Thursday, May 20, 2021

Philadelphia Electrical Contractor Sentenced To Two Years On Charges Of Tax Fraud And Theft Of Employee Benefits

PHILADELPHIA – Acting United States Attorney Jennifer Arbittier Williams announced that Donald Dougherty, 55, of Philadelphia, PA, was sentenced to two years in prison, one year of supervised release, and was ordered to pay approximately $358,000 in restitution and a $125,000 fine by United States District Judge Michael M. Baylson for filing a false income tax return and theft from an employee benefit plan. 

In January 2021, the defendant pleaded guilty to the charges, which arose from his ownership of Dougherty Electric Incorporated (DEI), an electrical contracting firm located in Philadelphia. The false income tax return charge related to Dougherty’s diversion of DEI resources for his personal benefit. In 2015, he used the resources of DEI to pay for $237,100 in personal expenditures, including a Dougherty family vacation at the Ritz Carlton Hotel in Miami; repairs to his home; condominium association fees for his wife’s New Jersey condominium; expenses for beer delivery; and $25,000 transferred from the DEI operating account and deposited into the defendant’s personal account. Dougherty failed to report the receipt of these benefits on his personal income tax return for 2015. 

The charge of theft from an employee benefit plan resulted from Dougherty’s failure to pay benefits over to a labor benefit plan as required by a collective bargaining agreement between the national Electrical Contractors Associations and International Brotherhood of Electrical Workers (IBEW) Local 5 in Pittsburgh. The agreement required DEI to file payroll and remittance reports with Local 5 that identified DEI employees working in Pittsburgh, the hours worked, the wages they earned, and to then make corresponding contributions to the Local 5 benefit plans. 

Dougherty skirted around the agreement by using non-union labor to work on a contract project in Pittsburgh. He concealed his use of non-union labor by using his brother’s pass-through company to pay non-union electrical workers on DEI’s Pittsburgh projects. The deception enabled him to avoid making total contributions of $266,000 to Local 5’s benefit fund.  

“Donald Dougherty’s schemes to enrich himself backfired, and now he has received a just punishment as the consequence of his actions,” said Acting U.S. Attorney Williams. “This is an important reminder for those who might consider filing false returns: the government is very good at detecting this type of fraud – and you will be found out and prosecuted.” 

“Mr. Dougherty not only stole from the Government, he put his own interests ahead of honest and hard-working union members,” said Michael J. Driscoll, Special Agent in Charge of the FBI’s Philadelphia Division. “Such greed and corruption cannot go unchecked.  The FBI is committed to working with our law enforcement partners to protect the Government’s resources and dedicated laborers everywhere.” 

“Today’s sentence sends a clear message that the laws of the land apply to everyone,” said IRS Criminal Investigation Special Agent in Charge Thomas Fattorusso. “No matter who you are, it is unacceptable to purposely underreport your income. If you intentionally file fraudulent tax returns, your status will not protect you from federal prosecution.” 

“The U.S. Department of Labor, Employee Benefits Security Administration, will pursue to the fullest extent of the law those who unlawfully profit by failing to make required contributions to employee benefit plans,” said Michael Schloss, Regional Director of EBSA’s Philadelphia Regional Office. 

The case was investigated by the FBI, IRS Criminal Investigations Unit, and the Employee Benefits Security Administration of the U.S. Department of Labor and is being prosecuted by Assistant United States Attorney Richard P. Barrett and Frank Costello.

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