Maryland Laborers Business Manager Pleads Guilty to $1.7M+ Ripoff; Jury Convicts Contractor

liuna logoIt was one of the stranger union scams, stretching from suburban Washington, D.C. to the Arab nation of Qatar.  And the defendants reaped what they sowed.  On November 1, Anthony Frederick Sr., former business manager of Laborers International Union of North America (LIUNA) Local 657, pleaded guilty in U.S. District Court for the District of Columbia to fraud and theft charges in connection with the diversion of over $1.7 million in funds from the Washington, D.C.-based union to a suburban Maryland firm, STS General Contracting.  Three weeks later, on November 22, STS owner Gary Cooper was convicted by a Washington trial jury on similar charges.  A Maryland real estate agent, Christopher Kwegan, previously had pleaded guilty in the case.  The convictions follow indictments handed down in October 2015.

LIUNA Local 657 represents roughly 1,500 construction workers in the Washington, D.C. area.  It also for a while served as a source of generous, and illegal, self-enrichment for its business manager, Anthony Wendel Frederick Sr., and two associates.  Union Corruption Update discussed this case when it broke over a year ago.  According to federal prosecutors, Frederick, now 50, a resident of Upper Marlboro, Md., during May 2013-June 2014 diverted more than $1.7 million in union funds to a Greenbelt (Prince George’s County), Md.-based construction company, STS General Contracting, without prior knowledge or approval by the local or international union executive board.  Nearly $1.1 million of that money ostensibly went toward renovations of the Local 657 administration building, which turned out to be cosmetic.  Frederick also paid in excess of $580,000 in union funds to STS supposedly for construction of a new training center.  Another firm previously had handled the contract.  Frederick also paid $20,000 to STS to acquire an excavation permit that normally cost $143 and more than $20,000 to renew several existing permits that could have been handled for $250 each.  That meant a lot of money left over for things having nothing to do with union business.

That’s where the outside men came in.  STS General Contracting owner-CEO Gary Cooper now 58, also a resident of Upper Marlboro, Md., along with an area real estate agent, Christopher Kwegan, now 59, a resident of Randallstown, Md., directed part of the stolen union money from STS accounts toward a $225,000 down payment on a residential property acquired by Frederick and construction of a three-car garage on that property.  The pair also moved at least $600,000 to Frederick’s wife, giving her 50 percent ownership in another construction firm owned by Cooper.  In addition, Cooper and Kwegan cleaned out an STS bank account containing roughly $525,000; its only depositor was LIUNA Local 657.  Much of the stolen money was spent on personal items, shopping, entertainment, hotel stays and overseas travel.  Another $172,000 went to an electrical engineering services firm in the Arab Gulf state of Qatar, reportedly for the purpose of aiding political opposition.  An absolute Arab Gulf monarchy ruled according to Islamic Sharia law, Qatar seemed an unlikely destination for funds from any American source, union-related or not.  This is a country in which at least 18 persons in 2010 were sentenced to floggings of between 40 and 100 lashes for the “crimes” of alcohol consumption and illicit sexual relations.  Even assuming that the beneficiaries of the funds oppose such practices, it’s not the job of unions in this country to use member dues for such a purpose.

The scam came apart following a routine internal union audit.  That audit triggered an investigation by the FBI and the U.S. Labor Department’s Office of Inspector General and Office of Labor-Management Standards.  The Justice Department in October 2015 announced the indictment of Anthony Frederick for one count each of theft, wire fraud and unlawful payments, plus several counts of money-laundering.  He pleaded guilty.  Kwegan also pleaded guilty to these offenses.  Cooper took his chances by going to trial, but it proved a bad bet.  He would be convicted for the same offenses.  Kwegan, it should be noted, is carrying an extra burden these days.  On November 8 of this year, he and Baltimore-based real estate consultant Alexander Sivels II were sentenced in federal court for their respective roles in a mortgage fraud scheme involving at least nine residential properties in the city of Baltimore.  Kwegan had pleaded guilty in July.  The pair during 2007-11 had arranged for “straw buyers” to purchase these properties at wildly inflated prices.  Each property eventually went into foreclosure.  Both defendants received a 27-month prison sentence to be followed by three years of supervised release.  Sivels, the ringleader, also was ordered to make restitution in the amount of $1,317,314.35, while Kwegan was ordered to pay $530,641.27.  Three other defendants, Andreas Tamaris, Cecil Chester and Michael Camphor, also pleaded guilty to fraud.  Whatever might be said of the former business manager of Laborers Local 657, he didn’t choose his business associates wisely.