Double-Breasted Company Owners, Officers Can Be Indicted For Underpaying Benefit Contributions

Author:Mr Mark Shapiro and Andrew W. Stephenson
Profession:Holland & Knight
 
FREE EXCERPT

Mark L. Shapiro is a Parnter in our Chicago office and Andrew W. Stephenson is a Partner in our Washington DC office.

HIGHLIGHTS:

A federal district court in Massachusetts has held that the shareholders and officers of a double-breasted construction company can be indicted and could go to prison for fraudulently misrepresenting that their business was a lawful double-breasted operation with two separate companies, if the government proves the allegations in the indictment. The indictment of individual shareholders and officers in such a case represents a significant escalation of the risk of not properly setting up and properly operating double-breasted operations, which are common in the construction industry. Double-breasting is still lawful, but companies must rigorously maintain separateness in operation, as the decision in this case dramatically increases the risks if a double-breasted operation is alleged to be a single business. The U.S. District Court for the District of Massachusetts held in September that the shareholders and officers of a double-breasted construction company can be indicted and could go to prison if the government proves they fraudulently misrepresented that their business was a lawful double-breasted operation with two separate companies. According to the indictment, the defendants, who failed to maintain the separateness of their two corporations, reported to the Massachusetts Laborers Benefit Funds (MLBF) the hours worked by employees of their union company but not their non-union company, and based on these false reports, failed to make payments due to the MLBF.

Normally, a dispute over whether an employer had properly reported and paid all the contributions it was obligated to make under a collective bargaining agreement (CBA) would be resolved by civil litigation or arbitration. The indictment of individual shareholders and officers in such a case represents a significant escalation of the risk of not properly setting up and properly operating double-breasted operations, which are common in the construction industry.

The Facts

Air Quality Experts Inc. (Air Quality) is an asbestos abatement company that was incorporated in 1987. AQE Inc. (AQE) is also an asbestos abatement company that was incorporated in 2005. Christopher and Kimberly Thompson together owned and operated Air Quality and AQE. Christopher was the president and treasurer of Air Quality. Kimberly, his wife, was the president of AQE and...

To continue reading

FREE SIGN UP