©GCR, illustration by Denis Carrier

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“Staff robbed of $20.6m”: Contractor charged with biggest wage fraud “in US history”

9 April 2021 | By GCR Staff | 0 Comments

In what is being called the biggest prevailing wage criminal case on record in US history, one of Pennsylvania’s biggest contractors has been accused of stealing millions of dollars from its employees.

The company, Glenn O Hawbaker Inc, was charged yesterday with four felony counts after a three-year investigation into what Pennsylvania attorney general Josh Shapiro called a “complex and well-disguised sleight of hand”.  

His office claims Hawbaker robbed employees of some $20.6m in owed benefits between 2015 and 2018, when the probe began.

“My focus now is on holding Hawbaker accountable for breaking the law, and getting these workers their money back,” Shapiro said in announcing the charges.

“Employers across this Commonwealth, you are on notice: if you steal from your employees, if you misclassify workers, if you violate our labour laws, we are going to find out, we are going to hold you accountable, and we will do all we can so Pennsylvania workers receive the wages and benefits owed to them under the law.”

Shapiro alleged that Hawbaker had stolen from workers for decades although, owing to statutes of limitation, the current charges relate to alleged offences between 2015 and 2018.

The investigation began after whistleblowers raised the alarm, resulting in a warranted search of Hawbaker’s headquarters in June 2018. The attorney general’s office has set up a hotline for people who have worked for Hawbaker who feel they may have been a victim of theft.

Seeking “swift resolution”

A 70-year-old family-owned firm, Hawbaker is one of the state’s largest construction firms, reportedly receiving contracts worth $1.7bn between 2003 and 2018 from the Pennsylvania department of transportation.

In a statement to local media, the company said it had cooperated with the investigation after it learned of it and immediately changed its practices. 

“Upon learning of the Attorney General’s investigation in 2018, we have cooperated fully,” the statement said. “While we believe that we have always acted in accordance with all state and federal laws, in an abundance of caution, the company immediately changed its prevailing wage practices.

“These changes remain in effect today as we continue to do what’s right for our employees, both past and present. Our company will continue to work constructively with the Attorney General’s office to reach a swift resolution.”

In their affidavit of probable cause, investigators said the company claimed it “relied on bad advice of former counsel”.

The alleged crimes

Prosecutors allege Hawbaker stole wages from its workers by using money intended for prevailing wage workers’ retirement funds to contribute to retirement accounts for all Hawbaker employees – including the owners and executives. As a result, workers received less money in their retirement accounts than what was owed.

They claim Hawbaker also stole funds intended for prevailing wage workers’ health and welfare benefits and used them to subsidise the cost of the self-funded health insurance plan that covers all employees.

They further claim that the company disguised its scheme by artificially inflating its records of benefit spending by millions of dollars each year and claiming credit for prohibited costs. Those measures created the appearance that it provided employees with benefits that far exceeded the cost of those that it actually did.

As an example of alleged malpractice, in their affidavit of probable cause, investigators calculated that in 2018 Hawbaker claimed it cost $18.65 an hour to cover workers’ health and welfare costs, when in reality it cost $6.67.

“Hawbaker used its workers’ fringe benefit funds to lower their costs, and thereby increase profits for the Hawbaker family,” the attorney general’s office claimed.

The company will be arraigned on 12 May on four felony counts of theft by failure to make the required disposition of funds. The organisation waived its preliminary hearing. No individual has been charged.

Image: ©GCR, illustration by Denis Carrier

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