The United States Attorney for the District of Massachusetts announced that it indicted two construction company executives for running what the Department of Justice calls “a fraudulent “double breasted shop” scheme.” The DOJ charged Christopher Thompson and Kimberly Thompson on 18 counts of mail fraud, one count of benefit fund embezzlement, and 18 counts of filing false documents with an ERISA fund. A copy of the indictment can be found here.
The facts set forth in the indictment are not ground breaking. One company, Air Quality Experts, Inc., was an asbestos abatement contractor established in 1987. Air Quality was not a signatory to any collective bargaining agreement. In 2005, the owners of Air Quality set up the creatively named AQE, Inc., which signed a collective bargaining agreement with the Massachusetts Laborers District Council. According to the indictment, AQE operated out of the same office, used the same equipment, operated under the same management, and, critically, used the same employees, as Air Quality. However, AQE did not submit fringe benefits for the members of the Laborers Union for the work they performed for the non-signatory entity, Air Quality.
While the facts of this indictment are not groundbreaking, the fact that the Department of Justice indicted the owners of the improperly established and maintained double breasted operation is tremendous. Normally, an improperly established and maintained double breasted operation would result in a civil lawsuit by a union seeking to recover fringe benefits owed for work performed by the non-union entity. While the civil liability in those cases can be significant, it never meant jail time for the owners of the double breasted firms. Therefore, this case significantly ups the ante for firms that have double breasted operations, but who fail to properly maintain them.
There is nothing wrong or illegal about a double breasted operation per se. In fact, both firms can even have common ownership. However, they never can have common employees, common equipment, and common management. That is what apparently did in the owners of AQE and Air Quality.
Wally Zimolong
Wally represents contractors (and subcontractors) and developers. His clients build and develop residential, commercial, and industrial properties nationwide. Wally enjoys working with the owners of the businesses he represents because they tend to be entrepreneurs and all around interesting people.
