Thread: immigrant worker scheme betrays Wal-Mart

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Posted on Sun, Jul. 16, 2006



Ringleader of immigrant worker scheme betrays Wal-Mart




By Peter Shinkle

St. Louis Post-Dispatch

(MCT)

A St. Louis-area businessman masterminded a scheme in the late 1990s to bring illegal immigrants to clean floors at Wal-Mart stores across the country.

Wal-Mart paid at least $82.2 million over three years to shell companies set up by businessman Christopher Walters, federal agents discovered. Walters' companies in turn paid subcontractors who hired illegal immigrants from countries stretching from Poland to Mongolia.

When investigators dug into the scheme, Walters cut a deal and became a star cooperating witness in a criminal probe targeting Wal-Mart. He told investigators that a Wal-Mart executive told him to set up the shell companies, and he recorded conversations with scores of Wal-Mart employees.

"Walters created these dummy corporations, but he did so at the direction of Wal-Mart," said Jeff Demerath, Walters' attorney.

The investigation led to a landmark settlement in March 2005, when Wal-Mart agreed to pay $11 million to avoid charges that it employed illegal immigrants.

In return for his cooperation, Walters avoided criminal charges. But he agreed that 12 of his shell companies would plead guilty to conspiring to transport illegal immigrants into the country and would forfeit $4 million.

Now, more than a year later, the companies still have not paid the $4 million. Court records reflect payment of about $2 million. Federal officials say the amount forfeited so far is about $2.8 million.

Walters, 43, who lives in a mansion on a gated lane in Chesterfield, Mo., declined to comment. Demerath said he expected the companies to pay the $4 million.

Walters' pivotal role in the probe has left him persona non grata at Wal-Mart, which denies it knew of the illegal immigrants working for Walters' companies.

"We feel like we were hoodwinked," said John Simley, Wal-Mart spokesman.

As for the claims Walters made about the conspiracy and Wal-Mart's role, Simley said: "It's important to note that he was a cooperating witness. It's not like he volunteered to do this."

The scheme began after federal immigration agents raided a Wal-Mart in the St. Louis area in early 1997.

At that time, the cleaning company Walters inherited from his father, Intensive Maintenance Care Inc., was cleaning about two-thirds of all Wal-Mart stores in the country, according to an account by Walters cited by immigration officials. As a result of the raid, Wal-Mart fired Walters' company, according to both Walters and Wal-Mart.

Walters said that Leroy Schuetz, then a vice president in the operations branch at Wal-Mart headquarters in Bentonville, Ark., told him IMC had been fired because of its use of illegal workers.

But the Wal-Mart executive also gave him a very different message, Walters told agents of U.S. Immigration and Customs Enforcement. Schuetz "told him to create different companies" so that if one company was fired for employing illegal immigrants, Walters could still do business with Wal-Mart through the other companies, according to Walters.

Wal-Mart denies it recommended setting up the companies.

"There's nothing in the evidence to indicate that," said Simley.

What's more, the employee Walters spoke with was Leroy Schuetts, not Schuetz, and he was a regional manager, not a vice president, Simley said. As for the claim that the Wal-Mart employee urged use of multiple companies, "Schuetts has denied it," Simley said. He said Wal-Mart would not make Schuetts available for an interview.

In July 1997, Walters established Express Corporate Services Inc., according to records filed with the Missouri Secretary of State. More than a year later, he established IMC Associates Inc. And on Dec. 14, 1998, seven companies were established on a single day. They had names such as Comet Floor Care Associates Inc., World Clean Associates Inc. and Ironman Maintenance Associates. Walters had his employees' names put on the public filings; his own name seldom appeared on them.

Walters then hired subcontractors, and it was those subcontractors who hired the illegal workers, said Demerath, Walters' attorney.

Soon, cash from the world's largest retailer was gushing into Walters' companies.

In 1999, Wal-Mart paid Intensive Maintenance Care and six other Walters companies $18.3 million, agents said. By 2001, that number had jumped to $37.8 million.

Wal-Mart paid those companies a total of $82.2 million from 1999 through 2001, but that might be only a fraction of the amount Wal-Mart paid because the six companies do not include a key company, Express Corporate Services, or several other of Walters' cleaning companies.

Nor does it include the amounts paid to Walters' brother, who also had a company that provided cleaning services for Wal-Mart.

Walters bought a $2.4 million house an apartment complex, also for $2.4 million. Other expenditures agents found included a $21,763 Rolex watch for Walters' wife, Jamie.

By then, a Russian had tipped off the feds.

In November 1998, an immigration agent interviewed Vladimir Blinov, a Russian who worked cleaning the Wal-Mart in Honesdale, Pa. He said his employer was a man named Stanley Kostek.

Blinov was in the country illegally because he had entered on a tourist visa and then had overstayed the term of that visa. Blinov had been told before he left Russia about the job he would get at Wal-Mart, Blinov told the agent, Julio Santana of the Philadelphia office of Immigration and Customs Enforcement.

This was the start of what would be a seven-year probe by Santana and other immigration agents of Wal-Mart's use of illegal immigrants. They called it Operation Rollback, a play on the retailer's ads for lowering prices.

In early 2000, agent Santana discovered information that quickly expanded the probe to Wal-Mart operations nationwide.

A probation officer told Santana that the Honesdale Wal-Mart's manager identified the company that cleaned the store as Comet Floor Care and said that he believed the cleaning crew members were all illegal immigrants, Santana said in an affidavit filed in court in Pennsylvania. Immigration officials subpoenaed documents from Wal-Mart, and those documents revealed that Wal-Mart had paid Comet $8 million in 1999 to clean 82 stores throughout the United States, Santana said.

Santana also got information from a confidential informer, who set up recorded phone calls with Kostek. The informer worked for Kostek at the Honesdale Wal-Mart and lived in a trailer with cleaning crew members from the former Soviet republic of Georgia.

Immigration agents raided Wal-Mart stores in Honesdale, Harrisburg and two other cities in Pennsylvania on March 20, 2001. They arrested 27 illegal immigrants from countries including Georgia, Russia, Hungary and Ukraine.

They also searched the trailer in Honesdale where the informant said Kostek housed illegal workers who cleaned the local Wal-Mart.

"The aliens slept on the floor in sleeping bags, and the bathroom was abnormally dirty," Santana wrote.

Two days after the raids, the informer called immigration officers to tell them that Kostek, who owned a company called CMS based in Queensbury, N.Y., had moved him to Salem, N.H., to clean a different Wal-Mart, and from there to New Jersey.

Soon, the informer himself was in trouble. By April 2001, other workers had threatened him physically and suspected him of cooperating with immigration officials. Also, back in his home country of Georgia, family members of deported Georgians had threatened his family. He was taken out of the investigation, Santana said.

Violence reared its head when another man working with Kostek, Myroslav Dryjak, brought in some Armenians to replace the crew at the Honesdale store. When one of the Armenians, a man about 60 years old, complained that he wanted to work in New York, Dryjak and another man took him outside the trailer and assaulted him, the informant told immigration officials.

In fall 2001, immigration agents raided Wal-Marts in Pennsylvania, New York, Ohio and Missouri, arresting 68 illegal workers from countries including Poland, Lithuania and Mongolia.

At stores in St. Ann and O'Fallon, the agents arrested six Czechs and a Pole, all employed by a company called National Floor Management. Illegals at other stores worked for a string of other companies: Ironman Maintenance Inc., IMC, Comet, Champion, Precision Cleaning Inc. and Pinnacle Management Inc.

Santana began to scrutinize the companies. The public documents they filed offered limited information, but they kept leading back to St. Louis County. Investigators also discovered a pattern: Many of the companies had the same agent at the same address on South Florissant Road in Ferguson.

Immigration agents also obtained records from Wal-Mart revealing the $82.2 million that Wal-Mart paid the seven Walters companies. And from Normandy Bank in St. Louis County, Santana obtained records showing a web of payments linking the Walters companies to each other and to subcontractors.

On April 10, 2002, agents raided the offices of Intensive Maintenance Care in Ferguson, Mo., CMS in Queensbury, Mo., and one other subcontractor. The agents seized financial accounts holding $3 million in cash. They also filed forfeiture cases in federal court in Pennsylvania seeking to take control of the Walters' Ladue home and the Fenton apartment complex, claiming both had been bought with the proceeds of an illicit scheme to launder money and employ illegal immigrants.

Walters maintained that he never knew the subcontractors were hiring illegal immigrants, said Demerath, his attorney. But making that case stand up in court might be tough, Demerath acknowledged.

"We knew it was dangerous to go to trial on that because he probably did look the other way," Demerath said.

In July 2002, three months after his office was raided, Walters agreed to talk with the federal investigators - with his attorney present. It was then that Walters acknowledged that he had first learned of illegal workers used by his subcontractors as early as 1994, Santana said in his affidavit. He also told the story of how the 1997 raid led him to set up multiple companies.

But Walters did more than recount history to help the agents - much more. After the April 2002 raids, he had two of his employees call Wal-Mart stores and inform them that he was shutting down and going out of business. The employees recorded the calls. In July, Walters turned over the recordings to Immigration.

Demerath and prosecutors negotiated an agreement in which Walters' 12 companies would plead guilty to conspiracy to transport illegal workers into the country and would forfeit $4 million. In return, U.S. attorney Thomas Marino of Harrisburg, Pa., agreed not to pursue any charges against Walters, his wife, his father or his employees.

"It was a good deal for him," Demerath said.

Walters signed the agreement in January 2003, but it would remain secret for more than two years. In that period, Walters cooperated with the federal probe extensively, recording more than 100 phone calls and arranging secretly recorded meetings with Wal-Mart employees.

On April 23, 2003, Walters wore a wire to a meeting with Steve Bertschy, whom immigration agents identified as a Wal-Mart vice president over store maintenance.

Walters said he wanted to help Wal-Mart replace illegal immigrants in its stores with legal workers, but Bertschy did not accept the offer, Santana said in an affidavit later filed in federal court in Arkansas.

Walters told Bertschy that he knew of as many as 1,000 illegal immigrants working at Wal-Mart stores.

"We're trying to address that issue because people don't know exactly if there are illegal workers in our stores," Bertschy responded.

At another point, Walters said, "I know of at least 400 stores that had illegal aliens in them." Santana said Bertschy replied: "Don't repeat that."

Wal-Mart spokesman Simley acknowledged that Bertschy had made the comments attributed to him, but he said they were "out of context." Simley also denied that Bertschy was a vice president. His title was "manager, floor maintenance program," Simley said.

Later in 2003, Walters made recorded phone calls to 118 Wal-Mart stores to discover whether they employed contractors for cleaning services.

Armed with the recordings and other information provided by Walters, immigration agents obtained search warrants. On Oct. 23, 2003, agents raided the offices of Bertschy and other employees at Wal-Mart headquarters, taking away computer and e-mail data and 13 boxes of files and other papers. On the same day, agents arrested about 245 illegal immigrants employed at 61 stores in 21 states from New York to Arizona.

On March 18, 2005, Wal-Mart agreed to pay $11 million to settle allegations of hiring illegal immigrants, but the company denied any wrongdoing.

Walters' 12 companies agreed to a guilty plea and the $4 million forfeiture.

The settlement documents also pointed out that after the October 2003 raids, Wal-Mart notified the government that it intended to take action to ensure that independent contractors working for Wal-Mart comply with laws on employment of illegal immigrants.

Wal-Mart also agreed to a court order requiring it to train its managers on preventing the hiring of illegal immigrants, and to verify that its independent contractors are complying with immigration laws.

Walters and the Wal-Mart executives avoided any criminal charges, but prosecutors came down on others linked to the scheme. Three months after the settlement was announced, Walter Truszkowski, the owner of Deluxe Cleaning, pleaded guilty in federal court in Chicago of money laundering and conspiracy to conceal illegal immigrants.

Truszkowski admitted with his guilty plea that, through Walters' company Intensive Maintenance Care, he got "criminal proceeds in the form of Wal-Mart's payments." Last month, Truszkowski was sentenced to three years in prison and ordered to pay a $60,000 fine.

Truszkowski, of McHenry, Ill., admitted that he paid $247,319 as part of the conspiracy to an illegal immigrant from Lithuania, Algimantas Kondratavicius.

Kondratavicius, who was arrested in 2000 at a Wal-Mart in Valparaiso, Ind., pleaded guilty of importing illegal immigrants, admitting he obtained his workers from "alien smugglers" in Moscow and Tomsk, Russia. In 2004, he was sentenced to a year in prison.

Meanwhile, two other subcontracting firms, DJR Cleaning and CMS of Queensbury, got deals like Walters'. DJR owner Vincent W. Romano was not charged with a crime, but DJR itself pleaded guilty of conspiracy to transport aliens into the country and agreed to forfeit $200,000. Charges against CMS owner Stanley Kostek were dropped, but CMS pleaded guilty and forfeited $10,000.

Dryjak, who allegedly assaulted the Armenian while moving crews of illegal workers for CMS in the Northeast, pleaded guilty of conspiracy and was sentenced to probation.

Meanwhile, Walters' companies have yet to forfeit the full $4 million.

Last September, federal prosecutors dropped their efforts to force Walters to forfeit the home in Ladue, Mo., and the apartment complex in Fenton, Mo.

Marty Carlson, first assistant U.S. attorney for the middle district of Pennsylvania, which investigated Walters, declined to discuss why the full forfeiture had not taken place.

"We intend to move forward until we've secured the full $4 million," he said.

Amid all the Operation Rollback cases, what remains obscured is the fate of the hundreds of illegal immigrants arrested at Wal-Marts nationwide. Immigration officials have said many were deported, but it is unclear how many. Some disappeared during the investigation.

Some former Wal-Mart janitors have filed a lawsuit claiming Wal-Mart committed racketeering offenses in its failure to pay the minimum wage and Social Security taxes to janitors, including illegal immigrants.

James Linsey, an attorney who is seeking to make the case a class action on behalf of many Wal-Mart janitors, said immigrant janitors were "were working seven nights a week, 364 days a year," and in some cases were locked inside stores while they worked overnight.

Wal-Mart has denied the claims and has asked a federal judge in New Jersey to dismiss the case.

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© 2006, St. Louis Post-Dispatch.

Visit the Post-Dispatch on the World Wide Web at http://www.stltoday.com

Distributed by McClatchy-Tribune Information Services.






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© 2006 KRT Wire and wire service sources. All Rights Reserved.
http://www.grandforks.com

I was too at K-Mart for night stock. You couldn't get out till they let you out in the morning.

and in some cases were locked inside stores while they worked overnight.

Oh what a tangled web we weave.........

I have no doubt Wal-Mart execs were the architects of this scheme..... with Walters being a very willing participant. It was a multi-million dollar win/win for each, with both parties ASSuming that all culpability would be laid at the feet of the lowest common denominator, the "straw" sub contractors, should any given store (or stores) be busted. After all, the government couldn't possibly impose a multi-million dollar fine on a "little guy" business.