On Feb. 7, federal and local law enforcement announced the unsealing of a 137-count indictment against 26 bosses/members and one associate of the Int’l Union of Elevator Constructors Local 1. More than $6 million in wages and benefits were allegedly stolen. Allegedly, Local 1 bosses defrauded the construction industry and abused the hiring rights of Local 1 members by committing racketeering crimes at more than 20 construction sites in the N.Y.C. area between 1989-2001. The indictment outlines a longstanding scam in which corrupt union bosses repeatedly lined their pockets through no-show jobs doled out to corrupt union members willing to assist the enterprise.
“The acts of the individuals from Local 1 are appalling,” said N.Y.C. Police Comm’r Raymond W. Kelly. “As all New Yorkers are working toward rebuilding the City, it is despicable that members of Local 1 participated in such corrupt activities. [We] will continue to target those who manipulate union guidelines for their own benefit.”
The indictment charges that Charles L. Novak, a Local 1 vice president and business agent until 2000, as well as Matthew J. Downey and Anthony DeGennaro, both of whom acted as Local 1 representatives at construction sites, engaged in a pattern of racketeering activity through various criminal activities, including demanding and receiving unlawful labor payments, mail fraud, extortion, interstate transportation of property converted and taken by fraud, money laundering, and witness tampering.
Further, the indictment charges that William C. Barthold, David Coakley, and William Tracy, each Local 1 site representatives, as well as Anthony DeGennaro’s wife, Susan, conspired with Novak, Downey, and DeGennaro to commit the alleged labor racketeering crimes. These seven defendants are charged with being members of a racketeering enterprise (“Local 1 Operators’ Crew”) that corrupted Local 1 through their no-show job scheme and other crimes and abused the membership’s right to employment referrals through an open employment list.
In addition to these seven “RICO defendants,” 20 other defendants face an assortment of fraud, money-laundering, tax evasion, and other charges. For example, the indictment charges Robert Shannon, currently a Local 1 vice president and business agent, and Terence Carr, a Local 1 executive board member of and the son-in-law of Local 1 president John Green, with demanding and receiving unlawful labor payments in violation of the Taft-Hartley Act.
In addition to fines and prison time, the indictment seeks forfeiture of up to approximately $3 million from defendants who are convicted of the RICO or RICO conspiracy charges, including a bank account, real properties, and their interests in the Local 1 pension, annuity, and welfare plans. The indictment also seeks to forfeit monies and various properties from defendants who are convicted of a money laundering charge.
The case has been assigned to U.S. Dist. Judge David G. Trager (E.D.N.Y., Clinton). Downey, who was charged with witness tampering in a Oct. 30 indictment, was scheduled to be arraigned on the superseding indictment before Trager on Feb. 15. Other defendants entered not guilty pleas on Feb. 7 before U.S. Magis. Judge A. Simon Chrein in Brooklyn. Chrein set bail for all but one defendant, Anthony DeGennaro, who was ordered held without bail. Prosecutors submitted a letter to Chrein alleging that DeGennaro, of Middletown, N.J., was linked to organized crime, was a flight risk, and had tampered with three of 12 witnesses who were mentioned by pseudonyms in the indictment. The letter quotes DeGennaro as saying “If I go for a guy that rats me out, on my God’s heart, I will kill him.”
The charges center on the collective bargaining agreements (CBAs) entered into by most major N.Y.C. construction contractors with Local 1, which require the contractors to hire Local 1 members to operate the temporary elevator cars. Although the CBAs required that Local 1 refer operators for employment based on an open employment list maintained and kept current by Local 1, the indictment charges the RICO defendants with circumventing that list by themselves selecting who would be put on contractor payrolls at particular construction sites. Allegedly, the defendants exploited the CBAs through the following criminal activities.
1. The No-Show Jobs Scheme — Beginning in 1989, the RICO defendants–Novak, Downey, Anthony and Susan DeGennaro, Coakley, Tracy, and Barthold–submitted and caused to be submitted fraudulent time sheets to contractors at numerous construction sites, claiming that hours had been worked by certain elevator operators who, in fact, had not worked those hours; either they did not appear at all at the construction site, or their hours were grossly inflated. Most of the money for these no-show jobs ended up in the pockets of Novak or other union members, including Downey, Anthony DeGennaro, Coakley and Barthold, each of whom functioned in the capacity of union representative by deciding who worked at particular sites, ensuring contractor compliance with CBAs, and resolving disputes at various locations.
At certain construction sites, Downey, Anthony DeGennaro, Barthold, and Coakley caused their own names to be used to claim falsely that they had worked certain hours as operators, when, in fact, they had either been elsewhere, often conducting union business at other construction sites. Certain of the no-show operators actually worked as chauffeurs for union representatives, including Novak and DeGennaro, while on the payroll of building contractors.
Many Local 1 members who participated in the no-show jobs scheme claimed to have been working on multiple construction jobs at the exact same time. In addition, three union members involved in the scheme had other, full time jobs–Edward W. Connelly was employed as a supervisory fire inspector for N.Y.C.; Steven L.Seidl was a full-time employee of St. John’s Univ.; and James Cassidy was employed full time as a clerk for Local 1.
The most common method for the transfer of no-show job payments to union officers and representatives was by depositing the paychecks into bank accounts controlled by Downey or Anthony and Susan DeGennaro, including an account in the name of “Mattlynn,” a fictitious entity controlled by Downey. Between 1996-1998, Downey deposited more than 1,400 checks payable to other Local 1 union members, totaling more than $1.5 million, into the Mattlynn account. Other methods used by Downey and Coakley to obtain cash from the no-show jobs scheme was to instruct no-show operators to cash their checks and give the cash to these defendants, or to collect the checks from various no-show operators and cash them at a bar in Manhattan.
In addition to the seven RICO defendants, 19 defendants–Richard Brady, Carr, James F. Cassidy, Michael J. Coady, Jr., Connelly, Raymond P. Costello, Marc A. DeGennaro, Edward B. Donohue, Paul J. Downey, Karen Gordon, Peter R. Grim, Timothy J. Grim, Thomas B. McCarthy, Kevin M. Murphy, Michael E. O’Gara, Steven G. Schmitt, Seidl, Shannon, and Frank D. Walker– are charged with participating in the scheme by allowing their names to be used for no-show jobs. These nineteen defendants profited from the scheme through receiving inflated contributions to their pension, annuity, and welfare plans, and some received a portion of the fraudulently obtained wages, including Carr and Shannon, despite their being prohibited to do so by virtue of their status as union representatives and officers.
Allegedly, between 1989 and Mar. 2001, contractors paid more than $3 million in the names of no-show operators. Including withholding taxes and contributions to the benefit plans, the charged enterprise stole more than $6 million from construction projects during the charged period.
2. The Labor Peace Payments Scheme — The indictment charges that between Jan. 1997 and Apr. 2001, Novak, Matthew Downey, and Joseph L. Fusilli, a non-Local 1 member, extorted or conspired or attempted to extort payments from contractors in exchange for labor peace. These defendants and others approached contractors and employers at various job sites where Local 1 elevator operators were not employed. Regardless of whether Local 1’s CBAs required that Local 1 operators be employed at these sites, these three defendants demanded and accepted payments from the contractors and employers in return for avoiding disruption of work at the sites by Local 1 members and others. In order to mask these labor peace payments, Novak caused fraudulent time sheets to be submitted in the names of Local 1 elevator operators, claiming that the hours had been worked when, in fact, they had not been. The contractors and employers then paid these members of Local 1, who, in turn, gave a portion of the payments to Novak or simply made cash payments to Downey.
The indictment charges the seven RICO defendants, as well as the remaining 20 defendants, with various crimes in connection with the no-show job and the labor peace payment schemes, including violations of the Taft-Hartley Act (unlawful labor payments), mail fraud, making false statements to federally-regulated pension plans, interstate transportation of stolen property, money laundering, extortion, witness tampering, conspiracy to defraud the United States, and tax evasion.
The charges of witness tampering against Matthew Downey and Anthony DeGennaro stem from their various attempts to persuade or coerce union members to lie to federal investigators and to the grand jury. For example, according to a previously filed complaint in this case, in a recorded conversation on June 22, 2000, Downey told a cooperating witness who had been on a no-show job to tell a federal grand jury that Downey had cashed his checks for him to save time, and that Downey had returned all of the money to the witness. When the witness reminded Downey “[W]hat the deal is,” Downey (referring to investigators), said, “Yeah, I know what the deal was, but they don’t!” He then added, “I gotta be very careful, here” because “if I ever get caught in a conversation like, something like that, they got it on tape, they get me for (unintelligible), for, uh, obstruction of justice.”
FBI Asst. Director-in-Charge Barry W. Mawn added: “In the wake of the events of September 11, there will be many rebuilding projects begun in New York City. Lower Manhattan has already been victimized once. All those who would seek to take advantage of the effort to recover from that tragedy by engaging in criminal acts similar to those committed by today’s defendants are on notice that the law enforcement community will be paying close attention and will vigorously pursue any and all information provided to us.”
“The participation of high ranking members of Local 1 in this criminal scheme is particularly reprehensible,” said U.S. Atty. for the E. Dist. of N.Y. Alan Vinegrad. “These arrests signal the government’s continuing commitment to hold accountable those who abuse labor unions through their corrupt activities. . . .The message from these arrests should be clear: those who try to cheat and extort the New York City construction industry and abuse the hiring rights of the members of their own labor unions will be caught, prosecuted and punished.”
U.S. Sec’y of Labor Elaine L. Chao stated: “Strong enforcement is a critical component of the [Bush] Administration’s efforts to protect the retirement security of America’s workers. This prosecution] demonstrates our commitment to protecting workers’ benefits and strengthening the confidence of the American workforce that their retirement savings are secure.”
If convicted of the racketeering or racketeering conspiracy charges, Novak, Matthew Downey, Anthony and Susan DeGennaro, Barthold, Coakley, Tracy face up to 20 years in prison and a fine of up to $250,000 for each crime. If convicted of the extortion or extortion conspiracy charges, Novak, Matthew Downey, and Anthony DeGennaro face up to 20 years in prison and a fine of up to $250,000 for each crime. If convicted of the witness tampering charges, the defendants Matthew Downey and Anthony DeGennaro face up to 10 years in prison and a fine of up to $250,000 for each crime. Defendants who are convicted of the money laundering or money laundering conspiracy charges face up to 20 years in prison and a fine of up to $500,000 for each crime. Defendants who are convicted of committing interstate transportation of property converted and taken by fraud face up to 10 years in prison and a fine of up to $250,000 for each crime. Defendants who are convicted of demanding and receiving unlawful labor payments in violation of the Taft-Hartley Act face up to 5 years in prison and a fine of up to $15,000 for each crime. Defendants who are convicted of mail fraud face up to 5 years in prison and a fine of up to $250,000 for each crime. Defendants who are convicted of making false statements to pension plans face up to 5 years in prison and a fine of up to $250,000 for each crime. Defendants convicted of conspiring to commit Taft-Hartley violations, mail fraud, interstate transportation of property converted and taken by fraud, tax evasion and to make false statements to pension plans face up to 5 years in prison and a fine of up to $250,000 for each crime. Defendants convicted of tax evasion face up to 5 years in prison and a fine of up to $100,000 for each crime. [USAO E.D.N.Y. 2/7/02; Bloomberg News 2/7/02; Newsday 2/8/02]