Driving design quality

Former Navillus execs convicted of embezzling more than $1M in worker benefits

Dive Short:

  • A federal jury very last week returned responsible verdicts in opposition to previous executives at Navillus Contracting, one particular of New York City’s biggest development corporations, for their job in a plan to stay clear of creating necessary contributions to employees.
  • Next a a few-7 days demo just before United States District Choose Pamela K. Chen, Donal O’Sullivan, founder, operator and previous president of Navillus Tile (which did organization as Navillus Contracting) Padraig Naughton, Navillus’s former fiscal controller and Helen O’Sullivan, a previous payroll administrator and Donal’s sister, had been convicted on 11 counts charging wire fraud, mail fraud, embezzlement from employee rewards cash, submission of phony remittance experiences to union benefits cash and conspiracy to commit those crimes. The defendants, who remaining the business soon after their indictments in 2020, face up to 20 several years in jail, according to a push release from the U.S. Attorney’s Business.
  • Less than collective bargaining agreements (CBAs) with quite a few labor unions, Navillus was expected to make use of union members and add to benefits accounts, together with health, pension and getaway resources, for do the job done at its web sites. To stay clear of producing these payments, the defendants allegedly positioned some of the firm’s workers on the payroll of a consulting enterprise it established that was not matter to the CBAs. They then took ways to conceal the plan from auditors.

Dive Perception:

Navillus has done main assignments in the New York City area, which includes A person Globe Trade Heart. The enterprise, known for its concrete and tile operate, entered into CBAs with various unions, together with:

  • Bricklayers and Allied Craft Employees Community No. 1
  • New York Town District Council of Carpenters
  • Cement Masons Union
  • Tips, Cleaners and Caulkers
  • International Brotherhood of Teamsters Nearby 282

As part of the agreement, the contractor was to periodically file experiences with benefits funds to element how several hours each individual employee was on the work.

Nevertheless, Navillus’ former executives undertook a sophisticated scheme to steer clear of generating far more than $1 million in benefits payments, according to the U.S. Attorney’s Business office. Involving 2011 and 2017, prosecutors said the consulting organization proven by Navillus’s former executives issued weekly checks to employees for operate they executed on its construction positions. Then the consulting organization “issued wrong invoices to Navillus to make it seem that the payroll funds ended up payments for ‘masonry’ and ‘consulting’ work that the consulting company had executed for Navillus,” according to court files.

Prosecutors reported people invoices were generated to address up the arrangement.

“As located by the jury, the defendants deliberately devised a fraudulent scheme to keep away from generating required contributions to union added benefits resources on behalf of Navillus’s staff, in order to deprive the personnel of positive aspects they experienced earned and deserved,” said Breon Peace, United States attorney for the Jap District of New York in the push release.

Past difficulties

In 2017, Navillus Tile submitted for personal bankruptcy following managing into problems over union payment challenges. It claimed the submitting was the result of a judge buying it to pay back $76 million into union money, according to The Authentic Deal. At the time, the outlet reported that Navillus had allegedly set up two non-union corporations to steer clear of these payments. In 2018, a federal court judge signed off on a strategy for the enterprise to exit personal bankruptcy soon after reaching a settlement with the unions.

Other contractors have also recently faced problems over gain payments to personnel. In a lawsuit filed before this month, three staff of Glenn O. Hawbaker accused the Pennsylvania road builder of violating the Worker Retirement Revenue Protection Act. Instead of placing the prevailing wage workers’ retirement cash into the 401(k) account of people who acquired it, Hawbaker employed the cash to pay for all worker, government and operator retirement financial savings, lawyer Mike Donavan wrote in the lawsuit.

This resulted in prevailing wage personnel currently being small-changed in their income-sharing and retirement saving accounts.

In April, Pennsylvania Lawyer Typical Josh Shapiro billed Hawbaker with stealing $20 million from staff in the largest wage theft scenario on file. 

Following a a few-calendar year investigation, Hawbaker was billed with 4 counts of theft relating to violations of the Pennsylvania Prevailing Wage Act and the federal Davis-Bacon Act. Investigators reviewed Hawbaker’s accounting records and observed that, between 2015 and 2018, the contractor stole just about $20.7 million of prevailing wage workers’ fringe advantage revenue.