Philadelphia Electrical Contractor, Donald Dougherty Indicted for Bank, Tax Fraud and Theft of Union Benefit Funds
The Contracting Company’s Accountant was also Indicted for Tax Fraud
Philadelphia, PA (STL.News) First Assistant United States Attorney Jennifer Arbittier Williams announced that Donald Dougherty, 54, of Philadelphia, PA, the owner of Dougherty Electric, Inc., (DEI) an electrical contracting business based in Philadelphia, PA, was charged by Indictment with multiple charges of bank fraud, tax fraud and theft from employee benefit plans. Also charged in the Indictment is Michael McKale, 47, of Warrington, PA, an accountant who worked for Dougherty, with counts related to tax fraud.
Specifically, Dougherty was charged with conspiracy to defraud the IRS, six counts of filing false tax returns, bank fraud, making a false statement to a bank, ten counts of filing false reports with unions, and 18 counts of failing to make contributions to union employee benefit funds on behalf of employees. McKale was charged with conspiracy to defraud the IRS and three counts of aiding and abetting the preparation and filing of false income tax returns.
According to the Indictment, Dougherty and his accountant, McKale, worked together to falsify corporate records so that Dougherty could pay less federal income tax than he was legally required to pay. The Indictment also charges that Dougherty gave his wife a no-show job at DEI, which paid $166,400 annually, mere weeks before she purchased a Jersey shore condominium for more than $900,000, and that he caused the falsification of corporate records in order to disguise her no-show salary as a legitimate business expense. In total, the defendant is charged with claiming a total of approximately $1.16 million in improper business expense deductions, causing a tax loss of approximately $416,300.
The Indictment further charges that in November 2015, Dougherty learned that the IRS had received an anonymous letter which reported that his wife had been given a no-show job and that DEI labor had renovated her condominium. Allegedly, after receiving that information, Dougherty filed amended income tax returns which removed certain improper business deductions but which still claimed false business deductions for his wife’s salary and car expenses. The Indictment alleges that McKale helped him commit this fraud while working remotely on DEI’s internal bookkeeping records by secretly changing properly recorded personal expenditures to make them appear to be business expenses in order to suppress Dougherty’s tax liability through fraud.
The Indictment also charges that Dougherty fraudulently represented to Wells Fargo Bank that he and his wife could not pay the mortgages on their $1.7 million South Philadelphia home, ultimately causing the bank to accept a one-time payment of $900,000 to settle the mortgages. However, according to the Indictment, Dougherty’s claims of financial distress were false and, in reality, DEI’s gross income increased from roughly $3 million in 2010 to about $23 million in 2013, causing the defendant’s personal income to surpass $2 million.
In addition to the above, the Indictment alleges that Dougherty committed multiple thefts from employee benefit plans. Specifically, the Indictment charges that Dougherty employed nonunion labor in Pittsburgh and paid them through a pass-through company created by his brother, all in order to avoid more than $500,000 in required contributions to the employee benefit fund of International Brotherhood of Electrical Workers Union Local 5 in Pittsburgh. The Indictment also alleges that Dougherty hired nonunion labor in Philadelphia and failed to pay $26,000 in contributions to IBEW Local 98’s employee benefit fund on their behalf.
“Donald Dougherty’s alleged schemes to enrich himself had multiple victims: hard-working union employees, bank stakeholders, and honest American taxpayers who pay their tax obligations,” said First Assistant U.S. Attorney Williams. “Further, he found an accountant to help him defraud the IRS by secretly changing properly recorded expenses into fraudulent ones. And when the defendants thought their scheme might be uncovered, they allegedly cooked the books even further to cover their tracks. The wide-ranging fraud alleged in this Indictment displays greed compounded by more greed, and it will be met with criminal consequences befitting such audacious conduct.”
“Donald Dougherty and Michael McKale are suspected of falsifying financial records to hide Donald Dougherty’s use of his business as a personal piggy bank,” said IRS Criminal Investigation Special Agent in Charge Thomas Fattorusso. “Criminal behavior like this is a slap in the face to all hardworking Americans who pay their tax obligations. Rest assured that protecting the integrity of the tax system continues to be a top priority for IRS-CI, as we strive to ensure that everyone pays their fair share.”
“Donald Dougherty allegedly cheated the government, his bank, and his employees,” said Michael J. Driscoll, Special Agent in Charge of the FBI’s Philadelphia Division. “Simply put, anyone seeking to evade their legitimate financial obligations through blatant and willful deception needs to answer for that fraud.”
“Employers may not, by scheme or subterfuge, deprive their employees of the hard–earned contributions due their employee benefit plans. The U.S. Department of Labor, Employee Benefits Security Administration, and its law enforcement partners will vigorously investigate this activity and pursue criminal charges as warranted,” said Michael Schloss, Regional Director of EBSA’s Philadelphia Regional Office.
If convicted, Dougherty faces in excess of 200 years in prison, 5 years of supervised release, and a $9,250,000 fine, and McKale faces a maximum sentence of 14 years in prison, 3 years of supervised release, and a $1,000,000 fine.
The case was investigated by the FBI, the IRS Criminal Investigation Division, and the Department of Labor, Employee Benefits Security Administration, and is being prosecuted by Assistant U.S. Attorneys Paul L. Gray and Frank R. Costello.