% of the subcontract amount.
In 2016, contractors working for the Rochester school district were fined a total of $825,000 to settle claims of fraud related to minority contracting. Those companies were Concord Electric Corp. (fined $350,000), Hewitt Young Electric ($160,000), Michael A. Ferrauilo Plumbing and Heating ($90,000), Manning Squires Hennig ($200,000) and Mark Cerrone Inc. ($25,000).

Dive Insight:

There are a growing number instances of minority contractor fraud in the U.S., possibly a result of more state and local government agencies adopting or increasing minority- or woman-owned business requirements. Sometimes there may not be enough qualified minority firms available for the job, but in some cases, contractors just want to expedite construction and are willing to risk the potential fallout.

(Read More)