Ronald Mulcahey often paid his employees in cash. Now he’s preparing to pay a price of a different kind. On October 25, Mulcahey, proprietor of a number of environmental services firms in the Boston area, pleaded guilty in U.S. District Court for the District of Massachusetts to defrauding his employees of scheduled benefits. One of his companies had a collective bargaining contract in force with a local of the Laborers International Union of North America (LIUNA). By paying certain employees off the books through a pair of identical nonunion companies, he was able to underreport benefits and avoid applicable federal taxes. The guilty plea follows a joint investigation by the IRS and the U.S. Labor Department’s Employee Benefits Security Administration. Sentencing is set for January 19.
In the construction industry there is a widespread practice, known as double-breasting, in which the owner of a unionized business sets up one or more parallel nonunion businesses for the purpose of paying lower wages and/or benefits than those mandated by a collective bargaining contract. Very often, payment is off the books. The practice is illegal. Yet it frequently occurs anyway, especially in non-Right to Work states with a heavy immigrant presence such as Massachusetts. Union Corruption Update has summarized a number of such cases. Ronald Mulcahey has joined their ranks. A resident of Andover, Mass., Mulcahey was the owner and sole officer of three Woburn, Mass.-based companies specializing in asbestos removal, demolition and fireproofing: Wing Environmental Inc.; Wing Specialty Trades; and EWT-Fireproofing. Wing Environmental Inc. had a bargaining agreement with LIUNA Local 1421. As such, it had to report all employee hours worked and make scheduled contributions to union pension and other benefit plans. By contrast, Wing Specialty Trades and EWT-Fireproofing were nonunion companies that did the same things that Wing Environmental did. Therein lay the problem.
According to prosecutors, Mulcahey during January 2008-June 2011 used Wing Environmental as a cover for defrauding Local 1421. He allegedly paid certain employees a combined cash sum of $723,607 and then logged these disbursements in the books of the two nonunion companies. In so doing, he avoided making required benefit payments subject to provisions of the Employee Retirement Income Security Act of 1974 (ERISA), while avoiding federal income and employment tax taxes. Eventually, IRS and Labor Department investigators uncovered the double-breasting scheme, and the Justice Department charged Mulcahey in May 2015. Following the guilty plea last month, U.S. Attorney Carmen Ortiz emphasized that the main issue is protection of worker rights. “We remain committed to protecting the rights of union members who rely on ERISA funds which provide them with health care, pensions and other services,” she said. “The failure of employers to make appropriate contributions to these funds not only violates federal law, it endangers the funds’ fiscal viability and jeopardizes union members who need the services they provide.”