A U.S. Department of Justice news release said Philip Joseph Franklin is charged with one count of conspiracy to commit offenses against the United States, eight counts of mail fraud, two counts of providing a false statement to a government official, one count of money laundering, and two counts of providing a false statement in relation to a document required by the Employee Retirement Income Security Act (ERISA).
The indictment charges Franklin with conspiring to enrich himself by retaining money that should have been paid into his employees’ pension and benefit funds. Either directly or through employees, he allegedly falsified time sheets and other payroll documentation and submitted documents containing false information to the pension and benefit funds as well as to the government agencies that administer federally funded construction projects.
In addition, Franklin created a shell company, Master Drywall, with separate accounting books and bank accounts but no employees or operations, to facilitate the scheme. Master Drywall ceased existence in December of 2005.
According to the news release, while conducting business in Minnesota, Franklin Drywall was bound to the terms of two collective bargaining agreements with two labor unions. Under the terms of the agreements, the company was required to pay into applicable pension and benefit funds specified amounts for each hour worked by any employee in a job classification covered by the agreements. Employees of Franklin Drywall were eligible to receive benefits from those funds if they retired, became disabled, or were terminated. In addition, relatives were eligible to receive benefits upon an employee’s death.
In order to evade payment into the pension and benefit funds, Franklin allegedly directed payroll employees to falsify time sheets, reporting no more than 40 hours of work per week per employee regardless of the time actually spent on the job. Any extra hours were paid at a straight hourly rate rather than the overtime rate, either through Master Drywall or through a separate Franklin Drywall check characterizing it as “other pay.” More than $500,000 was obtained in this manner and used for Franklin’s personal benefit.
At the same time, salaries for Franklin and his wife were paid from the Franklin Drywall account, as were expensive cars, jewelry, vacation trips, personal credit card bills, and a partial down payment on a $675,000 house in Las Vegas. Franklin wire transferred $150,554.97 in funds derived from the mail fraud for the down payment on the Las Vegas home.If convicted, Franklin faces a potential maximum penalty of five years on the conspiracy charge, 20 years on each mail fraud count, 10 years on the money laundering charge, and five years on each false statement count.