FACCHIANO CONSTRUCTION CO., INC., 1987-DBA-14 (ALJ Sept. 27, 1990)
[1] 91-06.WAB ATTACHMENT]
U.S. Department of Labor Office of Administrative Law Judges
Seven Parkway Center
Pittsburgh. Pennsylvania 15220
IN THE MATTER OF
Proposed debarment for labor
standards violations by:
FACCHIANO CONSTRUCTION COMPANY, INC. Case No. 87-DBA-14
a/k/a MICHAEL FACCHIANO CONCRETE
CONSTRUCTION COMPANY, Contractor
MICHAEL FACCHIANO, SR., Owner
MICHAEL FACCHIANO, JR., Owner
JOHN FACCHIANO, Owner
With respect to laborers and
mechanics employed by the contractor
under U. S. Department of Housing and
Urban Development Project Nos. C.D.
VI 2.2.8 (Swissvale Community Development
Corporation, Phase IV, Waverly Street
Sidewalk/Curb Completion); C.D. VI-3-2,
(Braddock, Pennsylvania Economic
Development Corp., Cherry Way Park);
C.D. VII-7.1 (Twin Rivers Council of
Governments Area Wide Catch Basin Program);
C.D. VII-7.3, (Phase II, Steel Valley
Council of Governments Catch Basin/Curb
Ramping Project); C.D. VII-7.4, (Turtle
Creek Valley Council of Governments Area
Wide Catch Basin/Curb Ramping Program);
C.D. VII - 7.5, (Char-West Council of
Governments Catch Basin Repair Project);
C.D. VIII - 3.11.2 (Steel Valley Council of
Governments Catch Basin/Curb Ramping
Project); C.D. VIII - 7.5, (Char-West
Council of Governments Catch Basin
Reconstruction); C.D. IX -7.5, (CharWest
Council of Governments Catch Basin
Project); C.D. IX - 2.2.5, (Dormont,
Pennsylvania Community Development
Corporation, Potomac Avenue Public
Improvement, Phase III), C.D. IX - 3.2, [1][2]
(Braddock Economic Development Corporation
Catch Basin Program); C.D. IX - 3.12.37,
(Steel Valley Council of Governments,
Andrews Street Water Line Rehabilitation);
C.D. IX - 7.3, Steel Valley Council of
Governments, Catch Basin/Curb Ramping
Program); C.D. IX - 7.4 (Turtle Creek
Valley Council of Governments Catch
Basin/Curb Ramping Program); C.D. X - 7.2
(South Hills Council of Governments,
Manhole Repair, (Pleasant Hills); PA R-440,
(Urban Redevelopment Authority of Pittsburgh,
Clifton Park Project); 26429-F (Gomer Street
Wall Reconstruction); 26933-F (City of
Pittsburgh, Larimer Avenue Grading, Paving
and Curbing).
APPEARANCES:
Alfred J. Fisher, Jr., Esq.
For the U. S. Department of Labor
Thomas A. Berret, Esq.
For Facchiano Construction Company, Inc,
Michael Facchiano, Jr., and John Facchiano, Respondents
Richard Wile, Esq.
For Michael Facchiano, Sr., Respondent
Before: GEORGE P. MORIN
Administrative Law Judge
DECISION AND ORDER
This matter is before me on an Order of Reference of October
2, 1986 from the Administrator, Wage and Hour Division, United
States Department of Labor, which referred the case to the Office
of Administrative Law Judges with a request for a hearing pursuant
to 29 CFR [sec] 5.12(B), concerning proposed debarment of the
named respondents for violation of two Davis-Bacon related Acts
listed in 29 CFR [sec] 5.1, i.e., the Housing and Community
Development Act of 1974, as amended, (42 U.S.C. 5310, 1440(g)), and
the Contract Work Hours and Safety Standards Act, as amended, (40
U.S.C. 327, et seq.)
A hearing was held on January 18, 1990 in Pittsburgh,
Pennsylvania. All parties submitted post-hearing briefs.
Additionally, the jointly represented respondents and the
individually represented respondent, Michael Facchiano, Sr., each
filed briefs in reply to complainant's post-hearing brief. [2]
[3] The following abbreviations will be used in this decision:
"TR" for the transcript of the January 18, 1990 hearing; RX for
respondents' exhibits; JX for joint exhibits of the parties; and
Govt. Exh. for the complainant's exhibits.
Statement of Stipulated Facts
Many of the facts in this case are not in dispute, as is
evident from the 10-page Stipulation of the Parties, in evidence as
JX-1. Facchiano Construction Company, Inc., is a Pennsylvania
corporation, primarily engaged in the operation of a concrete
contracting business in Pittsburgh, Pennsylvania. Its corporate
officers are Michael Facchiano, Sr., President, and his two sons,
Michael Facchiano, Jr., and John Facchiano, Secretary and
Treasurer, respectively.
The contracts listed in the caption were awarded between the
dates of January 1, 1982 and September 30, 1984, and were all
funded, in whole or in part, through community development block
grants administered by the United States Department of Housing and
Urban Development (hereinafter called "HUD"). All of the contracts
were subject to and contained representations and stipulations
required by the Housing and Community Development Act of 1974,
Contract Work Hours and Safety Standards Act (CWHSSA) and
applicable DOL regulations at 29 C.F.R. Part 5, and were subject to
the labor standard provisions of the Housing and Community
Development Act of 1974.
By the terms of the contracts, Facchiano Construction Company
was required to pay its employees prevailing union hourly wage
rates and fringe benefits. In 1984, the Inspector General's Office
of the Department of Labor, in conjunction with the Federal Bureau
of Investigation, conducted an investigation of the respondent
firm's performance under the contracts. The investigation
disclosed that the firm, in some instances, had failed to pay
applicable prevailing wage rates and that falsified certified
payroll records, showing higher wage rates than were actually paid,
were submitted. The payrolls were certified as correct and
complete by Michael Facchiano, Jr., or John Facchiano, but none of
the falsified certifications were signed by Michael Facchiano, Sr.
As a result of the investigation, back wages totalling
$126,298.27 were found to be owing to 20 employees and were paid as
prevailing wages and fringe benefits, pursuant to the Act and
contracts. A criminal information was filed against the firm and
its Secretary, Michael Facchiano, Jr. Both of the defendants pled
guilty. On February 22, 1985, Michael Facchiano was sentenced to
six months in prison, fined $2,000.00, and placed on probation for
five years. The corporate defendant was also fined $2,000.00. The
fines were paid and the individual defendant served the prison
sentence. [3]
[4] Thereafter, on May 15, 1985, HUD notified Michael Facchiano,
Jr., and Facchiano Construction Company, Inc., that consideration
was being given to debar[r]ing them from further participation in
HUD programs for a three-year period, pursuant to 24 C.F.R.
524.6(a)(9), and, further, that they were temporarily suspended
from participation in HUD programs pending a final decision in the
matter of the debarment. Briefs and documentary evidence were
submitted by the respondents and by HUD, and, on March 5, 1986,
HUD's Board of Contract Appeals issued a determination and order.
Both respondents were debarred from participation in HUD programs
for 18 months, until November 15, 1986, a date reflecting credit
given by the Board for the period of the suspension.
While the HUD matter was pending, the Department of Labor, on
December 13, 1985, notified Michael Facchiano, Sr., Michael
Facchiano, Jr., John Facchiano, and Facchiano Construction Company,
Inc., of its intention to seek their debarment from contracting
completely with the federal government, pursuant to 29 C.F.R.
[sec] 5.12(a)(1). In response to respondents' request, the
Department of Labor, on October 27, 1986, referred the matter of
the proposed debarment to the Office of Administrative Law Judges
for a hearing. Thereafter, on February 12, 1987, the respondents,
with the exception of Michael Facchiano, Sr., filed suit in the
United States District Court for the Western District of
Pennsylvania to stay the administrative debarment proceedings on
grounds of res judicata and collateral estoppel. On stipulated
facts and cross-motions by the parties for summary judgment, the
finding of a United States Magistrate in favor of the Department of
Labor was affirmed by Judge Alan H. Bloch, who entered an order
granting the Department of Labor's Motion for Summary Judgment.
Both the Magistrate and Judge Bloch found that the doctrines of res
judicata and collateral estoppel did not apply to bar the DOL
proceeding. On appeal, the Court of Appeals for the Third Circuit
affirmed the lower court's denial of Respondent's motion for
summary judgment, but reversed the order granting the Department of
Labor's motion for summary judgment on grounds the question of
whether res judicata or collateral estoppel bar the Department of
Labor's action should first be presented and decided at the
administrative hearing.
The final matter stipulated to is that all pleadings,
stipulations and documentary evidence from any of the foregoing
judicial or administrative proceedings are admissible and may be
offered by any party in this proceeding. (JX 1)
ISSUES
1. Whether individual respondents are subject to the
debarment provisions of 29 C.F.R. [sec] 5.12(a)(1);
2. Whether the respondents' failure to pay prevailing
wage rates and overtime and their falsification of
payroll records constitutes "aggravated or willful"
[4][5] violations of the Davis-Bacon Related Acts under
which this action was brought, thus warranting debarment
for three years; and
3. Whether this administrative proceeding is barred by
the doctrines of res judicata and collateral estoppel
because of the prior proceeding, arising out of the same
activity, for which a period of debarment has already
been served.
Positions of the Parties
It is the complainant's contention that there are numerous
precedents for finding falsification of payroll records to
constitute "aggravated or willful" violations of Davis-Bacon
Related Acts for which a three-year period of debarment may be
imposed, and that the same should be imposed here. Complainant
does not view the differing phraseology in the regulations
governing debarments under the Davis-Bacon Act, as opposed to the
Davis-Bacon Related Acts, to be of significance, so as to affect
the debarment of the responsible officers in this Davis-Bacon
Related Acts case. Complainant argues that the debarment should be
for the full three years with no credit given for time Facchiano
Construction Company, Inc. and Michael Facchiano, Jr. were debarred
from participating in HUD contracts because debarment here will
cover participation in all government contracts whereas the earlier
debarment applied to only HUD sponsored contracts. And that same
distinction is the primary basis for the complainant's argument
against the defense of res judicata and collateral estoppel
applying in this instance.
Respondents, on the other hand, view as of major significance
the difference in the terminology used in the regulations
applicable to cases arising under the Davis-Bacon Act as opposed to
the Davis-Bacon Related Acts. As this case only involves "Related
Acts" violations, they maintain, the applicable regulations are
those contained in 29 C.F.R. [sec] 5.12(a)(1), . . . ["w]henever
any contractor or subcontractor . . .", and since the individual
respondents are neither contractors or subcontractors, they cannot
be debarred under this section. They point out that whereas the
debarment regulations for Davis-Bacon Act violations specifically
refer to responsible officers of contractors and subcontractors,
the "Related Acts" subsection does not. No contrary agency
interpretation of the clear and unambiguous language of the
regulation is justified. Respondents maintain that, contrary to
complainant's contention, in this "Related Acts" case, current
compliance and the respondents' record of efforts to achieve and
maintain compliance should be considered as mitigating factors in
imposing sanctions. Respondents point out that while the
regulations mention three years as the maximum debarment period,
they by no means require that length of time and give complete
latitude to the fact finder to impose a shorter period of
debarment, or no debarment at all, if the circumstances justify
that. [5]
[6] Complainant's Evidence
The government's case consists of the stipulated facts, Govt.
Exhs. 1 - 6, the joint exhibits and the testimony of three
witnesses.
Bruce B. Woods
Bruce B. Woods is an employee of the Office of the Inspector
General, U. S. Department of Labor, and is stationed in Pittsburgh,
Pennsylvania. In June 1984, he was assigned to investigate a
complaint received from Margaret J. Rau, a labor compliance officer
with the Allegheny County Department of Development. Mrs. Rau
reported that there were indications from auditing the certified
payrolls and from interviews with employees that Facchiano
Construction Company, Inc., was underpaying its employees on
federally funded jobs. Mr. Woods obtained certified payrolls for
his own analysis from Mrs. Rau and from the various agencies which
had entered into federally funded construction contracts with
Facchiano Construction Company. He also assembled information from
which he compiled a list of different company names and Facchiano
family members' names used on the contracts, associated papers and
bank accounts. In evidence as Govt. Exh. 1 is a list compiled by
Mr. Woods of names used on the contracts and on various documents,
including certified payrolls, for some of the projects listed in
the caption. A number code was used, the key to which is shown on
Govt. Exh. 2. Fourteen variations of the Facchiano name, including
the named corporate respondent and four other entities with the
abbreviation "Inc." as part of their name, appear on the first page
of the exhibit. In addition, seven individual Facchiano family
members' names are listed as used at some time while the contracts
were in effect. /FN1/
After visiting a construction site, where he observed vehicles
of two different Facchiano companies, and after checking bank
accounts, Mr. Woods, in July 1984, served a subpoena on John
Facchiano and initiated interviews with ten Facchiano employees.
From all indications, the Facchianos were not in compliance with
the Davis-Bacon Act in respect of payment of wages at the
prevailing rate. In examining certified payrolls and from his
interviews with employees, Mr. Woods discovered instances where
the [6]
/FN1/ Respondents' counsel objected to these exhibits as an
attempt to expand the list of "persons" against which a debarment
order could run, and contrary to the fact stipulated to by the
government that ". . . Facchiano Construction Company" was awarded
federally funded construction contracts. The exhibits were
received on representation by the government's counsel that they
were being introduced for informational purposes only. I merely
make the observation at this point that no attempt was made by
respondents to explain their use of multiple and confusing names or
by the complainant for bringing the matter up in the first
place. [6]
[7] names of some of the owners were shown as working for eight
hours each on three different jobs and of the names of employees
who worked on some of the jobs not even appearing on the certified
payrolls. (In later testimony, Mr. Woods recalled six instances
where this had occurred.) During the summer of 1984, subpoenas
were issued to the various company names the Facchianos had been
using. Their legal counsel moved to quash and thereafter other
subpoenas were issued; a hearing was held before a United States
M[agistrate] on a further motion to quash; and the respondents were
subsequently ordered to turn their business records over to Mr.
Woods's investigation. Shortly thereafter, the plea agreement was
worked out between the government and the Facchianos. Mr. Woods
testified that prior to the plea agreement signing, he had received
no cooperation from the Facchianos as far as surrendering business
records was concerned, but that after the signing of the plea
agreement, and pursuant to the conditions thereof, he began to get
their cooperation. Two meetings were held in October 1984 between
Mr. Woods and the two Facchiano sons, followed by another meeting
of the same three persons, and others, on January 21, 1985, at the
offices of the F.B.I. in Pittsburgh, where the amounts of and to
whom back wages were owing were determined. At these meetings the
information he received from the Facchianos was truthful and
accurate, Mr. Woods testified.
Margaret J. Rau
Margaret J. Rau, the contact who supplied the information
which precipitated the Department of Labor's investigation of the
Facchiano's compliance on federally funded contracts, testified
that she is a county employee who works as the labor compliance
officer for the Allegheny County Department of Development. Her
job includes issuing prevailing wage rates to contractors who are
bidding on federally funded community development projects. Money
for such projects is administered through her agency which itself
does not award contracts. Rather, funds are distributed by
Allegheny County Department of Development to municipal governments
and taxing authorities and to non-profit agencies and corporations.
When a contract has been awarded, Mrs. Rau or one of her two
assistants instructs the contractor on record keeping and on proper
procedures to be followed in filling out the various forms required
of the contractor in a federally funded project. One such form is
the weekly payroll, which Mrs. Rau's agency routinely audits. Mrs.
Rau also visits the sites where the work is being performed and
interviews the employees she finds working there for the purpose of
determining whether they are being paid at the appropriate wage
rate. It was during the course of one of these "site interviews"
that she observed that posters which she distributes to all
contractors, advising employees of their rights with respect to
being paid overtime rates of pay for hours in excess of eight in
one day and forty in one week, were not posted as required.
Neither were the prevailing wage rates posted nor posters required
by OSHA [7][8] and EEO. Information obtained at the Facchiano
construction site interviews was compared with that contained in
the certified weekly payrolls already in her possession, and
discrepancies were uncovered. Mr. Woods's office was notified, as
he indicated in his testimony, after which Mrs. Rau's role in the
investigation was limited to that of a witness. Mrs. Rau's
department stopped payment on all of the several projects it was
funding in which the Facchianos were the contractor, pending a
determination of the question of restitution of monies owed to
underpaid employees. The agency is able to control payments by
virtue of the fact that money used by the contracting agencies to
pay contractors remains under control of the Allegheny County
Development Department. Federal and state income tax and FICA
withholdings were paid for unreported and underpaid employees out
of monies posted as performance bonds by the Facchianos on ongoing
community development work. Mrs. Rau testified, finally, that
after the HUD debarment in 1985, Michael Facchiano, Sr., who was
not debarred, received a few small contracts (under $40,000 each)
through her agency, but neither Michael Facchiano, Jr., or
Facchiano Construction Company, Inc., under those names, bid on or
were awarded any contracts between the date they were suspended in
May 1985 and the date the HUD debarment ended in November 1986.
Complainant's only other witness, Bruce Ziegler, was called in
rebuttal at the conclusion of the respondents' cases. His evidence
will be discussed after the respondents' evidence has been analyzed
and findings made on the basis thereof.
Respondents' Evidence
Michael A. Facchiano, Jr.
Michael A. Facchiano, Jr., was born April 24, 1956. He was 28
years old when the investigation began in 1984, and is now 34. He
testified that he attended local schools in Pittsburgh and was a
1979 graduate of Point Park College in that city. His bachelor's
degree was awarded in business. While in school, he worked for his
father during summer vacations as a laborer and truck driver. He
apparently grew up in the business and as would be expected became
associated with it on a full-time basis when he finished his formal
education. At the time he began his permanent employment with his
father, the annual gross revenue of the company was between
$400,000 and $500,000, all but approximately 20 percent of which
came from residential concrete work such as putting in sidewalks
and driveways. The remainder was commercial work and the younger
Facchiano set upon a plan to increase the company's commercial work
and along with it revenue. He increased the amount of their bond
and obtained bank financing to help achieve this goal. The main
effort, however, was bidding on and hopefully being awarded
contracts for federally funded projects. In the years 1982, 1983
and 1984, between 70 and 75 percent of annual company revenues of
from $1 million to $1.2 million came from federally funded work.[8]
[9] In the years prior to 1984, the company was the subject of
three investigations for Davis-Bacon Act violations, involving
travel time, failure to pay overtime, and misclassification of
workers. The amounts involved were relatively small: $2,800 on
one, $400 on another and just $45 on the third. Apparently,
restitution was all that was required of the company as a result of
these investigations. Nevertheless, despite these earlier brushes
with the law, or at least involvement with the authorities, Michael
Facchiano, Jr., embarked on a scheme to increase the company's
revenue and thereby enhance his business stature in the eyes of his
father. This involved the deliberate misclassification of
employees, payment of less than prevailing wages required in the
federally funded contracts and the failure to pay overtime when a
worker exceeded the 8 hours in one day/40 hours in one week limits:
in short, the practices to which the witness admitted at the plea
agreement hearing before Judge Bloch. The witness testified that
other contractors were doing the same thing and he felt it was
necessary for his father's company to follow suit in order to
occasionally be the low bidder on the numerous contracts they bid
on, and to grow as a company.
In response to questions about his father's involvement in the
scheme, the witness testified that his father, who can neither read
nor write, was not involved in the process of drawing up bids nor
did his name appear on any of the certified payrolls as other than
an employee. The elder Facchiano, he testified, would verbally
report to his daughter, who kept the books and made up the payroll,
at the end of each work day, and, from memory, give her the hours
the crew worked on the job that day. He stated that his father was
active on the job at the construction sites; was unaware of the
scheme to expand the company by illegal means; and would have
preferred to keep the company small and to remain in the
residential concrete business.
Immediately after the suspension took effect, Michael
Facchiano, Jr., resigned his position as an officer of the
corporation and ceased all managerial duties. He went to work as
an employee of his father's business (Michael Facchiano
Contracting), more or less as a foreman. At the time of the
suspension, the company hired a new employee to be office manager
whose principal duties were to check payroll certifications and
wage rates. Job supervisors stationed at each job began to collect
data necessary to make up the payroll and to turn their work
product over to the office manager for final processing. These
procedures replaced haphazard and disorganized methods of compiling
data in use before the investigation began. Payroll data has now
been computerized, in a further attempt to avoid errors. The
company signed union contracts with three building trade unions
(cement workers, carpenters and laborers) in 1988, and the unions
are now directly involved in monitoring on their members' behalf
wages, job classifications and hours. [9]
[10] An employee handbook was also compiled and distributed to
all employees. (RX 1) This handbook explained in detail the rights
and obligations of employees in matters of pay, classification,
hours, conduct on the job, benefits while employed and after a
layoff or termination, and safety. Distribution of the employee
handbook ceased, the witness testified, "when we became signatory
to union agreements" in November of 1988. (TR 95)
The witness was questioned about the present earnings of the
company. In 1987, gross volume of the business was approximately
$4 million; in 1988, $5.5 million; and the witness estimated for
1989, "in the neighborhood of approximately five, five and a half
million." (TR 105) When asked about their contract bidding
activity in 1987, the witness stated that of 25 projects they bid
on, they were the successful bidder on seven or eight. They bid on
50 or 60 in 1988 and were awarded "no more than 10." On the 25
they bid in 1989, they were awarded eight or nine contracts. (TR
110) Facchiano Construction Company, Inc., the corporate
respondent, is still in existence, Michael Facchiano, Jr.,
testified, but it is inactive. It has not taken on any work since
the investigation began and Michael Junior resigned his position in
the corporation. The only active business is the sole
proprietorship, Michael Facchiano Contracting. The union
contracts, alluded to by this witness and more fully described
below, are with the proprietorship. Michael Junior was asked his
status in the "business" as it is now organized, (TR 112), and he
replied that he is employed as a superintendent, but that
additionally he is involved in the bidding process, purchase
of equipment, employee relations, and general office procedures.
His brother John has acquired an engineering degree and is also
involved in bidding, along with a full-time estimator who is now
carried on the payroll. Michael Facchiano, Sr., owns the business
and the equipment. He also owned the equipment during 1982, 1983
and 1984 when the corporation was the active business entity. The
corporation leased the equipment from Michael Senior. (Tr 128)
And, apparently, the same employees who worked for the corporation
are (generally) employed by the proprietorship. (TR 129)
Lewis Dennis Martire
Lewis Dennis Martire is president of Laborers Local No. 1058
and testified that Michael Facchiano Contracting became a signatory
to a union contract in or around November 1988. The principal
reason this person was called as a respondents' witness was to
describe the union's involvement in verifying the accuracy of
signatory's payrolls to insure union member are paid the proper
rates for the proper classifications on hours worked. Not only are
records checked after the hours have been worked and reported, but
union stewards and field representatives, present on the job, are
able to talk to the workers and discuss these matters on a current
basis. The witness testified that no problems have arisen with
Michael Facchiano Contracting since the contract was signed.
Welfare and pension payments have been properly made, and laborers
[10][11] referred to the company for employment have been hired
when there have been openings.
James T. Strutt
James T. Strutt is the business representative of Local No.
2274 of the United Brotherhood of Carpenters and Joiners of
America, which has organized the carpenters employed by Michael
Facchiano. He authored a January 12, 1990 letter to the elder
Facchiano stating his union's general satisfaction in all its
dealings with Facchiano since the organization took place. (RX 5)
Prior to organization, however, Mr. Strutt vigorously pursued a
policy opposed to the Facchianos being permitted to bid on
federally funded projects in view of the pendency of the instant
debarment proceeding. This opposition took the form of letters to
members of Congress and Department of Labor officials inquiring
about this matter. Mr. Strutt testified that procedures similar to
those described by Mr. Martire are now in place to monitor rates of
pay, classifications and hours worked by union members on Facchiano
projects.
Rebuttal Witness
Bruce Ziegler
Bruce Ziegler, a heavy equipment operator employed by Frank's
Contracting, is a former employee of Facchiano Construction
Company, Inc. He worked as a laborer and heavy equipment operator
for the company in the years 1982 and 1983. He worked on federally
funded projects but was unaware of the prevailing wage rate
requirements on such projects until he heard about them from other
employees. He worked under the elder Facchiano's supervision most
of the time. At times he complained to Mr. Facchiano and to Mary
Jean Casamassa, Mr. Facchiano's daughter, that he was not being
paid adequately for overtime hours. Sometimes the overtime hours
appeared in his next paycheck, other times they did not. Mr.
Facchiano promised the witness that he would be getting a raise in
1984, when Facchiano would be beginning work on new projects, but
the witness never saw the raise since he was laid off in December
1983. At the time he was laid off, his rate was $7.00 per hour,
but he was unable to check this rate against the prevailing wage
rate which was supposed to be in the contract specifications binder
kept at each job site because the page where this information was
given had been ripped out of the binder.
Res Judicata and Collateral Estoppel
The charging letter from HUD to Michael Facchiano, Jr., dated
May 15, 1985, and signed by Alfred C. Moran, Assistant Secretary
for Community Planning and Development, advised Mr. Facchiano that
he is considered to be a contractor or grantee under Title 24, Code
of Federal Regulations, Section 24.4(f); that his mail fraud [11]
[12] conviction is evidence of irresponsibility and cause for
debarment under 24 C.F.R. [sec] 24.6(a)(9); and that prior to a
final determination of the debarment issue, he has the right to
make written request to submit documentary evidence and written
briefs, as described in Subpart C of the regulations. Mr.
Facchiano, by counsel, made timely request for the opportunity to
submit documentary evidence and a written brief, and to have a
hearing and an opportunity to be heard. /FN2/
The HUD debarment regulations are clearly related to criminal
activity. At 24 C.F.R. [sec] 24.305, Causes for Debarment, it is
stated that debarment may be imposed for conviction or civil
judgement for such criminal conduct as commission of fraud in
obtaining or attempting to obtain a public or private agreement or
transaction, violation of federal or state antitrust statutes,
commission of embezzlement, theft, forgery, bribery, falsification
or destruction of records, making false statements, receiving
stolen property, or for the commission of any other offense
indicating a lack of business integrity or business honesty. The
final subsection of [sec] 24.305, subsection (f), begins with the
words: "In addition to the causes set forth above, HUD may debar a
person from participating [*] in any program or activities of the
Department . . ." [*](emphasis added)[*]. The quoted and
underscored material indicates that HUD debarments affect only HUD
activities.
In his March 5, 1986, Determination, the HUD administrative
law judge indicated that the serious sanction of debarment is
imposed to assure that the Department does business only with
responsible contractors and grantees, and not for punitive
purposes. He determined that Michael Facchiano, Jr., and the
corporation /FN3/ had been convicted of a crime (mail fraud) which
could be the basis for HUD debarment, but before making his final
determination, he reviewed respondents' evidence in mitigation
(cooperation, assurances against recurrence, restitution, no prior
record, testimonials to good character). While the ALJ earlier
stated that the proposed debarment was tied to respondents' mail
fraud convictions, he seemed to base the debarment he found to be
justified on all aspects of their scheme to defraud employees. At
the same time the mitigating factors urged by respondents as
supporting a finding of present responsibility were not considered
adequate for respondents to avoid debarment altogether, the ALJ did
consider them sufficient [12]
/FN2/ The HUD administrative law judge, in his "Determination" (of
which more later), pointed out that under the regulations, when a
proposed debarment is based on a conviction, the hearing is
limited, as stated in the charging letter, to the submission of
documentary evidence and written briefs. Accordingly, he denied
the request for oral hearing.
/FN3/ The corporation received a separate charging letter which is
not among the documents in evidence in this case. [12]
[13] to reduce the debarment period from the possible three-year
length to just 18 months, with credit given for prior time while
under suspension.
In granting the Department of Labor's Motion for Summary
Judgment and dismissing the Facchiano's motion for the same relief,
the Magistrate appointed by the United States District Court for
the Western District of Pennsylvania found to be controlling the
fact that the HUD debarment went to HUD projects only, while the
DOL debarment would have government-wide effect, and the further
fact that the HUD debarment was based on the criminal conviction
while the DOL debarment, if any, would be based on the Davis-Bacon
Act violations themselves. United States District Court Judge
Bloch adopted the Magistrate's report and recommendations as the
opinion of the court.
In a lengthy opinion in Facchiano v. U.S. Dept. of Labor, 859
F.2d 1163 (3rd Cir. 1988), the Court of Appeals for the Third
Circuit referred the issue of claim preclusion to the Department of
Labor administrative law judge to decide as a mixed question of
fact and law.
I find, as did the United States Magistrate and Judge Bloch,
who had the same arguments before them as I do, that the bases for
the two debarment proceedings (violations of Davis-Bacon Acts, on
the one hand, and conviction of a serious crime, on the other) as
well as the limited vs. broad application of debarment by the two
agencies, sufficiently distinguish the proceedings to defeat the
res judicata and collateral estoppel defences. With this finding,
which is, in effect, a finding that I have jurisdiction, I am able
now to proceed with an adjudication on the merits.
Debarment of Individual Respondents
Respondents appear resigned to entry of an order debarring
Facchiano Construction Company, Inc., as well they might, in view
of the fact that such an order would have little if any effect on
the family's operation, given the inactive status of the
corporation and the robust growth of Michael Facchiano Contracting
since the era of the criminal proceedings and the HUD debarment
action. Clearly, to be of any real effect in insuring future
compliance with the requirements of the Acts and regulations
governing their federal contract work, a debarment would have to be
directed against Michael Facchiano and his two sons. They
vigorously object, and question this court's authority to enter an
order debar[r]ing them, as responsible officers in this "related
Acts" case. The government has cited to several Wage Appeals Board
cases where [13][14] such orders were entered in related Acts
cases. /FN4/ However, it does not appear, from my reading of the
cited cases, that in any of them was the precise issue here
presented discussed. The Wage Appeals Board simply took for
granted that in related Acts cases, just as in Davis-Bacon Act
cases, the debarment order would encompass the responsible officers
as well as the corporate entity which had entered into the contract
or contracts with the government.
As an appendix to his written closing brief, counsel for the
government attached a copy of a 1986 letter from Assistant
Administrator Valin to an attorney in Bismarck, North Dakota, who
questioned the extent of coverage of a debarment order in a related
Acts case. The attorney's argument was the same as is being
asserted by the respondents here: Since "responsible officers" are
mentioned in [sec] 5.12(a)(2), when addressing debarment under the
Davis-Bacon Act, but are not mentioned in [sec] 5.12(a)(1) when
addressing debarment in other than Davis-Bacon Act cases, the
distinction should be recognized and observed. The Assistant
Administrator advised that the DOL has consistently interpreted
[sec] 5.12(a)(1), and a predecessor regulation as well, as
authorizing debarment of "responsible officers." He also found
support in the language of [sec] 5.12(b)(1) where no distinction
seems to be made between debarments under the two section. I am
unimpressed by the reasoning used in this letter which seems to
substitute precedent steeped in history for true legal precedent.
I have searched for reported Wage Appeals Board cases as well
as cases decided by administrative law judges for one on point, but
without success. If, as I believe, this is a case of first
impression, I must find in favor of the individual respondents. A
valid issue has been raised and the [A]dministrator, in my
judgment, did not meet his burden of proof on that issue. Not only
did he fail to explain why the language in the two subsections
differs, but he did not seem even to want to recognize that the
difference exists. Further, I am puzzled by the fact that while in
each of the Wage Appeals Board cases the government cited the named
"responsible officers" were captioned with their corporate titles,
in this case they were not but, rather, were called "owner", which,
except in the case of Michael Facchiano, Sr., does not seem to be
correct. Ownership of Facchiano Construction Company, Inc., could
only be through ownership of the corporation's stock. The
stipulation does not cover the subject of stock ownership and
nothing adduced at the [14]
/FN4/ In the Matter of Brite Maintenance Corporation & Mark
Charpentier, President/Treasurer, WAB Case No. 87-07 (May 12,
1989); In the Matter of Homer L. Dunn Decorating, Inc., & Homer L.
Dunn President & Owner, WAB Case No. 87-03 (March 10, 1989); In the
Matter of Rust Construction Co., Inc., and Jerry Rust, President,
and Sandra Rust, Vice-President, WAB Case No. 87-15 (Oct. 2, 1987);
and Camilo A. Padreda General Contractor, Inc., and Camilo A.
Padreda, President, WAB Case No. 87-01 (Aug. 3, 1987). [14]
[15] hearing shed any light on the matter. I find that in this
"related Acts" case any debarment order entered should be directed
against only the corporate respondent for the reasons stated above.
Based upon the stipulation and facts found herein, the
conclusion is inescapable that Facchiano Construction Company,
Inc., in failing to pay the prevailing wage and overtime to its
employees and for falsifying payroll records to make it appear that
such prevailing wage and overtime rates had been paid, was in
aggravated and willful violation of the labor standards provisions
of the Housing and Community Development Act of 1974 and the
Contract Work Hours and Safety Standards Act. When an aggravated
and willful violation finding is made, the Wage Appeals Board
consistently finds debarment to be an appropriate sanction, and
generally imposes it for the maximum allowable period of three
years. See: Brite Maintenance Corporation, supra.
In this case, however, the corporation has already been
debarred for 18 months from participating in HUD contracts. Since
the corporation has not been shown to have bid on any projects
other than those administered by HUD, a further 18-month debarment
would appear to be appropriate in the circumstances which include
consideration given to all of the mitigating factors discussed
above.
ORDER
Having concluded that Facchiano Construction Company, Inc.
committed willful and aggravated violations of the Housing and
Community Development Act of 1974 and the Contract Work Hours and
Safety Standards Act, IT IS ORDERED, pursuant to 29 C.F.R.
[sec] 5.12(a)(1), that Facchiano Construction Company, Inc., shall
be ineligible for a period of 18 months to receive any contract or
subcontract subject to any of the statutes listed in 29 C.F.R.
[sec] 5.1(a).
GEORGE P. MORIN
Administrative Law Judge
GPM:mv
Dated: SEP 27, 1990
Pittsburgh, PA [15]
