Charles R. Smith Jr. kept two sets of books. And one of them proved far more trouble than it was worth. Last Tuesday, March 27, Smith, owner of a Sharon, Mass. demolition and asbestos abatement company, was sentenced in Boston federal court to six months of home detention in connection with his defrauding members of a Laborers International Union of North America (LIUNA) local out of nearly $800,000 in scheduled wages and benefits. Smith and his unionized firm, SMI Demolition Inc., also were placed on probation for two years and ordered to pay restitution. The defendants – effectively the same entity – had pleaded guilty this January to two counts of mail fraud following an investigation by the U.S. Labor Department’s Office of Inspector General and Employee Benefits Security Administration.
At bottom, this was a case of what is commonly called ‘double-breasting.’ Under this arrangement, a unionized contractor sets up a parallel nonunion company identical all but in name to the union one. The ulterior motive is to avoid payment of wages and benefits specified in a collective bargaining agreement. The practice is especially common in non-Right to Work states. It is also illegal, as it cheats union workers out of what they were promised. Union Corruption Update in recent years has described a number of double-breasting cases, especially in New England (such as here and here). One can add another case to the list.
According to federal prosecutors, Charles Smith, now 51, a resident of Sharon, a community in southwest suburban Boston, operated a unionized company, SMI Demolition Inc., alongside an identical nonunion firm, Southern Middlesex Industries Inc., for the purpose of evading contractual commitments with LIUNA Local 1421. During October 2011-December 2013 SMI paid some employees union wage rates and made scheduled contributions to the Massachusetts Laborers Benefit Funds. However, the contractor paid employees of Southern Middlesex Industries less than what their union counterparts received for doing the same work. To conceal the scheme, Smith submitted false remittance reports. In addition to engaging in double-breasting, Smith and SMI deprived certain workers of overtime pay as part of an asbestos abatement contract at an airplane hangar at Hanscom Field in Bedford, Mass. The $25 an hour wage rate paid for extra hours worked beyond the 40-hour work week was well below that mandated by federal overtime rules.
The scams added up. Smith and SMI Demolition Inc. were ordered to pay restitution of $703,330 in connection with the double-breasting scheme and $79,956 in connection with the overtime fraud. That’s more than $780,000 in all. Federal officials emphasize justice has been done. “Charles R. Smith Jr. and SMI Demolition Inc. devised a scheme to illegally enrich themselves by avoiding paying required overtime and prevailing wage rates to union members they employed on various asbestos removal projects under collective bargaining agreements,” said Peter Nozka, Acting Special Agent-in-Charge for the U.S. Department of Labor’s Office of Inspector General, New York Region. “We will continue to work with our law enforcement partners to safeguard the union benefit funds from those who seek to exploit it for personal gain.”