In an alleged fraud scheme that he called “unprecedented” in its size and sophistication, Pennsylvania’s top prosecutor on Thursday announced criminal charges against one of the state’s largest contractors, claiming that they deprived thousands of workers a cumulative $20 million in retirement contributions and inflated their healthcare costs to boost their profits.
Glenn O. Hawbaker, Inc., a State College-based construction firm that frequently repairs roads and bridges for the Commonwealth, faces four counts of theft for allegedly violating state and federal laws that set wages for laborers working on public projects.
During a news conference Thursday, Attorney General Josh Shapiro declined to say whether his office would bring charges against any of Hawbaker’s individual employees. The firm has a staff of roughly 100 people at its corporate headquarters in State College and as many as 800 working on construction sites.
Shapiro added that Hawbaker has cooperated with its investigation, which aims to pay back workers any benefits allegedly withheld from them.
Founded in State College in 1952, Hawbaker has become a go-to firm for state infrastructure projects.
It netted $1.7 billion in contracts from the Pennsylvania Department of Transportation between 2003 and 2018, Shapiro said. State campaign finance records also show its employees have also given thousands of dollars to state lawmakers’ campaign funds.
Hawbaker and other firms that get government contracts are supposed to pay workers on those projects the state’s prevailing wage – a minimum hourly rate, set in state law, that includes a base wage as well as benefits such as healthcare and retirement contributions.
According to charging documents filed in a Centre County magisterial district court Thursday, Hawbaker siphoned some of the money from its prevailing wage workers and put it in company-wide retirement funds.
Shapiro said the company also overstated how much it paid for employee healthcare. This created the appearance that Hawbaker was meeting its prevailing wage requirements, Shapiro said, even though it was only paying a portion of that wage to its workers.
As a result, Hawbaker deprived its workers of a cumulative $20 million in public dollars that were meant to flow into their retirement funds, Shapiro said. That money went instead to the company’s internal projects, company bonuses, and corporate retirement accounts.
“They fleeced workers in order to put more money back into their pockets,” Shapiro said Thursday. “The guys doing the back-breaking work on Pennsylvania’s roadways had their retirements stolen from them in order to go into the pockets of the C-suite executives.”
Shapiro said that thousands of workers may have been shortchanged. They include people such as Harry Ward, a carpenter who worked on Hawbaker crews for 30 years.
Shapiro recounted Thursday that Ward was preparing for retirement when he noticed that his retirement contributions were falling short of what he should have been paid. That was because he was denied thousands of dollars of contributions that Hawbaker should have made, Shapiro said, as well as the interest that those funds would have accrued in his 401(k) account.
Shapiro said that workers such as Ward tipped the Office of the Attorney General to the alleged fraud. His agency executed a search warrant at Hawbaker’s corporate headquarters in 2018, combed through the company’s financial records, and found that their numbers “didn’t add up.”
In a statement issued through a public relations firm on Thursday, Hawbaker confirmed that it is cooperating with the Attorney General’s investigation.
It maintains that it always followed state and federal law, and changed its prevailing wage practices “in an abundance of caution” after learning of the investigation.
But charging documents show that Hawbaker executives have admitted to using prevailing wage funds to cover benefits for all its employees, as well as for its owners and executives. The claimed that it had relied on “bad advice of former counsel.”
Shapiro said that thousands of Hawbaker’s current and former employees may be unaware that they’re owed money. He encouraged those Hawbaker workers to contact his office at 814-746-3518 to see if they could get money back.