Benefits Administrator for NYC ‘Sandhogs’ Laborers Local Charged with $42 Million Ripoff

Sandhogs at workOne would think a union office administrator who makes more than $500,000 a year wouldn’t have to resort to stealing. But Melissa King isn’t a typical administrator. King, until recently the longtime benefits consultant for Local 147 of the Laborers International Union of North America (LIUNA) in New York, was charged on December 1 in Manhattan federal court with arguably the largest embezzlement scheme in the history of American labor. Prosecutors are saying that for at least six years she stole a staggering $42 million from three union benefit funds, diverting the money to bank accounts that she controlled. Her lawyers claim she is innocent. Now out on $10 million bail, she’s going to have a tough time convincing a jury of that.

LIUNA Local 147 is an elite underground construction unit known as the “Sandhogs.” With roots going back well over 100 years, the heavily Irish-ethnic 1,000-member union represents the workers who dig New York City’s subway, sewer and water tunnels, often at hundreds of feet beneath the ground. It was the sandhogs who did the excavation work for such engineering marvels as the Lincoln, Holland, Queens-Midtown and Brooklyn-Battery Tunnels. Their massive ongoing main project, the Third Water Tunnel, when completed in 2020 at a projected cost of roughly $6 billion, will carry 1.3 billion gallons of water per day for 9 million area residents and ensure that water keeps running should either of the first two tunnels fails. It’s grueling and dangerous work. And the workers are paid well. They also expect to collect their full retirement benefits. But thanks to the alleged actions of Melissa King, there’s a distinct possibility they won’t.

King, 58, a resident of Irvington, N.Y., through her home-based company, King Care LLC, handled all administrative functions for Sandhog benefit funds since 1980, and at an annual official compensation that eventually reached $540,000. That’s pretty lavish even for an international union president. Apparently, it wasn’t lavish enough. Starting in 2002, prosecutors charge, King illegally transferred about $42 million from three union accounts covering pensions, vacation pay and other benefits to accounts she personally controlled. A large portion of it, to put it lightly, was unrelated to union business. Of the alleged thefts, $7.2 million went to pay off American Express bills, more than $3 million to equestrian businesses (apparently she was grooming her daughter for an equestrian career), and $713,500 to a jewelry business. The criminal complaint states she also transferred $500,000 to an E*Trade Securities account without union authorization.

It’s hard to see how theft of this magnitude could have gone on for so long without someone noticing. Surely, union officials, were they on the ball, would have sensed the financial shortfall. Likewise, one has to wonder how the auditors at the U.S. Labor Department failed to see glaring discrepancies on the union’s annual financial reports. Still, action comes better late than never. The union leadership dismissed Ms. King from her duties last December. And this past June, union trustees filed a civil suit containing allegations similar those in the new criminal complaint. Prosecutors are confident they’ve got their culprit. “Employees work hard for their benefits and depend on plan administrators to be caretakers, not thieves,” said Preet Bharara, U.S. Attorney for the Southern District of New York. “These charges bespeak a massive betrayal of trust.”

King’s defense attorneys, Peter W. Till and Frank C. Razzano, take a much different view. “Ms. King looks forward to full and complete vindication when the allegations are ultimately presented to a jury,” the pair said in a prepared statement. Their client, charged with one count of embezzlement and eight counts of money laundering, hopes such a jury exists. If convicted, she faces up to five years in prison on the embezzlement count and 10 years on each of the money laundering counts. Whatever the outcome, a whole lot of union members right now are wondering if and when they’ll see their benefits. Perhaps if New York were a Right to Work state they would have other things to worry about.