Lehi
13 Jul, Monday
74° F

  

TOP
Image Alt

Utah Business

Several of Utah's most well known construction sites and projects are the breeding ground for fraudulent labor practices.

Black market builders are taking over UT construction sites

A shiver crawls up my back as I climb out of the big pickup truck parked near a large construction site west of downtown Salt Lake City. I’m tagging along with a team of investigators who assure me I’ll witness a crime in progress.

Two massive five-story structures, both under construction, stand on the other side of Cornell Street, just east of the Utah Health Department headquarters. Like that building, this complex is a government project. It will be known as Cornell Place, a 146-unit HUD funded apartment complex that provides subsidized housing for low-income residents. Federal tax dollars are building this place. My guides tell me construction contractors are stealing some of that money. 

“They see us,” Rigo says, pointing to two men wearing yellow hard hats and orange reflector vests. He says they’re lookouts who are “going to warn Pinto.” 

Rigo Ramirez is not a cop and this is not a police sting operation. He and his cohort, Miguel Reynoso, are labor union reps who are conducting a site visit. Their aim is to get inside the buildings and talk to as many workers as they can to find out who hired them and how they’re paid, before the man known as Pinto, their purported boss, sends word around the job site that nobody is allowed to talk to the visitors.

Black market builders

Ramirez and Reynoso have done dozens of site visits like this over the past three years. They have hundreds of video clips, shot with hidden pen cameras, documenting workers’ confessions that they are, indeed, working illegally on the job sites.

ADVERTISEMENT

“Guys like Pinto, running this operation, are nothing more than labor brokers, cash coyotes,” says Patrick Beiker, chief representative of the Utah office of the Southwest Carpenters Council. 

The Council represents 56,000 carpenters, drywallers, steel framers, and tradesmen throughout the southwestern US. For three years, Beiker and his tiny team have been gathering evidence of what the Union refers to as widespread, systematic tax fraud and labor law violations.

Today’s surprise visit turns up nothing Beiker can use, as Pinto denies any of his workers are taking cash under the table. Before the site superintendents can kick us off the property, they say that even if there are cash-paid workers on the job, the company knows nothing about it and isn’t responsible for it. Beiker is undeterred.

“We have found thousands of guys on projects like this all over Utah,” Beiker says, “working off the books, taking cash money.”

Beiker knows this business. He’s a career carpenter, from California, who came to Utah to fight for the rights of union carpenters. He and his cohorts are also, indirectly, fighting for taxpayers as they work to break up the business practice known as “black market building.” Beiker explains it as a shadow business model, in which subcontractors are hiring people they refer to as “supplemental subcontractors.” Those third-level contractors, whom Beiker also refers to as “cash coyotes,” hire the labor.

“A high number of those labororers are undocumented immigrants,” he says, explaining how contractors appear to be violating immigration law.

But that’s not the only law being violated, Beiker says. Once a laborer is hired, he says, their boss’s boss, the subcontractor, is either putting their name on the books as a part-time worker, or keeping no record of their employment. In either case, this off-the-books employment, known under Utah statute as “workforce misclassification”  allows contractors to evade paying payroll taxes and required benefits premiums.

“It cheats taxpayers out of who knows how many millions of dollars in tax revenue,” he says.

When pressed to identify projects where the so-called fraud is happening, Beiker points to some of Utah’s most expensive and important public works projects.

“We have evidence that illegal workers are building the new airport terminals,” he says. “They built the new Gardner classroom building at the U of U, the new courthouse in Provo, several new schools in the Alpine, Canyons, and Jordan districts, and even the Vivent Arena renovation,” he says.

Common knowledge 

Law enforcers say they’ve known for years about fraud in the construction industry. Ongoing complaints prompted a federal enforcement action in June of 2018 at the $3.6 billion Salt Lake International Airport reconstruction project. Agents from the Department of Homeland Security, US Immigration and Customs Enforcement, and the Utah Attorney General’s office investigated complaints of labor trafficking and worker exploitation. They detained about a dozen laborers and questioned a few dozen others  but made no arrests.

The enforcement action appears to have been a tiny drop in a very large bucket but law enforcers still say fraud in Utah’s construction industry is widespread.

“What we know and what we can prove in court are two entirely different standards,” says Leo Lucey, chief of investigations at the Utah Attorney General’s office.

What Lucey says he knows is that the practice of hiring construction workers off the books, paying them cash, and evading payroll taxes is pervasive in Utah.

ADVERTISEMENT

“It’s apparent this practice is widespread and that it has been happening for a while,” he says, quick to add that he believes law enforcers need tougher statutes.

“We can only enforce the laws that are on the books,” he says. “It doesn’t make sense to devote precious resources to an investigation and prosecution that will result in a thousand dollar fine.” 

Cracking down

Utah lawmakers appear to be listening. An obscure but potentially potent measure was signed into law at the end of the 2020 legislative session. Senate Bill 153, known simply as Business Practices Payroll Amendments, doubles fines for violations of Utah’s Misclassification of Workforce statute, enacted in 2015. 

The champion of the original law, Senator Karen Mayne (D) Salt Lake County, pushed the newest amendment through the 2020 session. It authorizes state regulators to impose fines of up to $4,000 per day on repeat offenders.The bill’s floor sponsor in the House of Representatives, James Dunnigan (R) Taylorsville, says the measure is long overdue.

“The increased penalty will not only work as a deterrent and consequence,” Dunnigan says, “but it will fund an additional inspector at DOPL [the Division of Occupational and Professional Licensing] that is much needed.

DOPL director, Mark Steinagel says he welcomes the new weapons in the fight against labor abuse and tax fraud in Utah’s booming construction industry.

“It seems to me people want government involved with targeting the major violators,” he says.

Senator Curtis Bramble, (R) Provo, vows the state’s crackdown on construction industry fraud will continue.

“As we find areas in the law where we need stronger enforcement, we’ll have a higher rate of success at increasing enforcement.”

Jon is a veteran journalist whose career has taken him to Salt Lake City, Green Bay, Boston, Los Angeles, Phoenix, and back to Utah. He has covered business and industry, government and politics, crime and the courts, and dabbled in science and technology, but this reporter’s professional passion has always been telling the stories of ordinary people doing extraordinary things. He penned a memoir entitled The Prodigal Father – A True Story of Tragedy, Survival, and Reconciliation in an American Family (Hay House, 2000) which enjoyed Amazon.com Bestseller status for eight weeks and was optioned for a feature film by Disney. When he’s not chasing a story, Jon can be found on a mountain trail, a beach, or losing a golf match to one of his sons.

Comments (34)

  • Avatar

    Andrew J.

    Wow! Very interesting article. I would love to see more on this topic.

    • Avatar

      Nate

      Very simple: this fraud is happening because of competition on building costs to get the job. Illegal immigration is spurring this! Stop illegals from working here and the money will go into legal workers who pay taxes. Fair work rates will level and Issue solved.

      Why make additional laws and more gov to spend and take the tax money. In essence, politicians making nonunderstandable laws are funding government (themselves) with our hard earned taxes. That’s is fairly fraud in itself…as money is being channeled away from it’s intended purpose.

  • Avatar

    Jessie Wittwer

    This is wild! How ironic that these large construction companies, who I am assuming some must oppose the presence of immigrants, use them while simultaneously using taxpayers to benefit them. I want a follow up with this!

  • Avatar

    Dianne

    Wow I would also like to see more about this,contractors should loose their licenses,stealing jobs from legal citizens

    • Avatar

      Nate

      Not stealing jobs…giving them jobs. And pocketing the difference in pay from the taxpayers

  • Avatar

    Jack

    Illegal workers (illegal aliens) are not eligible for government benefits so why would they be motivated to have payroll taxes withheld for government benefits? That is a huge chunk of the payroll tax. The other part is income tax. If they are independent contractors (by law or not) they would be paying their income taxes some other way. Maybe someone should look into whether they are paying their income tax another way. They do not have a legal social security number so they cannot be hired legally or have income taxes withheld. Income taxes are used by the state and feds for other things like public safety. So if we want them to pay income taxes, shouldn’t the fine go to offset the income taxes they aren’t paying instead of funding DOPL? This does not just happen in Utah. Instead of cracking down on this why doesn’t Utah do more to implement its guest worker statute or advocate for immigration reform so these workers can legally work and pay taxes. There are programs that can import construction workers legally from other countries on a seasonal basis if we could just make them not draconian to implement. The reality is these workers are here, they are skilled, they are not leaving, and the construction companies need the workers, so they are not going to self-deport, so maybe we should be exploring another solution.

    • Avatar

      Don

      I absolutely agree. If you don’t, you really don’t know what you are talking about regarding the reality of what is and what is needed. I come from a time when you truly had to study for both the business and trade portions of the test for getting your GC or trade contractors’ license. You had to qualify with a minimum number of years in a supervisory position, have a former boss sign off on your experience and have a work in progress limit based on the financials. There were no “Contractors Schools” to give you the answers. Now the DOPL hands license out to trade contractors illegal alien or not. I’m dumbfounded by those who I have come to know are licensed and insured illegal or not. I’m of the understanding the DOPL knows the need we are under regarding the shortage of construction workers. So if the DOPL says they are for addressing this Black Market (or Brown Market) Builder problem, it seems they are playing both sides of the fence. So if you have a complaint then maybe you should encourage your own son or daughter to get into the construction field to fill the void. Go to any construction site and you will find it hard to see anyone there that is white and under forty. The rest are mostly Hispanic.

    • Avatar

      Terry

      This is BIG money for the brokers and for those comoanies taking a cut of the cash cow. Reform for the workers would cut these brokers out of their cut.

    • Avatar

      THANE HALES

      Good response. We need workers and they need a system to pay taxes. The liberals oppose any regulations even voting. This hurts our country and our freedom.

  • Avatar

    Smith

    No surprised….it also creates subpar workmanship. These folks are not only illegally here and working, they are also taxing the system through medical and education benefits that they don’t pay for either. Those fines are nothing, I am not for red tape and bureaucracy, but maybe these public work jobs should have a hiring office instead of trying to catch fish in an open stream…use a bottle neck.

    • Avatar

      M

      Exactly!!!

  • Avatar

    J. Larry Bloodworth

    I agree with Jack’s comment. The undocumented workers have no social security number, so where would the money withheld go? However, they do need to have worker’s comp in case they get hurt on the job. No SS# is needed for that. This is sort of the gray area of the law, similar to polygamy. Yes, both black market builders and polygamists are illegal… but both are tolerated. In my view, the investigators are chasing ghosts.

  • Avatar

    RT

    This could probably be found in many, many industries. Take landscapping, mowing lawns, etc. Many of those very hard working people are probably illegals as well. How about the hotel industry and service people. I wonder just how many “legal” citizens would actually do those jobs? This is a very interesting dichotomy going on because we need laborers like these people who work hard and fast. I also believe in obeying the laws of the land. Just remember if we kick these illegal immigrants out of the workplace, just be prepared to pay higher prices for what we have. Just a thought.

    • Avatar

      Craig Hughes

      Just remember, this type of thing is the biggest form of corporate welfare there is. It is often said we need these workers because citizens won’t do these jobs. The rest of the sentence is left off- for pay this low. If the illegals were not there, wages would have to rise to attract people to these jobs. And what happens is that the illegals can’t make it on low pay either- they rely on welfare, food stamps, section8 housing, wic, etc to make up the difference. So what is the result? The taxpayer subsidizes these corporations by supplying government assistance to the illegals, thus making it so the corporations don’t have to pay higher wages. No wonder the Chamber of Commerce and the Association of General Contractors fight hard to keep illegals around. Missing tax dollars is only a small piece of the puzzle.

  • Avatar

    D.C.

    This has been going on for years and the key building entities I.e. State of Utah, the Church, developers and major and small builders are all very aware and allow the businesses to survive as long as they themselves aren’t affected financially. Millions of state and federal tax dollars are not collected.

  • Avatar

    Amigo

    the Church does not hire and allow illegal workers on site.

  • Avatar

    Andy

    the church has had plenty of temples built with illegal workers, and Illegal workers will probably build the grand daddy Salt Lake temple as well. If you think this isn’t happening, you are very misinformed. The church is looking to built at the most “competitive price”. unfortunately that means cheap. And the way you get cheap is without paying benefits, overtime, and taxes.

  • Avatar

    Andrew

    Maybe the church doesn’t hire them directly per se, but the contractors building the temples are full of illegal carpenters. Even the greatest temple of all, the Salt Lake Temple, will have a ton of illegal carpenters on it performing the renovation.
    The church is looking to build at the “most competitive price” which basically means cheap. I don’t fault the church for not wanting to spend irresponsibly, but the way a Contractor gets to be really cheap is to avoid paying benefits, overtime, and taxes.
    Everyone in the construction industry knows this is happening, but as long as it’s getting done for cheap, nobody cares. Meanwhile, the contractors who are allowing this to happen make out like bandits – literally, and the state of Utah along with responsible people who are paying taxes will end up paying the cost in the long run

  • Avatar

    jpv

    Racist Labor unions are pissed at undocumented immigrants working.

    Shocking.

  • Avatar

    THANE HALES

    Good response. We need workers and they need a system to pay taxes. The liberals oppose any regulations even voting. This hurts our country and our freedom. Things need to change.

  • Avatar

    David Edward Thompson

    Amigo,

    True, bit they are a part of the scam. Especially when church structures are being built.

  • Avatar

    Joe

    1. “It cheats taxpayers out of who knows how many millions of dollars in tax revenue,” he says. How? Great data point. Here…Obviously the homework has been done and we have some true metrics to go by.
    2. There was an undercover operation done into unions in California. The percentage of illegal workers was 8%. In the Union… i wonder if the Union and it’s “cohorts” worked as hard to do an internal audit what they would find.
    3. Union work is the highest labor cost to any city or state tax payer cost. Look it up. #fact

    • Avatar

      Kevin Smith

      Joe,

      Thank you for sharing your thoughts. One has to wonder why union representatives seem so interested in undocumented “cash employees”….potential undocumented “union dues paying employees”?

      Kevin

  • Avatar

    Anthony Trujillo

    A very interesting article on a problem that seems to be quite unsolvable. The only thing I missed about it was what happened to the people who got caught doing this in the past? What fines if any did they face or get out of altogether? How hard was it to prove? Overall though, a good article, really “puts you in the know” after reading it. If this is a preview of the kind of things you can produce, I look forward to reading your investigative features in the future. Great Job!

  • Avatar

    Linda

    Great article and information. I work for a small construction firm in California, we battle and compete with contractors without licenses, for whatever reasons, whether they have been suspended for violations, expired or they just never got one. They hire workers and pay them under the table and don’t pay workers comp so it shows they have no employees. This hurts everyone, including the client who is getting a substandard structure, if they are hiding employees imagine what else they are hiding.

  • Avatar

    Scott Parker

    Great Article about a real problem which is infiltrated the construction markets in most markets. This practice creates the obvious costs and tax costs mentioned. It also creates great risk for the General Contractor. If an illegal was seriously hurt in the job site, he/she could file a claim against the GC which my be an exclusion of coverage in its General Liability policy. The GC has real exposure if he does not police his own job site. The liability risk could carry through to the Owner. There are so many reasons to be sure this practice does not happen. Specific language in the Subcontractors Contract Agreement prohibiting this practice could be a start and shift the risk to the Subcontractor and away from the General Contractor and Owner.

  • Avatar

    Matt Cook

    Very informative article! It’s hard to believe this is happening across the country and isn’t being stopped!

  • Avatar

    Ross Martin

    Well done first-person news story. Hope the state and Utah Business continue to follow through and shut down these dangerous “builders.”

  • Avatar

    Camille Nighthorse

    Wow! How does this even happen…. I suppose over time and the corruption that has gone on within the government. It’s really too bad how they get away with this!

  • Avatar

    Carol-Lee Porter

    Hi Jon, very well done. I think this could be a story to follow-up on. Surprised that ICE was not in the mix to help. No workers means nobody to do the con’s work.

  • Avatar

    Brad

    Great job Jon. Good to see real investigative reporting. Glad to see Utah Business tackling tough stuff.

  • Avatar

    Jeanette

    Looks like this story has hit a nerve! It’s complex with many facets. The bottom line, wrong-doing is wrong -doing. It’s good to see a light shine on something that needs to be addressed and fixed. A lot of money and safety is on the table here. The Legislature needs to keep at it and button up the loopholes.

  • Avatar

    Curt Fonger

    Wow Jon.. you put me right there with you.. I’m a retired Michigan State Police detective where factual, precisé reports are crucial in presenting your investigational results in written form to the Prosecutor..
    You nailed it. Your writing is detailed and flows magnificently from beginning to end.
    I still have great interest in ferreting out criminal wrong doing… you, sir, have peaked my interest to learn more about these Utah Bandidos…

    i sincerely hope your writing continues, It borders on many best selling novels I’ve read,
    Good luck & much success going forward. Remember. “ DO RIGHT. FEAR NOT” which was always out motto in the Michigan State Police.
    We need more Anti Crime Warriors like you to expose what’s going on behind the scenes!

  • Avatar

    Sherri

    Great article. We need more investigative journalism like this!

Sorry, the comment form is closed at this time.