In the largest case of its kind on record, one of Pennsylvania's biggest road and bridge construction firms has been charged with stealing more than $20 million from its workers, according to the office of State Attorney General Josh Shapiro.
After a three-year investigation, Glenn O. Hawbaker Inc. of State College, Pennsylvania, has been charged with four counts of theft relating to violations of the Pennsylvania Prevailing Wage Act and the federal Davis-Bacon Act. Investigators reviewed Hawbaker's accounting records and found that, between 2015 and 2018, the contractor stole nearly $20.7 million of prevailing wage workers' fringe benefit money, according to charging documents.
The investigators determined that the complex scheme had lasted decades, but Hawbaker could only be charged for the last five years due to the statute of limitations. Hawbaker is one of the largest contractors to complete projects on behalf of the state, receiving an estimated $1.7 billion in funding as of 2021, the attorney general's office said.
"This is the largest prevailing wage criminal case on record — under Pennsylvania prevailing wage law and across the United States under federal law," Shapiro said in the announcement. "My focus now is on holding Hawbaker accountable for breaking the law, and getting these workers their money back."
The Pennsylvania Prevailing Wage Act and the Davis-Bacon Act dictate that contractors on projects that receive state or federal funding pay the same wage rates determined by state and federal agencies. Contractors can satisfy a portion of the required wage by providing fringe benefits to employees.
Hawbaker claimed to provide above-average employee benefits, when, in actuality, the company was stealing its workers' retirement, health and welfare money, the attorney general alleges. As a result, individual workers lost tens of thousands of dollars from their retirement. Hawbaker used its workers' benefit funds to lower their construction costs and to increase profits for the Hawbaker family, according to the release.
Investigators discovered that Hawbaker stole wages by using money intended for prevailing wage workers' retirement funds to contribute to retirement accounts for all Hawbaker employees — including the owners and executives. As a result, workers received less money in their retirement accounts than what was owed. Hawbaker also stole funds intended for prevailing wage workers' health and welfare benefits and used them to subsidize the cost of the self-funded health insurance plan that covers all employees, the attorney general said.
The contractor disguised its scheme by artificially inflating its records regarding benefit spending by millions of dollars each year and claiming 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.
"Upon learning of the Attorney General’s investigation in 2018, we have cooperated fully," the company said in an official statement shared with Construction Dive. "While we believe that we have always acted in accordance with all state and federal laws, in an abundance of caution, the company immediately changed its prevailing wage practices. These changes remain in effect today as we continue to do what’s right for our employees, both past and present. Our company will continue to work constructively with the Attorney General’s office to reach a swift resolution. "
Notable projects under construction by Hawbaker, according to its website, include the $14.7 million Waddle Road Interchange bridge replacement, the East Hall residence at Penn State University and the Nittany Valley Sports Complex.
This story has been updated to include comments from Glenn O. Hawbaker Inc.