Pennsylvania contractor accused of robbing staff of $20.6 million
By Jenny LescohierApril 12, 2021
One of Pennsylvania’s biggest contractors has been accused of stealing millions of dollars from its employees in what is being called the biggest prevailing wage fraud case in U.S. history.
Glenn O Hawbaker Inc., a road and bridge contractor based in State College, PA, has been charged with four felony counts after a three-year investigation into what Pennsylvania Attorney General Josh Shapiro called a “complex and well-disguised sleight of hand.”
The Glenn Hawbaker fraud case includes accusations of violating the Pennsylvania Prevailing Wage Act and the federal Davis-Bacon Act, laws that require companies hired for public projects to pay workers a set rate determined by state and federal agencies.
According to reports, the AG’s office claims Hawbaker robbed employees of some $20.6 million in owed benefits between 2015 and 2018, when the probe began.
“My focus now is on holding Hawbaker accountable for breaking the law, and getting these workers their money back,” Shapiro was quoted.
Shapiro alleged that Hawbaker had stolen from workers for decades although, owing to statutes of limitation, the current charges relate to alleged offenses between 2015 and 2018.
The investigation began after whistleblowers sounded the alarm, resulting in a warranted search of Hawbaker’s headquarters in June 2018. The attorney general’s office has set up a hotline for people who have worked for Hawbaker who feel they may have been a victim of theft at (814) 746-3518.
Cooperating with the investigation
A 70-year-old family-owned firm, Hawbaker is one of Pennsylvania’s largest construction firms, reportedly receiving contracts worth $1.7 billion between 2003 and 2018 from the Pennsylvania department of transportation.
In a statement to local media, the company said it had cooperated with the investigation after it learned of it and immediately changed its practices.
“Upon learning of the Attorney General’s investigation in 2018, we have cooperated fully,” the statement said. “While we believe that we have always acted in accordance with all state and federal laws, in an abundance of caution, the company immediately changed its prevailing wage practices.
“These changes remain in effect today as we continue to do what’s right for our employees, both past and present. Our company will continue to work constructively with the Attorney General’s office to reach a swift resolution.”
In their affidavit of probable cause, investigators reportedly said the company claimed it “relied on bad advice of former counsel.”
Stolen wages, inflated costs
Prosecutors allege Hawbaker stole wages from its workers by using money intended for prevailing wage workers’ retirement funds to contribute to retirement accounts for all Hawbaker employees – including the owners and executives. As a result, workers received less money in their retirement accounts than what was owed.
They claim Hawbaker also stole funds intended for prevailing wage workers’ health and welfare benefits and used them to subsidize the cost of the self-funded health insurance plan that covers all employees.
They further claim that the company disguised its scheme by artificially inflating its records of benefit spending by millions of dollars each year and claiming credit for prohibited costs. Those measures created the appearance that it provided employees with benefits that far exceeded the cost of those that it actually did.
As an example of alleged malpractice, in their affidavit of probable cause, investigators calculated that in 2018 Hawbaker claimed it cost $18.65 an hour to cover workers’ health and welfare costs, when in reality it cost $6.67.
“Hawbaker used its workers’ fringe benefit funds to lower their costs, and thereby increase profits for the Hawbaker family,” the attorney general’s office claimed.
The company will be arraigned on May 12 on four felony counts of theft by failure to make the required disposition of funds. The organization waived its preliminary hearing. No individual has been charged.
Hawbaker is reportedly the second Centre County contractor to recently face criminal charges related to prevailing wage law violations. In March, Goodco Mechanical and its owner pleaded guilty to misdemeanor theft charges following accusations that they deliberately misclassified workers on prevailing wage jobs to pay a lower rate.