In today’s post, we explore a form of trickery involving underpayment of workers tasked with constructing federally-funded housing in the Milwaukee, Wisconsin, area. Watry Homes, LLC, has settled both civil and criminal charges stemming from a massive payroll fraud scheme costing taxpayers millions of dollars and resulting in the extreme underpayment of the Watry employees tasked with completing the project.
In sum, Watry Homes and its owner, Scott Watry, have agreed to pay $1.6 million to resolve the allegations. Moreover, Mr. Watry has pled guilty to conspiring to defraud the government – a crime for which federal prosecutors are advocating he should spend 4.25 to 5.25 years behind bars.
The ongoing payroll fraud was brought to light in 2013 after a former roofing supervisor and administrative professional was fired for questioning payroll practices in the company.[1. Spivak, Cary, “Watry Homes owner to plead guilty to fraud, pay $1.6 million settlement.” June 15, 2015. http://www.jsonline.com/news/wisconsin/watry-homes-owner-to-plead-guilty-to-fraud-pay-16-million-settlement-b99519935z1-307395741.html] From there, she reported her information directly to a confidential whistleblower attorney, and she is now expected to receive $180,000 for her role in combatting fraud.
Details of the payroll scam within Watry Homes
For a period of several years, Watry Homes was fortunate to win lucrative government contracts for the installation of roofing and siding on various government-funded housing projects. When a construction company agrees to perform contract work on behalf of the government, it must adhere to and abide by the terms of the government’s contract provisions, which include the payment of a prevailing wage for employees involved on the job. In the event that a contractor fails to pay the prevailing wage, or lies about the amount he is paying his workers, this is considered a violation of the Davis Bacon Act. In turn, any violation of civil or criminal laws occurring pursuant to a government-funded project will likely trigger the False Claims Act, resulting in significant fines and penalties.
Here, the prevailing wage for carpenters and siders is $45.00 per hour and $42.50 per hour, respectively. Under the scam, Watry was allegedly paying these laborers a mere $15 to $35 per hour, despite reporting the full prevailing wage on weekly payroll reports required under the terms of the contract.[2. Green, Christie, “Watry Homes’ owner pleads guilty to underpaying wages on federally funded project.” June 15, 2015. http://www.cbs58.com/story/29324384/watry-homes-owner-pleads-guilty-to-underpaying-wages-on-federally-funded-project] To cover up the scheme, Watry underreported the number of actual hours worked by each employee, presumably in order to cover up any subsequent discrepancies revealed by an accounting audit. Moreover, Watry is accused of reporting the use of employees that did not actually exist, and threatening employees with termination for refusing to take the lower wages.
In January, 2015, a second Watry employee also pled guilty to conspiring to defraud the government. The ultimate criminal sentences for both defendants have not been decided.
Contact Berger & Montague, P.C. today
If you are aware of fraud against the federal government and would like to discuss your information with a confidential qui tam attorney, please do not hesitate to contact Berger & Montague, P.C. today.