Manhattan DA indicts contractor, payroll company, alleging wage theft, workers compensation fraud

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The Steinway Tower under construction in NYC. Photo by GrissJr (Wikipedia)

Queens-based Parkside Construction, its constituent companies, its principals, and an external payroll processing company, Affinity Human Resources, LLC, have been charged for schemes involving the theft of more than $1.7 million in wages, as well as workers’ compensation insurance fraud totaling approximately $7.8 million, New York State officials have announced.

The defendants are charged in a New York State Supreme Court indictment with Insurance Fraud in the First Degree, Grand Larceny in the Second and Third Degrees, and Scheme to Defraud in the First Degree, among other charges.

See the New York Times story about the indictment

“Amid Manhattan’s luxury building boom, sometimes it’s all too easy to overlook the human beings behind the scaffolding,” Manhattan District Attorney Cyrus R. Vance, Jr. said in as statement

“Construction workers are responsible for some of the most dangerous jobs in the city, and whether they’re working thousands of feet up in the air or twenty feet below ground-level, they deserve to be paid fairly and fully for their work. My office made a commitment to fight wage theft, which impacts employees across all industries, but is especially common in the construction business, where unscrupulous employers like the ones charged in today’s indictment are devising new and different ways to cheat and steal. Since launching our joint effort to ensure workplace integrity, my office and our partners have returned hundreds of thousands of dollars in stolen wages to workers, and I thank our partners for their dedication to this important issue.”

New York State Department of Labor Commissioner Roberta Reardon said: “Unscrupulous individuals must face the consequences of their actions. Governor Cuomo has made it clear time and time again: stealing from hard working New Yorkers is unacceptable. Thanks to the Manhattan District Attorney’s Office, these bad actors no longer just face hefty fines, they face criminal charges as well.”

New York City Department of Investigation (DOI) commissioner Mark G. Peters said: “The defendants charged in this wage theft scheme played a long con with their employees, promising a decent wage but failing to deliver full paychecks. They flouted workers’ rights by stealing their wages and failing to pay them for the work they did, according to the charges. DOI, the Manhattan District Attorney’s Office, and our partners in the Construction Fraud Task Force will continue to investigate wage theft crimes in the construction industry and attempt to make whole those workers who were cheated out of their rightful pay.”

The indictment is the result of a long-term investigation into wage theft and other forms of fraud within the construction industry, led by the Manhattan District Attorney’s Office’s Rackets Bureau and Construction Fraud Task Force, DOI, New York State Department of Labor (NYS DOL), and New York State Insurance Fund (NYSIF), with additional assistance by the Port Authority of New York and New Jersey (PANYNJ) Office of the Inspector General and the Business Integrity Commission (BIC).

Wage theft scheme

According to the indictment and documents filed in court, between 2014 and 2017, Parkside Construction, its owners, and its constituent companies, which included Parkside Construction Builders Corp., Parkside Construction Contractors Inc. and GS&F Enterprises LLC,  stole more than $1.7 million from employees through a wage theft scheme with the Affinity payroll service’s assistance. Affinity provided Parkside with human resources services such as payroll, employee benefits, and workers’ compensation management.

During this period, Parkside had contracts with multiple builders and developers to perform concrete installation and masonry work on several high-rise buildings in Manhattan, including:

  • The Marriott Hotels at 215 Pearl St.
  • Steinway Tower at 111 W. 57th St.
  • Courtyard New York Downtown Marriott at 133 Greenwich St.
  • Hilton Garden Inn New York Times Square S. at 326 W. 37th St.
  • DoubleTree by Hilton Hotel at 350 W. 40th St.
  • Public Hotel at 215 Chrystie St., and
  • Jarmulowsky Bank Hotel at 9 Orchard St.

In total, the contracts represented more than $100 million in income for Parkside, whose business, on-site operations, and payroll were jointly managed by co-owners Francesco Pugliese, 39, and Salavtore Pugliese, 46. James Lyons, 54, served as supervising foreman and Yenny Durate, 42, was the payroll manager.

The prosecutors assert that, in order to keep track of employees’ earnings, Parkside, which employed more than 500 workers, used computerized face-recognition machines at worksites to record workers’ hours. However, as part of the wage theft scheme, printouts from the on-site time-keeping machines were later altered and updated with lower weekly hours than those actually worked. The falsified timesheets were then submitted for processing to Affinity.

In addition, Parkside and the companies’ principals directed Michael Dimaggiox, 58, an outside accountant, and Affinity’s owner Jerry Hamling, 57, to pay some workers’ wages with so-called “expense reimbursement” checks to hide the fact that these payments were compensation, thereby avoiding making withholding taxes and unemployment insurance contributions.

During the period charged in the indictment, the defendants stole more than $1.7 million from at least 520 workers who were not compensated for work that they performed at construction sites throughout the city.

Insurance fraud scheme

Between March 2014 and October 2017, Parkside, its owners, and senior employees also hid more than $40 million in payroll from NYSIF in order to maintain the workers’ compensation coverage at fraudulently low premiums, the indictment asserts.

In New York State, all employers are required to maintain workers’ compensation coverage for their employees. The premium for workers’ compensation insurance is based on the level of payroll and the type of work performed by a company’s employees.

In 2014, Parkside and its constituent companies reported an estimated yearly payroll of approximately $1.3 million. Based on this information, NYSIF granted policies to Parkside. By 2015, however, Parkside’s payroll had grown to more than $15 million.

The officials say Affinity and Hamling helped conceal the payroll by falsely informing NYSIF that operations had been restructured, all workers’ employment had been terminated, and all direct labor involving construction had been subcontracted out to other vendors. These claims were reiterated and furthered by Parkside’s owner as well as its accountant, who allegedly falsely certified that partial records pertaining the company’s payroll were complete and accurate.

Based on numerous false statements and submissions, the defendants failed to report more than $42 million in payroll, thereby evading more than $7.8 million in insurance premiums, the indictment asserts.

The Manhattan D.A.’s Office’s Asset Forfeiture Unit is also filing a civil forfeiture action seeking a total of $1.7 million with respect to the wage theft scheme and $7.8 million with respect to the workers’ compensation insurance fraud scheme to be used as restitution for victims.

1 COMMENT

  1. Was this job bonded by this subcontractor? if not, is it not the general contractor responsibility to make this whole. Believe the Dept. of Labor mandated this years ago. Great reason for posting Payment bonds.

    Fn

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