Connecticut Construction Company Fined $200K for Underfunding Retirement Plan, Filing False Tax Return

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that CHERRY HILL CONSTRUCTION, INC., a company based in North Branford, was sentenced today by U.S. District Judge Janet Bond Arterton in New Haven to three years of probation and a fine of $200,000 for underfunding its retirement plan and filing a false tax return.

On January 13, 2015, CHERRY HILL CONSTRUCTION, INC., (“CHERRY HILL”) pleaded guilty to one count of filing a false tax return, and one count of making a false statement in relation to documents required by the Employee Retirement Income Security Act of 1974 (“ERISA”).  ERISA is a federal law that sets minimum standards for retirement plans in private industry, including a requirement that plan sponsors provide adequate funding for a plan.

According to court documents and statements made in court, CHERRY HILL provides statewide service in site development, on-site crushing, trucking, demolition, as well as roll-off dumpsters, top soil, aggregates and landscaping.  CHERRY HILL was awarded and completed prevailing wage construction projects requiring payment of the prevailing wage rate plus the fringe rate.  The fringe rate is the cost of benefits to the employee.

When a company is awarded a prevailing wage project, the company must submit certified payrolls that list the hours, prevailing wage rate and fringe they are paying each employee.  The company can either pay the employee the fringe directly or open a benefit plan with the fringe payment being deposited into an account for the benefit of that employee.  The company is then paid by the federal, state or municipal governments the amount of payroll, including the fringe, after receiving the certified payrolls.  The government entity for which the project is being worked pays these funds only because the employer certifies that the prevailing wage and fringe is being paid to an employee directly or being deposited into a benefit plan.

CHERRY HILL opened a profit sharing/401(k) plan that was covered under ERISA.  CHERRY HILL has admitted that, in 2010 and 2011, it underfunded its retirement plan by approximately $950,000.  CHERRY HILL further admitted that it filed a corporate tax return for the 2010 tax year that inflated its actual contribution to the plan, which resulted in an increased employee benefit deduction.

CHERRY HILL has fully funded its retirement plan and paid $193,000 in back taxes, interest and penalties.

This matter was investigated by the Internal Revenue Service – Criminal Investigation Division; U.S. Department of Labor – Office of Inspector General, Office of Labor Racketeering and Fraud Investigations; U.S. Department of Labor – Employee Benefits Security Administration, and U.S. Department of Transportation – Office of Inspector General.  The case was prosecuted by Assistant U.S. Attorney Douglas P. Morabito.