HARRISBURG — Pennsylvania Attorney General Josh Shapiro announced charges against State College-based contractor Glenn O. Hawbaker Inc. for four felony counts of theft on April 9.
The charges relate to alleged violations of the Pennsylvania Prevailing Wage Act and the federal Davis-Bacon Act and allege that the company stole more than $20 million in wages from thousands of employees since 2015.
“This is the largest prevailing wage criminal case on record — under Pennsylvania prevailing wage law and across the United States under federal law,” said Shapiro. “My focus now is on holding Hawbaker accountable for breaking the law and getting these workers their money back.”
The family-operated Glenn O. Hawbaker Inc. is one of the largest contractors to complete projects on behalf of the commonwealth, receiving an estimated $1.7 billion in funding as of 2021. According to the Pennsylvania Department of Labor, Hawbaker is the fifth-largest employer in Centre County.
This case involves employees throughout the state.
In a written statement, the company said, “Glenn O. Hawbaker is a third-generation, family-owned company that has been in business for nearly 70 years. Upon learning of the attorney general’s investigation in 2018, we have cooperated fully. 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. Since 1952, Glenn O. Hawbaker’s mission has been to build, serve and advance local communities, and that will never change.”
The Pennsylvania Prevailing Wage Act and the Davis-Bacon Act ensure that all contractors working on projects that receive state or federal funding pay the same wage rates, which are determined by state and federal agencies. The laws require that all of the set rate must be paid to workers in the form of wages and fringe benefits, which includes retirement and healthcare plans.
Hawbaker is accused of stealing from its workers’ retirement, health and welfare money, thus not meeting the prevailing wage that should have been paid to these workers.
“On paper it looked like Hawbaker was going above and beyond for their workers, but it was all a lie,” said Shapiro. “In reality, they were engaged in a massive, unprecedented fraud on two district fronts.”
On the first front, Shapiro alleged Hawbaker underfunded employees’ retirement accounts by at least $15 million over the past five years.
“Instead of putting the amount of money prevailing wage workers were owed into the 401k, they used some of it to pay non-prevailing wage workers’ pensions, essentially taking
from one group of workers to pay for the rest of the company,” said Shapiro. “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 C-suite executives. That’s how the fraud works.”
Shapiro said the second scheme involved using false billing to inflate the cost of healthcare benefits.
“Overstating the value of their healthcare plan allowed Hawbaker to report that they met that prevailing wage, when they were only paying a portion of what was due to the workers and actually pocketing the rest,” said Shapiro.
The criminal complaint alleges that Hawbaker claimed it cost $18.65 an hour to cover health and welfare costs when it actually cost $6.67.
“That $12 an hour difference belonged to the worker. Instead, Hawbaker kept it for themselves,” said Shapiro.
He alleged that keeping this money allowed Hawbaker to under-bid “honest companies” by using the stolen money to offset costs.
“Here is the thing: they weren’t stupid about it. This was a sophisticated operation that spanned many years,” said Shapiro.
The money that was stolen was also used to fund internal projects and provide company bonuses, Shapiro claimed.
An investigation found that the fraud had gone back decades, but, because of
the statute of limitations, Hawbaker could only be charged going back to 2015, Shapiro said.
Since the investigation started, Hawbaker has cooperated with his team of investigators who “combed through” thousands of records, the attorney general said.
“This was an extremely difficult and detailed investigation,” he said.
Shapiro urged people who believe they may have been impacted to reach out to his office and share their stories at (814) 746-3518.
He said one such story was of Harry Ward, of Aaronsburg, who worked for Hawbaker for 30 years. He helped “sound the alarm” about the alleged fraud.
“As Harry approached retirement, he started getting concerned. He noticed on his statement that his contributions were so much less than he had logged over the decades,” said Shapiro.
Ward went to PennDOT to get a record of what he should have been paid over the years.
“It didn’t match up with what he should have been paid,” Shapiro said. “Harry was shorted of thousands of dollars that should have been made on his behalf. Not to mention the earnings and growth to those contributions that should have been made.”
Hawbaker waived a preliminary hearing on the charges. A formal arraignment is scheduled for May 12.
“Employers across this commonwealth, you are on notice: if you steal from your employees, if you misclassify workers, if you violate our labor laws, we are going to find out, we are going to hold you accountable and we will do all we can so Pennsylvania workers receive the wages and benefits owed to them under the law,” said Shapiro.