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Attorney General Tom Reilly today announced 118 indictments against 20 people as part of a widespread investigation into payroll and unemployment fraud schemes involving members of the International Longshoremen's Association (ILA). Those indicted today include 14 longshoremen, two former longshoremen business agents, three longshoremen managers and one Massport employee.
The indictments follow an in-depth investigation into payroll fraud schemes involving longshoremen who off-load container ships at Massachusetts Port Authority's (Massport) Conley Terminal in South Boston. AG Reilly announced the indictments today along with Thomas J. Kinton Jr., executive director and chief executive officer at Massport. They were also joined by Marjorie Franzman, special assistant in charge of the U.S. Department of Labor OIG and members of the state Department of Unemployment Assistance (DUA). The investigation is ongoing.
"There was a culture within this group of longshoremen that tolerated and encouraged a system of fraud and corruption on Boston's waterfront," Attorney General Tom Reilly said. "Our action is a blow to this corrupt culture where a select few insiders gamed the system to benefit themselves and their friends and took opportunities and benefits away from other longshoremen who played by the rules."
AG Reilly's extensive criminal investigation began in April 2005 after Massport contacted the AG about concerns that longshoremen were reporting young children on the payroll as working at the docks and instances of longshoremen being paid at hourly rates that are higher than the workers are entitled to under their labor contract. Longshoremen are members of an international union and not Massport employees. Further investigation by State Police and financial investigators assigned to the Attorney General's Office uncovered widespread instances where longshoremen were participating in schemes to defraud Massport and other marine shipping businesses operating at the port.
"Massachusetts is already an expensive place to do business. We are in competition with ports up and down the eastern seaboard for shipping business. Adding a fraud tax to the costs of doing business here is simply unacceptable," Attorney General Reilly added.
In October 2004, a new ILA master contract went into effect. The new contract contained seven different wages with employees hired before October 1 earning higher rates. The Attorney General's investigation found that in the weeks prior to the contract taking effect a number of children's names appeared on time sheets, including children of senior, well-connected longshoremen. Six of the children were age 10 or younger. The indictments announced include those against four senior union members and one other union member for placing their young children on Massport timesheets. These young children are the children of a former business agent, a walking boss, a yard boss, timekeeper and another union member. It is alleged that the longshoremen participated in this scheme so that in the event their children worked as longshoremen in the future they would be fraudulently paid at higher rates.
Another scheme uncovered as part of the investigation involves longshoremen being credited for hours they did not work in 2003 and 2004. Generally, longshoremen's benefits, such as vacation pay, medical and dental benefits, pensions and royalty payments are directly tied to the number of hours worked during a fiscal year. At 400 hours, a longshoreman gets a year of union seniority and pension eligibility. At 600 hours, he gets one week of vacation and at 700 hours, more benefits accrue and so on. At 1,500 hours, a longshoreman maximizes the benefits he can receive. The fraudulent practice uncovered in this investigation involves longshoreman with more hours worked agreeing to have payroll records falsely indicate that their hours were worked by longshoremen with less hours. In this way, the number of longshoremen reaching higher benefits levels is artificially increased, resulting in fraudulently inflated payments by Massport and the port shipping businesses. As a result 14 longshoremen were indicted as part of this scheme.
In order to collect unemployment, an applicant must report to the Division of Unemployment Assistance (DUA) that he tried but could not find work. This investigation found that some longshoremen allegedly collected state unemployment benefits when they either could have taken work as longshoremen, or were working as longshoremen or at another job. Three longshoremen were indicted on multiple counts of unemployment fraud and larceny by continuous scheme.
Massport officials cooperated fully and assisted with the Attorney General's investigation, which is ongoing.
"If the indictments handed down today produce convictions in court, then the crimes these workers have committed are not only crimes against fellow workers and Massport, but also fraud against the public. And this must not be tolerated," said Thomas J. Kinton, Jr, CEO and Executive Director, Massachusetts Port Authority. "We thank Attorney General Tom Reilly and his very professional staff for their hard work and diligent efforts on this complicated investigation."
Investigators from the U.S. Department of Labor Employee Benefits Security Administration and Office of Labor Racketeering and Fraud Investigations and the state's DUA assisted in this investigation.
Gordon S. Heddell, Inspector General, U.S. Department of Labor said, "Stealing benefits from employee benefit funds and defrauding employers through no-show jobs is deplorable. Hardworking and dedicated workers deserve honest union leadership. Corrupt union bosses and officials who abuse their positions of power and trust to facilitate fraudulent schemes should not be tolerated. My office will continue to work closely with the Massachusetts Attorney General's Office and other state and Federal agencies to root out labor racketeering schemes."
Ann L. Combs, Assistant Secretary of Labor said, "By manipulating payroll records to fraudulently obtain medical, pension, and other benefits, these defendants harmed workers who legitimately earned their benefits. This case demonstrates that benefits fraud is a serious crime that will be prosecuted to the full extent of the law."
All are scheduled to be arraigned in Suffolk Superior Court on September 5, 2006.
DUA wants to encourage the public to take advantage of its toll-free unemployment fraud hotline to report, anonymously, suspected cases of fraud at 1-800-354-9927.
Assistant Attorneys General James O'Brien and Marc Jones of AG Reilly's Criminal Bureau, are prosecuting the case, which was investigated by State Police assigned to the Attorney General's Office with assistance from the US Department of Labor and D.C. Rand, director of UI Benefit and Investigative Operations and Paul Griffin, investigator, from the Massachusetts Division of Unemployment Assistance.
For more information on this and other topics, consult CCH Employment Practices Guide or CCH Labor Relations.
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