Thread: Arrest of illegal workers puts spotlight on housing project

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By Nancy Cambria
ST. LOUIS POST-DISPATCH
02/15/2006

O'FALLON

The arrest of five workers on immigration charges on their way to an area construction project is the evidence watchdogs say they need to prove that poor labor practices are taking place at the site.

O'Fallon police said they discovered the workers inside a passenger van in a routine speeding stop Friday morning. An investigation revealed that the driver and the passengers were living in the country illegally, police said.

The group was on its way to work at the O'Fallon Lakes apartment complex, a housing project for lower-income people off Veterans Memorial Highway, the police report said.

The men were taken into custody by the federal Immigration and Customs Enforcement office, said Carl Rusnok, an agency spokesman. Four of the men had prior immigration violations, and the fifth had a criminal record, which means each is subject to deportation hearings, he said.

O'Fallon City Administrator Robert Lowery said the arrests provided the government with proof that illegal immigrants were working at the site and opened the door for a needed investigation.

"The reason (the government) was doing the cold shoulder and didn't want to come here was because we didn't have any kind of proof," Lowery said.

When such arrests are made, Rusnok said it was customary for his agency to investigate the employer and the circumstances surrounding the employment to determine whether illegal immigrants were knowingly hired. Rusnok said he could not name the employer or comment specifically on investigations. One of the men arrested told police they were working for a contractor based out of Texas.

The project, originally introduced to O'Fallon aldermen by the Gundaker Commercial Group last year, is being primarily developed through Related Capital of New York and constructed through NRP Contractors, a Cleveland-based developer that routinely subcontracts with out-of-state contractors. It is backed by $14.6 million in tax-exempt bonds issued by the Industrial Development Authority of St. Charles County in August 2004.

Gundaker Commercial Group could not be reached for comment.

Rick Bailey, a principal with NRP, said the company was unaware of the arrests or of any illegal worker activity on the site. He said NRP was not liable for the practices of its subcontractors.

For members of several local trade unions, including carpenters, bricklayers and electricians, the incident is proof that the developers have been using illegal labor. Representatives from several unions have repeatedly staged protest rallies at the construction site over the past two months.

Tom Heinsz, Carpenters' District Council Director of Organizing, said most out-of-state contractors failed to pay a prevailing wage - an industry wage standard set by the average professional rate in a particular area. The local carpenter's union, which pays an average prevailing wage of $26 an hour, was underbid by Texas firm Duo-Mark Construction by more than $1 million.

The situation has also prompted action by elected officials. Last month, O'Fallon Alderman Bob Patek successfully introduced an ordinance requiring contractors and subcontractors receiving any public money to supply workers compensation, pay a prevailing wage and verify U.S. citizenship or lawful status of all workers.

"Everybody needs affordable housing, but this isn't the way to do it," Patek said.

The St. Charles County Council is also grappling with the issue. It is currently withholding its $56,700 subsidy to the Economic Development Center of St. Charles County, which runs the authority. It is thinking of ways to ensure that the Industrial Development Authority levels the playing field between local and out-of-state companies. In addition to O'Fallon Lakes, the authority also issued $12.9 million in bonds for a similar housing project in Wentzville called Peine Lakes.

Reporter Mark Schlinkmann contributed to this report.

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Treasurer blasts project's officials
By Nancy Cambria
ST. LOUIS POST-DISPATCH
02/16/2006

O'FALLON

In the wake of the arrest and deportation of five illegal immigrants who were heading to work at a housing construction site in O'Fallon last week, state Treasurer Sarah Steelman blasted the project's financiers and developers.

Steelman said Thursday that the use of illegal immigrants was inexcusable and intolerable, particularly on projects subsidized by tax credits and tax-exempt bonds.

"This state will not do business with developers who think they can rip off the taxpayers and workers of Missouri," she said.

Steelman said the Gundaker Commercial Group had misled her and other members of the Missouri Housing Development Commission about the labor being used at O'Fallon Lakes, an affordable housing project off Veterans Memorial Parkway.

Officials at Gundaker said Thursday that they were also appalled to learn illegal workers were being used at the site.

Steelman said Gundaker officials had assured commissioners last May that they would use local labor on the project. Gundaker officials were called before the commission at that time to respond to rumors that contractors were using out-of-state labor and illegal immigrants in both O'Fallon and a similar apartment project in Wentzville, she said.

"I felt we had assurances from Gundaker," Steelman said. "I had asked periodically about this, and the staff of MHDC was not aware of any problems."

Steelman, who heads the housing commission, said Mike Hejna, president and CEO of Gundaker Commercial Group, had also committed to using local contractors on the project. Gov. Matt Blunt is also a member of the nine-person commission, which administers state and federal low income housing tax credits.

The commission awarded $600,000 in low income housing tax credits to the project and distributed an additional $741,000 in federal tax credits to it. The project is also backed by $14.6 million in tax-exempt bonds through the St. Charles County Industrial Development Authority.

In addition to Gundaker Commercial, two other companies are also under fire for their involvement in the project: Related Capital of New York, which is the controlling developer, and NRP Contractors of Cleveland, which is the contractor. NRP employs several out-of-state subcontractors to work on the site. Rick Bailey, a principal with NRP, said Wednesday that the company was not liable for the labor practices of its subcontractors.

Hejna said Friday that Gundaker would not tolerate the use of illegal workers at the construction site.

"It's a grave issue," Hejna said. "If NRP does not correct it, we'll legally petition them and the lender and ask that they be removed."

Hejna said Gundaker is a minority partner in the project and that Related Capital of New York has the ultimate authority to dismiss the contractor. Gundaker and one other local construction group had bid against NRP for the construction project, but Hejna said Gundaker was underbid by $4 million after the commission's May meeting.

Steelman said that officials from Gundaker, NRP and Related Capital have been asked to appear today at the commission's regular meeting.

"In this case, it is wrong for them to be using these tax credits when they're using illegal immigrants and underbidding other businessmen in the area for that public project," she said.

Local labor unions are applauding the scrutiny.

"Finally we are able to get somebody's attention," said Tom Heinsz of the local carpenters union. "Let's hope it changes for the local businessman. He's the one who has to compete with this stuff."

The county's Industrial Development Authority has been under pressure by the County Council to tighten its rules for contractors on projects helped by tax-exempt bonds from the authority.

Greg Prestemon, the authority's executive director, said Thursday that he was deeply disappointed with the contractors at O'Fallon Lakes and that the authority would meet today to discuss enacting new controls on employment practices of contractors on projects it aids.

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Arrests here shine light on illegal workers at building sites
By Nancy Cambria
Nancy.Cambria@post-dispatch.com
ST. LOUIS POST-DISPATCH
Monday, Feb. 27 2006

O'FALLON

People had been telling federal, state and local officials since April that
something was not right at an O'Fallon construction site.

White vans with black, spray-painted windows arrived with workers before dawn and left after dusk. Workers labored seven days a week, including over Thanksgiving and Christmas.

Already incensed by the use of out-of-state workers on a publicly subsidized project, local unions cried foul to anyone who would listen. They alleged that the workers were illegal immigrants bused in from Texas by subcontractors. There was talk that workers were paid in cash and that the money flowed out of the country via wire transfers to Mexico.

"We tried to get a whole lot of people to look at that job, and nobody wanted to bite on it," said Tom Heinsz, an area Carpenters union official.

All that changed Feb. 10, when a van on its way to the site was stopped for speeding. Five illegal immigrants were arrested. About a week later, eight more were taken into custody by immigration officials: seven who were found during a traffic stop and one arrested for a fight on the construction site.

The case shouldn't be that surprising, even in a state with a relatively small number of illegal immigrants, said Jeff Passell, a demographer with the Pew Hispanic Center, which studies immigration. Behind farming and cleaning, construction ranks third in the concentration of illegal immigrant workers in the nation, he said.

Areas such as Arizona and Texas traditionally have had a high number of illegal immigrants building homes, but, Passell said, illegal workers are now following construction jobs into new areas of the country. In the past 15 years, Missouri's estimated population of illegal immigrants has increased from around 10,000 to more than 55,000, Passell said.

While that is about half of 1 percent of the nation's estimated 10 million illegal immigrants, "it's not an insignificant increase," Passell said.

Rethinking policies

In the aftermath of the O'Fallon arrests, state and local officials who issued millions in bonds and approved tax credits for the project are struggling to find ways to ensure that legal labor practices are followed on publicly subsidized projects.

In the future, both the state housing corporation and the county authority are considering requiring payrolls that certify the legal status of workers, creating penalties for contractors and lenders, and asking employers to waive employee privacy rights so they can gain access to construction sites for spot checks.

The Missouri Housing Development Commission granted the affordable housing apartment complex $1.4 million in state and federal tax credits. The county's Industrial Development Authority, an offshoot of the county's Economic Development Center, approved the project for $14.6 million in tax-exempt bonds.

"To say we were disappointed with the apparent actions of the contractor and subcontractor is an understatement," said Greg Prestemon, the head of the Economic Development Center, which operates the Industrial Development Authority. "We're extremely angry."

In October, O'Fallon City Administrator Robert Lowery said officials had been personally reassured by Gundaker Commercial Group, the local developer affiliated with the $25 million project, that no improper labor practices were taking place. They received similar assurances from the Economic Development Center.

"As far as they were concerned, this was a city of O'Fallon problem," Lowery said.

Lowery said the police reports proved what the union and city officials had suspected all along. Through broken English, one of the illegal immigrants told police he owed a man he called his uncle $1,100 for his help to enter the country, and he worked as a laborer on the site to repay him. He was paid $8 an hour - well below the prevailing union wage of about $26- and worked nine hours a day, seven days a week and sent most of his money to his family in Jalisco, Mexico.

Others told police they were paid in cash every Friday by a site supervisor. All of them said they worked for a subcontractor out of Texas. The federal Immigration and Customs Enforcement Agency found one of the workers was a juvenile. He was arrested with his father.

New accountability

Prestemon said the Industrial Development Authority had little reason to suspect such labor abuses "in large part due to the strong reputation and name of Gundaker." The deal had been introduced to the authority by Mike Hejna, president and CEO of Gundaker, a local company that reported $68 million in revenue in 2004. The construction company later hired for the project, NRP Contractors of Cleveland, is one of the top producers of affordable housing in the nation. And its primary financier, Related Capital of New York, reports $8 billion in development and refers to itself as the national leader in financing government sponsored housing projects.

Rick Bailey, a principal with NRP, insisted that the company knew nothing about illegal labor on the site and deferred liability to its subcontractors. Andy Weil, managing director of Related Capital in New York, said his company was as shocked as everyone else about the workers and had never encountered illegal labor problems on other projects.

In April, amid growing rumors that the contractors on the site were breaking federal law by using illegal workers, Missouri Treasurer Sarah Steelman and former state Rep. Bill Luetkenhaus, both of the Missouri Housing Development Commission, asked Hejna to respond to the commission. Both said Hejna had assured them that the workers would be local and the labor legal. Luetkenhaus said that the response had appeased staff and board members but that they should have been looking harder.

Prestemon said once the bonds are sold, the authority has no ability to stop or impose sanctions on the project.

Hejna said Gundaker would never again structure a deal in which it was not the contractor. Despite protests from NRP, Hejna said workers from Gundaker now conduct morning identification checks at the site and turn away workers who fail to have the proper paperwork.

NRP contractors continue to work on the site, and the project's main financial backer, Related Capital, continues to employ NRP. Lowery said he believes Hejna's efforts have helped to reduce illegal workers at the site, but he thinks justice has not been served.

"Somebody has to be accountable here," he said. "We seem to punish the workers, and we let the contractors and subcontractors get away with this."