A major State College-based contractor will pay nearly $21 million in restitution after pleading no contest on Tuesday to wage theft charges, in what the state’s top prosecutor said is the largest prevailing wage criminal case and award in U.S. history.
Glenn O. Hawbaker Inc. was charged by the Pennsylvania Attorney General’s Office in April with four felony counts of theft by failure to make required disposition of funds following a three-year investigation into the company’s prevailing wage practices.
The company was accused 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.
Hawbaker Inc. executive vice president D. Michael Hawbaker entered the plea on behalf of the company in the Centre County Court of Common Pleas. A plea of nolo contendere, or no contest, means the defendant does not admit guilt but agrees to accept the penalties.
“We are fully committed to the agreement reached with the attorney general’s office and doing what is right for our employees now and in the future,” Hawbaker said.
As part of the plea agreement, the company agrees to pay $20,696,453 in restitution within 120 days to 1,267 current and former workers for prevailing wage violations that occurred between 2015 and 2018. Deputy Attorney General Philip McCarthy said the amount represents full restitution.
“A month ago I met with some of the men and women who had their wages and retirements stolen by Hawbaker — and I told them that we will do everything we can to get them every cent they are owed under the law. A few minutes ago, I was able to tell them that we, together made good on that promise,” Attorney General Josh Shapiro said during a press conference on Tuesday afternoon. “We took on one of the largest construction companies in the state, and now 1,267 people will have a better shot at retirement; they will get the paychecks they earned under the law; and they will have their work and their livelihoods protected and respected, instead of ignored.”
Hawbaker Inc. also will pay $240,562 in investigative costs and will serve five years of probation. During that time, the company will be subject to oversight by a corporate monitor. Alfred B. Robinson, an attorney and former wage and hour administrator for the U.S. Department of Labor, will act as monitor, providing quarterly reports in the first year and as needed for the remaining years.
Centre County President Judge Pamela Ruest imposed no additional fine, saying she was happy with the restitution amount.
“Hawbaker is pleased to bring this process to a conclusion and focus on the future,” a statement from the company said. “Our company’s decision to plead no contest avoids protracted litigation, which could have jeopardized the livelihoods of our dedicated employees.”
Hawbaker Inc. cooperated throughout the investigation and began remediating its prevailing wage practices in 2019, McCarthy said.
“We fully cooperated in this process and proactively addressed concerns raised by the attorney general’s office,” Hawbaker Inc.’s statement said. “As stated by the attorney general, we are making past and present employees whole.This process will be conducted under the direction of an independent monitor.”
The 70-year-old, family-owned company is one of the largest construction contractors in Pennsylvania and between 2003 and 2018 it was awarded $1.7 billion in contracts from PennDOT alone.
Shapiro accused Hawbaker Inc. of “a massive, unprecedented fraud on two distinct fronts,” that caused workers to either retire with less money in their retirement accounts than they were owed or to continue working past their planned retirement to make up for the shortfall.
Under prevailing wage laws, all of the set rate must be paid to the worker in the form of wages and fringe benefits.
The company was accused of using money intended for prevailing wage workers’ retirement funds to contribute to retirement accounts for all Hawbaker employees, including executives, and “essentially taking from one group of workers to pay for the rest of the company,” Shapiro said. That resulted in workers receiving less money in their retirement accounts than they were owed.
The company also allegedly took funds that should have gone to prevailing wage workers’ health and welfare benefits and used them to subsidize the cost of a self-funded health insurance plan that covers all employees.
Hawbaker artificially inflated “its records of benefit spending by millions of dollars each year and [claimed] 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,” according to the attorney general’s office.
Shapiro said that in 2018 the company claimed it cost $18.65 an hour to cover prevailing wage workers’ health and welfare costs but in reality it was $6.67. The difference should have gone to the employees’ wages and benefits, Shapiro said in April.
“We continue to believe that we followed all requirements regarding fringe benefits,” the company’s statement on Tuesday said. “The fringe benefit practices challenged by the Office of Attorney General were based upon advice provided by the company’s former attorneys. Hawbaker has always intended to properly pay all of its employees. Through the years, both state and federal regulators extensively reviewed our Prevailing Wage Act and Davis Bacon Act practices on jobs and did not find any wrongdoing. This led us to believe we were properly following all laws, and we did not plead guilty.”
In a pre-recorded video shown prior to Shapiro’s press conference on Tuesday afternoon, several Hawbaker Inc. workers recounted discovering that their retirement accounts were short.
“We sensed there was something going on because they would never give us straight answers,” Harry Ward, a semi-retired bridge worker said. “The proof was when I looked at my retirement statements that we got and the contributions didn’t add up to what they should have added up to.”
Keeping the money owed to workers, Shapiro said, allowed Hawbaker Inc. to underbid competitors on jobs statewide.
“I’ve heard directly from contractors that follow the law that this enforcement helps their business, and exposing these flagrant examples of wage theft and misclassification will deter employers from engaging in the same illegal schemes,” Shapiro said. “That’s why my office and our partners in law enforcement are committed to this work.”
Investigators allegedly found Hawbaker Inc. employed the practices for decades, but because of the statute of limitations could only be charged back to 2015.
PennDOT temporarily suspended the company from bidding on projects in April, but that was lifted in June when Commonwealth Court ruled PennDOT violated due process by implementing the ban before a hearing was scheduled.
Shapiro said on Tuesday that his office has no role in whether the company can bid on state-funded projects and that the decision would be up to the procurement agencies.
A former employee filed a civil lawsuit related to the charges against the company in May, with the possibility that it could be joined by hundreds of other workers.
No individuals were charged by Shapiro’s office in the case, unlike another prevailing wage case recently brought by the attorney general’s office against a Centre County contractor.
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. A Clearfield County judge sentenced Scott Good in April to a minimum of 120 days in county jail, while his company was ordered to pay $64,000 in restitution and a $10,000 fine.
