Benefit fraud in the construction industry has become disturbingly common, especially in the New York City area. On July 30, Donal O’Sullivan, president and owner of Navillus Contracting, Inc., helped by two other Navillus executives, his sister Helen O’Sullivan and Padraig Naughton, respectively, treasurer and controller, were indicted in Brooklyn federal court on 11 counts related to their alleged defrauding of union benefit plans of more than $1 million over six years. The defendants were arrested, arraigned and then released on bail. In an August 3 letter to clients, Donal O’Sullivan stated, “These allegations are against us personally, and we have no choice but to commit ourselves to clearing our names.” All three defendants have stepped aside “temporarily,” with company operations chief Colin Mathers taking over as interim CEO.
Founded in 1987, Navillus Contracting is one of the largest commercial construction firms in New York City, specializing in concrete, masonry, tile, stone and carpentry. Its projects include One Vanderbilt Avenue, Lincoln Center Promenade (North Tower), the 9/11 Memorial & Museum, the Second Avenue Subway, the RFK (formerly Triborough) Bridge and Madison Square Garden. The company also is heavily unionized, having signed collective bargaining agreements with Bricklayers and Allied Craft Workers Local 1, International Brotherhood of Teamsters Local 282, the Cement Masons and the New York City District Council of Carpenters, among other unions. These agreements require, among other things, that the firm contribute to pension, welfare and other benefit plans. To ensure that scheduled contributions are made, Navillus must file periodic remittance reports detailing how many hours on the job each worker spent. Apparently, there was a major problem in this area.
According to prosecutors, Donal O’Sullivan, now 59, his sister Helen O’Sullivan, 60, and Padraig Naughton, 48, during 2011-17 engaged in an elaborate payroll scheme to avoid making more than $1 million in pension contributions, aided by an unnamed third-party consulting firm. Neither Nevillus nor the consultant forwarded the contributions. In a pay-for-play arrangement, Nevillus reportedly paid more than $7.2 million to the consulting firm for construction work never performed, which in turn paid certain Nevillus employees from this funding pool. In this way, Nevillus was able to reduce the reported hours of work and hence the money it owed to the plans.
Donal O’Sullivan vehemently disputes the accusations. Nevillus, he asserted in his letter, has “worked hard over the past three decades to build strong relationships with the vast majority of New York unions,” but its effort has been undermined by “a select few who seem determined to tear apart the Navillus family.” He stated that his company paid $204 million to an array of union benefit funds during the 2011-17 period and that the indictment “falsely claims that unions were shorted by less than one-half of one percent of that amount.”
This would not be the first instance in recent years, however, in which Nevillus Contracting has been in hot water with federal authorities. In 2017, a district court ruled in favor of five union-sponsored benefit funds which had accused Nevillus of creating a virtually identical nonunion company operated by Donal O’Sullivan’s brother, Kevin, for the purpose of evading contractual requirements mandating the use of union labor. The presiding judge that September ordered Nevillus to pay $76 million to the plans. That case was a prime example of ‘double-breasting.’ Though not necessarily illegal, this dual-shop arrangement, as Union Corruption Update has documented many times, such as here, here and here, almost inevitably is illegal when the differences between the two companies are cosmetic, a giveaway being heavily overlapping if not identical employees, office space and phones. In such cases, the union company seeks to evade certain aspects of a collective bargaining agreement. Nevillus filed for Chapter 11 bankruptcy two months later in that case and then appealed the decision. The company eventually settled with the unions for $25.7 million.
Federal officials are convinced that Nevillus engaged in benefit fraud in the new case. “As alleged, these senior construction company executives were the architects of a payroll scheme designed to evade obligatory contributions to union benefits funds that their workers depended upon,” said Acting U.S. Attorney for the Eastern District of New York Seth DuCharme. “This Office, together with its federal and local law enforcement partners, will continue to investigate and hold accountable employers whose corrupt actions jeopardize their employees’ well-being.” FBI Assistant Director-in-Charge William F. Sweeney, Jr. similarly remarked: “This type of crime depletes the benefits that union employees have a right to access. Today’s arrests highlight this illegal scheme and reassert our dedication to rooting out crimes of this nature.”