IBEW Contractor in Maryland Charged with Benefits Fraud

IBEW logoUnion benefit plans work on an assumption that participating employers will make good on their promises. At a number of Maryland plans sponsored by the International Brotherhood of Electrical Workers (IBEW) that hasn’t been a safe assumption. On July 24, Michael Sewell, owner of MESCO Inc., a suburban Baltimore HVAC and plumbing supplier-service contractor, was charged in U.S. District Court for the District of Maryland with document fraud and wage/hour underreporting related to IBEW Local 24 benefit plans to which it owed contributions. In an earlier civil action, a group of IBEW benefit plans and the local had sued MESCO and Michael Sewell & Associates Inc., accusing them of failing to make scheduled payments. The plaintiffs in February were awarded most of the nearly $500,000 they had sought in back contributions, damages and interest.

The criminal action grew out of a civil suit originally filed in federal court on February 17, 2012 (No. ELH-12-505), as amended. The Maryland Electrical Industry Health Fund, a group of seven International Brotherhood of Electrical Workers-sponsored benefit plans, plus IBEW Local 24, charged that the Joppa, Md.-based MESCO Inc. and Sewell & Associates avoided making benefit plan contributions, as spelled out in a collective bargaining agreement. The plaintiffs alleged MESCO had failed to make contributions due for the periods October 2007-July 2011 and October 2011-September 2012. They also accused Sewell & Associates of failing to make contributions for January 2009-December 2011. The plaintiffs calculated that MESCO owed the health fund $228,810.87 in contributions, damages and interest and that Sewell & Associates owed $260.633.92 – a grand total of $489,444.79. And because MESCO Inc. and Sewell operated interchangeably, the plaintiffs wanted the court to declare each defendant jointly and severally liable; i.e., responsible for the other’s debts in the event of an inability to pay.

The plaintiffs won most of the day. On February 28 of this year, U.S. District Judge Ellen Hollander granted the Maryland Electrical Industry Health Fund a Summary Judgment. MESCO Inc. and Sewell & Associates, she ruled, must compensate the union health, pension and severance funds in the amount of $453,615.98, a sum representing more than 90 percent of the amount sought by the plaintiffs. Judge Hollander explained her rationale in an accompanying Memorandum Opinion (see pdf). A criminal action followed when the IBEW benefit plan trustees and Local 24 requested a Department of Labor investigation. The probe, conducted by the department’s Office of Labor-Management Standards, Employee Benefits Security Administration, and Office of Inspector General, concluded Sewell had violated the Employee Retirement Income Security Act (ERISA) by falsifying a document and knowingly underreporting work hours. DOL then turned the case over to Justice Department prosecutors.