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Oct
2015
21

Grand Jury Finds PA Contractor Guilty of $900,000 Misclassification Scam

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In Bethlehem, PA a grand jury found that Salukas & White Contracting Inc. funneled nearly $900,000 to two subcontractors who acted “as ATM machines” in a a scheme to pay workers off the books and defraud the Commonwealth of Pennsylvania.  The grand jury looked into the practices of the company and one of its owners, Mike White, over a three-year period from 2011-2013 and found that credible evidence was given by all involved except White. Charges will be filed against White in the upcoming days by Northampton County District Attorney John Morganelli.

Details of the scam, which involved rampant employee misclassification, comes from Lehigh Valley Live:

Over three years, authorities said, Antonio Garcia initially did business as Tony’s Drywall and later funneled money to Robert Leauber Drywall, a company that wasn’t on the job sites. Garcia, whose American wife would cash the checks, helped deliver $302,557, $281,000 and $300,697 — minus a 10 percent cut to the subcontractor— to off-the-books workers, Morganelli said.

Garcia was actually an employee of Salukas & White and he and his wife testified before the grand jury, Morganelli said. Garcia will not face charges because he cooperated with the investigation, Morganelli said. Garcia admitted that some of the testimony he initially gave the grand jury was not truthful, the grand jury’s report says.

The grand jury found Mark White “may have intentionally attempted to mislead the grand jury and provided inaccurate and false testimony regarding important and material information being investigated including stating he had no knowledge whatsoever of Leauber Drywall acting as a ‘middleman’ and/or taking a percentage or cut.”

Larry Salukas, speaking with immunity before the grand jury, confirmed the 10 percent cut, according to the grand jury’s report.

District Attorney Morganelli said he was “disappointed” that he could only charge White with one misdemeanor count of violating the Construction Workplace Misclassification Act and one felony count of perjury.  During testimony, Robert O’Brien of the Pennsylvania Department of Labor and Industry informed the jury that the state’s misclassification law is difficult to enforce. For example, the law allows a $2,500 fine for each violation in a criminal case and $1,000 in a civil case, meaning that breaking the law is often cheaper than the punishment for getting caught.  

In addition to White’s violations, the grand jury concluded that the state legislature should look into increasing penalties for the Construction Workforce Misclassification Act and that Salukas & White Contracting Inc. should receive future spot checks from the Department of Labor and Industry to ensure that the company is compliant with the law.

The complaint was brought forward by the Local carpenters union, whose business agent Kevin Lott labeled the scheme used by White as “rampant for nonunion companies.”  Lott, who testified before the grand jury, spoke to Lehigh Valley Live:

We appreciate the district attorney looking into this,” Lott said, adding that the unauthorized workers never earn money toward Social Security or Medicare. “It’s something we run into all the time. … It’s a shame that (the charges are) misdemeanors, but they’ve got to start somewhere.”

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