Douglas G. Radtke, age 61, from Minneapolis, the owner of Radtke Construction Corporation and Scaffold Service, Inc. was sentenced to 36 months in prison.  Chief Judge James Rosenbaum also ordered Douglas Radtke to pay a $20,114 criminal fine.  A jury convicted Douglas Radtke in March 2003 of one count of conspiracy, seven counts of failure to collect and pay tax, and two counts of mail fraud.

Scott Radtke, age 37, from St. Paul, Scaffold Service’s Sale Manager and Vice-President of Sales and Marketing, was sentenced to 24 months in prison.  A jury convicted Scott Radtke of one count of conspiracy and three counts of mail fraud.

Michael T. Donohoe, age 41, from Somerset, WI, Scaffold Service’s former Field Operations Manager and then Project Manager, was sentenced 18 months in prison for conspiracy, filing a false tax return, and three counts of mail fraud.

Chief Judge Rosenbaum also ordered Douglas Radtke, Scott Radtke, and Donohoe to jointly pay  restitution in the amount of $132,012 to Wilson McShane Corporation and $47,873 to Berkley Risk Administrator’s Company.

A fourth co-defendant in the case, Rita Galston, age 52, from Richfield, the former Controller and then Chief Financial Officer of Scaffold Service, is scheduled to be sentenced on May 28, 2004 for failure to collect and pay tax, and falsification of ERISA records.

Evidence during trial showed that the defendants engaged in a conspiracy to lower their labor costs and increase company profits by engaging in a fraudulent payroll, tax, and compensation scheme that ran from December 1995 to at least January 2000.  It was part of the conspiracy that the defendants arranged for employees of Radtke Construction and Scaffold Service to work in exchange for payment in the form of “cash checks” which were not subject to withholding taxes or union negotiated fringe benefits.  In an attempt to avoid IRS reporting requirements which are triggered by any cash payment greater than $600, the defendants arranged for payments to employees of up to $599.99 under their Social Security Number, and then required employees to supply names and Social Security Numbers of relatives and friends to serve as nominees for the issuance of additional “cash checks.”  More than 500 “cash checks” in the sum of approximately $175,000 were issued during the course of the conspiracy.

By paying employees through “cash checks,” Radtke Construction was able to avoid paying FICA payroll taxes, income tax, unemployment and disability insurance premiums, and fringe benefits payments, including payments to fund pensions and to provide health insurance coverage.

In an attempt to conceal the conspiracy, Galston created, signed, and submitted fraudulent IRS Employer’s Quarterly Federal Tax Returns and Donohoe filed false U.S. Individual Income Tax Returns.  The defendants caused fraudulent reports to be submitted to third party administrators which understated the benefits that Radtke Construction was suppose to pay.

The case is the result of an investigation by the Internal Revenue Service-Criminal Investigations and was prosecuted by Assistant United States Attorney Susan Burke.