White Collar Crime News

Two Convicted of Tax Fraud, Wire Fraud, and ERISA Fraud March 13, 2010

David C. William C. Holley and Joseph E. Funk, Jr. were found guilty by a federal jury of various fraud-related crimes. Mr. Holley and Mr. Funk were both convicted of one count of conspiracy to defraud the United States and one count of conspiracy to commit wire fraud. Mr. Holley was separately convicted of 12 counts of tax evasion and three counts of willful failure to account for and pay over taxes. Mr. Funk was separately convicted of nine counts of ERISA fraud. The defendants face a maximum term of 30 years’ imprisonment and a maximum fine of $1,000,000 with respect to the conspiracy to commit wire fraud conviction. They face a maximum term of five years’ imprisonment on each of the additional counts of conviction.

Mr. Holley and Mr. Funk were the President and Vice President, respectively, of a Wilmington-based demolition company, Holley Enterprises, Incorporated (“HEI”). From 2004 through May 2007, they engaged in a number of fraud schemes designed to wrongfully retain payroll taxes that should have been paid over to the U.S. Internal Revenue Service (“IRS”), wages that they were obligated to pay their workers pursuant to state law and benefits that they were obligated to pay to employee benefit funds on behalf of their union-affiliated employees. With respect to the tax fraud-related convictions, the defendants falsely reported to the IRS that for each quarter in 2004, 2005 and 2006, HEI had either three or four employees. In fact, the company employed anywhere from 25-50 employees during each of those quarters. As a result of the fraudulent tax returns submitted by the company, it wrongfully failed to pay over $363,000 in federal payroll taxes to the IRS during these years.

The defendants also engaged in a scheme in which they failed to pay HEI employees the prevailing wage set by state or local law for certain demolition projects, including three projects located in Delaware—the Louis L. Redding Middle School in Middletown, the Bancroft Elementary School in Wilmington, and the Hockessin Library in Hockessin. Instead of paying their employees the wages required by law, the defendants paid them one-third or one-fourth of that prevailing wage rate. Later, when the Delaware and New Jersey Departments of Labor investigated HEI regarding some of these construction projects, the defendants sent the agencies various types of false documents, all designed to cover up the scheme. These fraudulent documents included falsified checks, false payroll sheets, false tax documents, false insurance certificates, and false address information for their employees. All told, on just the six prevailing wage jobs identified in the Indictment, the defendants wrongfully failed to pay over $195,000 in wages to their employees.

Lastly, Mr. Funk made numerous false statements on documents submitted to Employee Retirement Income Security Act (“ERISA”) benefit plans. Mr. Funk knowingly under-reported or failed to report the hours worked by HEI employees on a 2005 demolition project on the ACE Insurance building at 436 Walnut Street in Philadelphia. As a result, HEI failed to pay the benefit plans over $208,000 in benefit payments that HEI was obligated to pay for the project.