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Former Sandhogs Union Benefit Funds Administrator Sentenced In Manhattan Federal Court To Six Years In Prison For Embezzlement And Tax Crimes

FOR IMMEDIATE RELEASE
Thursday June 21, 2012

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELISSA G. KING was sentenced today in Manhattan federal court to six years in prison for embezzling millions of dollars from the employee benefit plans she administered on behalf of the Compressed Air and Free Air Foundations, Tunnels, Caissons, Subways, Cofferdams, Sewer Construction Workers Local 147 of New York, New Jersey States and Vicinity AFL-CIO (“Local 147” or “Sandhogs Union”), and for filing false personal income tax returns that understated her personal income by millions of dollars.  KING pled guilty in October 2011.  She was sentenced by United States District Judge John G. Koeltl. 

Manhattan U.S. Attorney Preet Bharara stated:  “We hope that today’s sentence of Melissa King brings some measure of closure to the hard-working men and women whose money and retirement security she stole.  It also brings us one step closer to providing as much restitution as possible to her victims.”

According to the Information to which KING pled guilty, documents previously filed in Manhattan federal court, and court proceedings:

Local 147, which had approximately 1,000 members as of 2008, represents construction workers employed in numerous construction projects in the New York City area.  The union and its collective bargaining partners have established plans that provide various employment-related benefits to Local 147’s members, including pensions, annuities, worker’s compensation, vacation benefits and other benefits.  These plans include (i) the Local 147 Construction Workers Retirement Fund (“Retirement Fund”), which provides retirement benefits; (ii) the Local 147 Construction Workers Annuity Fund (“Annuity Fund”), which provides annuity benefits; and (iii) the Local 147 Construction Workers Additional Security Benefits Fund (“ASB Fund”), which provides severance, vacation, unemployment, workers’ compensation, unreimbursed medical expenses, and death benefits (collectively, the “Local 147 Funds”).

KING provided administrative services to the Local 147 Funds through the company that she controlled, King Care LLC (“King Care”).  Through King Care, she was responsible for undertaking various administrative tasks on behalf of the Local 147 Funds, such as collecting employer contributions, maintaining bank accounts, determining eligibility for benefits, paying claims to beneficiaries, filing reports with regulators, maintaining a general ledger of the funds’ income and expenses, and providing reports to the funds’ trustees.  Since 2002, KING had written agreements with Local 147, which provided that King Care was to be paid up to $15,000 per month for each of the Local 147 Funds, for a total of $45,000 per month for the three Funds, and a total of $540,000 annually.  The agreements further provided that King Care could bill the Local 147 Funds for hiring staff and for expenses related to King Care’s services. 

However, between 2002 and 2008, KING caused at least $42 million to be transferred, in the form of checks, from the bank accounts of the Local 147 Funds into an account controlled by King Care (the “King Care Account”) at Bank of America.

Moreover, between 2002 and October 2009, tens of millions of the embezzled funds were transferred out of the King Care Account through check, wire transfers, and other means, in transactions that were unrelated to the Local 147 Funds but which were for the personal benefit of King. These transactions include:

    - at least $7 million paid to American Express;

    - at least $3 million paid to various entities that sell, maintain, and transport horses;

    - at least $1,000,000 paid to jewelry companies;

    - at least $500,000 transferred to E-Trade Securities;

    - at least $300,000 paid to Neiman Marcus;

    - at least $150,000 paid to the Ritz Carlton Palm Beach;

    - at least $99,000 for travel on private jets;

    - at least $900,000 to pay the mortgage on her home;

    - at least $300,000 to pay for luxury automobiles;

    - at least $10 million transferred to other bank accounts held by King Care; and

    - at least $600,000 transferred to the “Trust Agreement between Jerome and
    Mabel King.”

As a result of KING’s embezzlement, hundreds of participants in the Local 147 Benefit Plans each lost approximately $55,000 to $80,000 in retirement savings and other benefits.

KING’s contract with the Local 147 Funds was terminated as of December 31, 2008.

*              *             *

In addition to the prison term, Judge Koeltl sentenced KING, 61, to three years of supervised release and ordered her to forfeit millions of dollars of assets, including her $2 million residence in Irvington, New York.  Judge Koeltl deferred determining the exact amount of forfeiture and restitution to August 29, 2012 at 10:00 a.m.

While imposing the sentence, Judge Koeltl said that “the offense in this case was egregious,” and that “the crime was a crime with real victims who had every right to expect better.”

Mr. Bharara praised the work of the United States Department of Labor, Office of Inspector General and Employee Benefits Security Administration and the Internal Revenue Service. 

This case is being handled by the Office’s Complex Frauds Unit.  Assistant United States Attorneys Joseph P. Facciponti and Jason P. Hernandez are in charge of the prosecution.

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