Maryland Laborers Union business manager and two others guilty of $1.7M+ scam.
In one of the stranger union scams, stretching from suburban Washington, D.C. to the Arab nation of Qatar, the defendants reaped what they sowed. LIUNA Local 657 represents roughly 1,500 construction workers in the Washington, D.C. area. For a while, it also served as a source of generous and illegal self-enrichment for its business manager, Anthony Frederick Sr., and two of his associates. According to federal prosecutors, between May 2013 and June 2014, Frederick diverted more than $1.7 million in union funds into a construction company, STS General Contracting, without prior knowledge or approval by the local or international union executive board.
Nearly $1.1 million of the redirected funds went toward renovations of the Local 657 administration building, which turned out to be cosmetic. Frederick also paid over $580,000 in union funds to STS for construction of a new training center. However, another firm had previously handled the contract. Further, Frederick paid $20,000 to STS for an excavation permit that would normally cost $143, and over $20,000 for the renewal of several existing permits that could have been handled for $250 each. This left a lot of money for things that were completely unrelated to union business. And this is where the outside men came in.
STS General Contracting Owner-CEO Gary Cooper and Area Real Estate Agent Christopher Kwegan directed part of the stolen union money away from STS accounts, toward a $225,000 down-payment on a residential property acquired by Frederick, and construction of a three-car garage on the same property. The pair also moved at least $600,000 to Frederick’s wife, giving her 50% ownership of another construction firm owned by Cooper. Furthermore, Cooper and Kwegan cleaned out an STS bank account containing roughly $525,000. The only depositor in this account was LIUNA Local 657.
Much of the stolen money was spent on personal items, shopping, entertainment, hotel stays and overseas travel. Another $172,000 was sent to an electrical engineering services firm in the Arab Gulf state of Qatar, reportedly for the purpose of aiding political opposition. Qatar seemed a fairly unlikely destination for funds from any American source, union-related or not.
The scam came apart following a routine internal union audit. That audit triggered an investigation by the FBI and the U.S. Labor Department’s Office of Inspector General and Office of Labor-Management Standards. In 2015, the Justice Department announced the indictment of Frederick for one count each of theft, wire fraud and unlawful payments, plus several counts of money-laundering. Frederick pleaded guilty. Kwegan also pleaded guilty to the same offenses. Cooper took his chances by going to trial, but his gamble didn’t pay off, and he was convicted for the same offenses.
It should be noted that Kwegan is also carrying an extra burden these days. In a subsequent case, he was sentenced in federal court, along with Baltimore-based real estate consultant Alexander Sivels, for his role in a mortgage fraud scheme involving at least nine residential properties in the city of Baltimore. Again, Kwegan pleaded guilty. Between 2007 and 2011, the pair had arranged for “straw buyers” to purchase properties at wildly inflated prices. Each property eventually went into foreclosure. Both defendants received a 27-month prison sentence, followed by three years of supervised release. Sivels, the ringleader, was ordered to pay restitution to the tune of of $1,317,314.35, while Kwegan was ordered to pay $530,641.27.
Whatever might be said of the former business manager of Laborers Local 657, he certainly didn’t choose his business associates wisely.
Frederick pleaded guilty to fraud and theft charges in connection with the diversion of over $1.7 million in funds from the union to a suburban Maryland firm, STS General Contracting. Kwegan also pleaded guilty to the same charges. The owner of STS, Gary Cooper, was convicted of similar charges, despite pleading his innocence.
Financial Loss for LIUNA Local 657, Financial Loss for Union Members
Anthony Frederik, Christopher Kewgan, Finanical fraud, fraud against unions, Gary Cooper