On November 4, 2011, Phillip Franklin, the President of Franklin Drywall in Little Canada,Minnesota, was sentenced to two years in federal prison for submitting false statements to the Minnesota Carpenters and Pension and Benefit Funds and the Painters and Allied Trades District Council No. 82 Pension and Benefit Funds.  In addition, federal prosecutors requested thatFranklinbe ordered to pay almost $3.3 million in restitution.  United States District Court Judge, Donovan Frank took the request under advisement.

Apparently,Franklinwas requiring his employees to falsify their time sheets and reports to the two benefits and pension funds, by reporting that they worked fewer hours than they actually worked.  The employees were paid at straight time by separate checks for any hours that they worked in excess of 40 hours per week.  Those additional hours were designated as “other pay.”

Franklinwas charged with criminal fourteen counts.  Among other claims, he was charged with mail fraud in violation of 18 U.S.C. §1341, submitting false statements to government officials in violation of 18 U.S.C. §1001, providing false statements in relation to documents required by ERISA in violation of 18 U.S.C. §1027 and illegal money transactions in violation of 18 U.S.C. §1957.

Needless to say, the Union which representsFranklin’s employees is using his conviction as a marketing tool for organizing.  Employers who participate in union trust funds must be careful to properly pay their employees in accordance with the terms of their collective bargaining agreements and participation agreements.  Most employers already know that they can be sued in civil court for failure to make proper contributions, but they aren’t aware of the potential criminal implications.