Three executives of Navillus Contracting, a large masonry and concrete subcontractor on major union construction projects in New York City, face an 11-count criminal indictment for allegedly cheating union benefit funds of more than $1 million between 2011 and 2017.

Company CEO Donal O’Sullivan, payroll department head Helen O’Sullivan and comptroller Padraig Naughton, were arrested and charged with conspiring “with others” to evade making contributions to seven union funds that included health and pension benefits. Helen O'Sullivan also is a sister to the CEO. All were released on bail.

The three have "temporarily" stepped down from their company roles, according to an Aug. 3 letter from Donal O'Sullivan obtained by The Real Deal publication. Colin Mathers, Navillus operations chief, now is interim CEO, with no date disclosed for the executives' return.

The company had collective bargaining agreements with the labor unions that required it to hire union workers on its projects and to file reports that detailed the number of hours worked by each employee.

Navillus employed union and non-union workers in violation of the collective bargaining agreement, but if it did hire non-union workers, it was required under the agreements to contribute to the union benefits funds on their behalf, according to the federal indictment made public July 30.

The company had an agreement with a consulting firm to pay “certain” employees for work done on Navillus jobs, which over the course of the alleged scheme amounted to more than $7.2 million. “Neither Navillus, nor the consulting firm made contributions to the benefit funds on behalf of the designated employees,” said the indictment filed July 29 in U.S. district court in Brooklyn, N.Y.

The consulting firm, which provided construction companies with surveys and construction project estimates, was not identified in the indictment, and its owner was named as "John Doe." His secretary, named in the document as “Jane Doe,” was described as having submitted false consulting firm billing invoices to Navillus to make it appear that the payments were for masonry and consulting work performed for the company to conceal the fraudulent payments to workers, the indictment said.

The three who were indicted along with “one or more others” conspired to embezzle money owed to the union benefits funds, the indictment said, noting that the government will claw back the stolen funds if the defendants are found guilty.

Sean O’Shea, a partner with Cadwalader, Wickersham & Taft in New York City and attorney for Donal O’Sullivan, said the government’s claim is “flatly false”  and noted that during the time period when it is alleged the company failed to pay $1 million to union benefits funds, it actually paid more than $200 million to those unds.

“It’s sad when the U.S. government is the collection agency for these unscrupulous unions,” he said.

According to O’Shea, O’Sullivan’s company is one of the largest union contractors in New York City. “The trend is away from union labor here,” he said, adding that the unions have created an environment that makes it difficult to work with them. “They ae trying to destroy a great union company when they should be looking in the mirror,” he said.  

Navillus settled a civil suit alleging fraud brought by five unions and benefits funds with a $25.7 million payment in 2018 for using a separate company owned by O’Sullivan and his brother to avoid negotiated agreements to use union labor on its projects.

Navillus filed for bankruptcy protection after an original judgment of $76 million, but was able to emerge after the amount was reduced as a means of keeping the company in business, the federal judge in the case said at the time.

Having both a union and nonunion construction companies with a single owner is not illegal under National Labor Relations Act, but if not set up properly can lead to trouble, industry observers warned.

Among major Manhattan projects for Navillus are the 9/11 Memorial and Museum, and the One Vanderbilt, One Manhattan West and 252 East 57th Street towers.