For George Peltz, running a business and ripping off a union often meant the same thing. That’s why he’s no longer involved in either. On May 20, Peltz, a Philadelphia-area contractor, was sentenced in U.S. District Court for the Eastern District of Pennsylvania to 18 months in prison and two years of probation for bribery, theft from a benefit fund, and tax fraud related to his dealings with International Brotherhood of Electrical Workers Local 98. He also paid nearly $1 million in restitution. Peltz had pleaded guilty in January. The actions are part of a larger federal and state joint probe of corruption in Philadelphia that thus far has implicated a city council member, a Pennsylvania Supreme Court justice, a couple of contractors and several Local 98 officials.
Union Corruption Update earlier had analyzed a sweeping federal indictment unsealed on January 30 against eight persons in the overlapping worlds of Philadelphia business, labor and politics. The defendants at various points during April 2010-August 2016 allegedly had engaged in a range of offenses including embezzlement, wire fraud and bribery. One of the prime targets was John “Johnny Doc” Dougherty, longtime business manager for the Philadelphia-based Electrical Workers Local 98. The indictment charged him, among other things, with one count of conspiracy to embezzle from the union and a related benefit plan, 34 counts of embezzlement, 23 counts of wire fraud, and two counts of falsification of union records to cover up the thefts. Five other IBEW Local 98 officials and employees also were indicted, most notably, President Brian Burrows. Two persons outside the union, contractor Anthony Massa and Philadelphia City Councilman Robert Henon, also were charged. Each of the defendants have pleaded not guilty.
Two additional persons, though not indicted, also were charged. One of them was George Peltz, co-owner of MJK Electrical Corp., a Berlin Township (Camden County), New Jersey-based electrical contractor with an office in Philadelphia. Now 67, Peltz, a resident of Ocean City, N.J., was an old friend of John Dougherty. And he used that relationship as an opportunity to engage in an illegal quid pro quo arrangement. According to prosecutors, Peltz during 2012-15 provided nearly $57,000 worth of home and office improvements to Dougherty at no charge in return for Dougherty steering millions of dollars in work to MJK. Federal law prohibits employers from providing money or other things of value to union officials unless the transactions reflect fair market value.
MJK’s projects included the construction of the Barnes Foundation building, the lighting of Boathouse Row, some of the setups for the 2016 Democratic National Convention at Wells Fargo Center, and most significantly, a roughly $2.1 million contract with Comcast Corp. The Comcast deal was very much the result of hardball negotiation on behalf of MJK by Dougherty and Henon, who had threatened to block any new contract with the Philadelphia-based media giant unless it steered a percentage of its fiber optic cable work to Peltz’s company at a 125 percent markup over the standard rate. What helped seal this shakedown was a longstanding requirement by the City of Philadelphia that a certain portion of its contracts had to be awarded to minority-owned businesses. And MJK was “minority-owned” because Peltz’s business partner and company president, Michael J. Jones, is black. Comcast, as I noted several years ago, for years has been a prominent booster of racial-ethnic “diversity.” And it has put its money where its mouth is, for years donating generously to National Action Network, the nonprofit organization founded and headed by civil rights hustler Al Sharpton. The last thing the company wanted was to be perceived as hostile to blacks.
George Peltz also ripped off his employees and the U.S. government. According to Assistant U.S. Attorney Paul Gray, Peltz “cheated the IRS and his own workers with impunity.” Specifically, he hid more than $1.6 million in business and personal income from the IRS, shortchanged his employees out of overtime wages, and avoided making nearly $500,000 in scheduled contributions to a union benefit fund. Much of the tax avoidance was related to payments by IBEW Local 98 to MJK Electrical Corp. in the form of market recovery funds, also known as “wage supplements,” This is a common if little-known practice among construction unions. Such transactions subsidize the labor costs of union contractors so they can compete with nonunion contractors. The practice is not necessarily illegal, but it can be. And it is definitely unethical. Such expenditures require hikes in dues assessments on workers to cover the costs of these contributions. During 2010-16, Peltz’s firm pulled in more than $3.2 million from the local in this manner.
George Peltz’s demise began one morning in the summer of 2016 when FBI and IRS agents raided the offices of John Dougherty, Councilman Henon and Peltz, plus Dougherty’s South Philadelphia home. On January 30 of this year, a federal court unsealed a grand jury indictment of Dougherty and seven other persons for their roles in a six-year scheme to rip off IBEW Local 98 by more than $600,000 and conceal the thefts by falsifying union financial records. Peltz wasn’t one of the defendants named in the 116-count indictment, but the investigation of his corruption grew directly out of those allegations. There would be little doubt as to how his case would end up. Consequently, he pleaded guilty to a variety of charges on January 28, 2019. At sentencing, he handed the court about $958,000 in restitution checks. “I’m so deeply sorry,” Peltz told U.S. District Judge Jeffrey Schmehl. “I can’t tell you how sorry I am for this lapse in judgment.” Judge Schmehl, unimpressed, called the defendant’s conduct a “systematic and deliberate stealing of money.” That said, he offered Peltz a relatively lenient 18-month prison sentence, six months short of the low end of federal guidelines. The indicted defendants, meanwhile, are set to go on trial in the coming months. They won’t have to worry about Peltz testifying against them, as his plea agreement was “non-cooperating.”
The scandals involving International Brotherhood of Electrical Workers Local 98 underscore the incestuous nature that often accompanies construction project deal-making. It is a world in which unions wield substantial political as well as economic clout, and can negotiate favorable and enforceable agreements. Local 98 boss John Dougherty was well-connected on a personal level, too. His brother, Kevin, serves as a Justice on the Pennsylvania Supreme Court; the Philadelphia Inquirer reported back in February that Kevin Dougherty failed to report union-paid repairs to his home made in 2011. One must emphasize here that much of this corruption happened because of the affirmative action edifice that our country has built over decades that mandates contract set-asides for racial minorities. George Peltz might not be a member of a certified minority group. But having his company classified as “minority-owned” enabled him to sway City Hall. That helped open the door to unearned wealth. Unfortunately, it also opened the door to prison.