NYC construction union brings $7 million corruption suit against developers

A New York City metalworking union has filed a RICO suit, alleging corruption and wrongdoing, against the major developers who they say are denying workers fair wages and benefits. In addition to the suit, however, union leaders say they aim to rehabilitate the public's perception of unions.

The union, Metallic Lathers Union Local 46, is suing Lalezarian Developers, JMH Development and HRH Construction for a payout of more than $21 million, accusing them of creating an illegal shell organization to avoid paying fair wages. The complaint was filed last week in Westchester.

Local 46 said in the complaint that the three companies had worked together to complete three buildings from 2007 to 2011, using a phony non-union company that they called Leviathan Construction Management. By using non-unionized workers for the buildings, union workers lost more than $7 million in pay. Punishment calls for three times the lost wages to be paid, totaling $21 million if the court sides with the unions.

Bill Hohfeld, labor management coordinator for Local 46, told Raw Story that unions get a bad reputation because they can be a nuisance to power mongers.

"Corporate America and business in general has done everything they can to put unions out of business," he said. We're almost like the last speed bump in between them and them having everything."

Tom Kennedy, the attorney bringing the case on behalf of the union, said at a press conference that the Leviathan plot was discovered when HRH Construction filed for chapter 11 bankruptcy. The union and Kennedy investigated HRH's finances, and found evidence of wrongdoing.

"We were able to subpoena records about the projects that in the past, the union had only known on the street," Kennedy said of three buildings named in the lawsuit. "[They were built in 2008 and 2009], a time when there was very little construction work in the city, these projects would have been very important in assisting thousands of union members and protecting their livelihood and the benefits that their families enjoyed."

HRH is obligated to hire union workers, but instead worked within the dummy corporation Leviathan to save money and hire non-union workers.

One family, the Singers, owns both Leviathan and HRH. The two businesses also have shared employees and expenses, and money has been transferred between the two businesses.

New York City Council member Stephen Levin said in a prepared statement that he supports the union and the suit.

“Developers like Lalezarian and JMH need to respect the rights of working people,” he said. “I am standing with Local 46, the Mason Tenders and all NYC unions to confront this kind of illegal behavior."

It's unusual for a union to bring a RICO suit against a developer — historically, the cases run the opposite way. However, a consultant who specializes in industry analysis for unions said that this could be the first case of many. Mike Locker, president of Locker Associates, said in a statement, "we are sure that this kind of activity is happening throughout the industry. This lawsuit is just the beginning of a more aggressive campaign to weed out this kind of corruption and to ensure that workers get the pay and benefits they deserve."

Hohfeld, the union leader, praised the creativity and initiative that have taken the case this far, the farthest he's seen a union-led RICO suit progress.

"There's a certain level of frustration among building trades," he said. "You hoot and you holler and the rat is there and the usual suspects, the elected officials, show up, telling you what you want to hear. Then everyone goes away and nothing gets done...I don't think [a union RICO suit has] come along this far this successfully before. It's out of the mold."

Kennedy, at the press conference, also predicted a future for this and other cases.

"We are confident that at the end of the day, this will stand as a message to the construction industry that if you are a legitimate company, if you have a union contract, you are obligated to follow it," Kennedy said. "If you take steps to avoid it by creating the kinds of shell enterprise that Leviathan represents, that the unions will find it, they'll find you, and you're going to pay."