Campaign News

After getting away with stealing money from his immigrant employees’ paychecks for years, a major contractor who worked city projects across the five boroughs was slapped on Monday with a $3.2 million fine and barred from doing business with the city and state for five years.

A six-year investigation carried out by the New York City Comptroller’s Office used undercover video, subpoenas, union records and a city agency paper trail to uncover the kickback scheme, Comptroller Scott Stringer said in a statement on Monday.

Stringer said K.S. Contracting Corporation and its owner, Paresh Shah, cheated dozens of immigrant workers out of their pay and benefits.

Shah told the city he was paying his workers the prevailing wages required under the New York State Labor Law. In reality, however, only about half of the workers received paychecks. Those who did were required to cash the checks and then surrender the money to company supervisors. Those supervisors would take a cut and then redistribute the leftover cash to employees , including those who did not receive paychecks, paying them at rates significantly below prevailing wages.

Before getting their money, many of the workers were required to sign a paper stating that they were, in fact, being paid the prevailing wage.

One supervisor was surreptitiously filmed in the act of counting workers’ surrendered cash in the front seat of his car. (See video at brooklyneagle.com.)

K.S. Contracting reported that it paid its workers combined wage and benefit rates starting at $50 per hour (or roughly $400 a day plus benefits) but actually paid daily cash salaries starting at just $90 per day and going, in some cases, as high as $200.

Part of the paper trail the Comptroller’s Office investigators uncovered in building a case against K.S. Contracting Corporation. Photo courtesy of the Office of the ComptrollerPart of the paper trail the Comptroller’s Office investigators uncovered in building a case against K.S. Contracting Corporation. Photo courtesy of the Office of the Comptroller

Between August 2008 and November 2011, the company cheated at least 36 workers out of $1.7 million in wages and benefits on seven New York City public works projects. The majority of the workers were immigrants of Latino, South Asian, or West Indian descent.

Stringer said that the need to stand up for immigrants was especially important in the time of President Trump.

“Contractors might think they can take advantage of immigrants, but today we’re sending a strong message: my office will fight for every worker in New York City,” he said.

The brazen scheme had gone on for years; an employee first filed a complaint with the office in May 2010.

K.S. Contracting was named as one of the worst wage theft violators in New York in a report by the Center for Popular Democracy in 2015. The full details of what was going on came out at a four-day administrative trial in May 2016.

The company, incorporated in New Jersey, was awarded more than $21 million in contracts by the city’s Departments of Design and Construction, Parks and Recreation and Sanitation between 2007 and 2010. Projects included the District 15 Sanitation Garage and the Barbara S. Kleinman Men’s Residence in Brooklyn, the Morrisania Health Center in the Bronx, the 122 Community Center in Manhattan, the North Infirmary Command Building on Rikers Island, Bronx River Park, and various city sidewalks in Queens.

K.S. Contracting is not the only contractor to rip off its immigrant employees. Since taking office in 2014, Comptroller Scott M. Stringer’s Bureau of Labor Law has assessed more than $20 million and barred 40 contractors from state and city contracts due to prevailing wage violations, according to the Comptroller’s Office.

A number of workers’ rights groups and immigrant organizations praised the comptroller’s investigation.

"At a time when exploitative employers are feeling increasingly emboldened by Trump’s hateful rhetoric, it is imperative that our city's leaders are taking a strong stance in defense of immigrant workers,” Deborah Axt, executive director of Make the Road New York, said in a statement.

“Too many employers in New York City exploit minority and immigrant workers. And it’s no secret that many immigrant workers are fearful of retaliation for standing up for their rights, especially in an environment where they are afraid of being deported,” said Lowell Barton, organizing director of Laborers Local 1010, LiUNA!

By Mary Frost

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Nearly 40 elected city officials from all corners of the U.S., including from metros bracing for Amazon HQ2 like Boston, Chicago, Denver, Los Angeles, Miami, New York City, and Washington, D.C., signed an open letter on Monday urging Seattle City Council to stay the course and criticizing Amazon’s tactics during the head tax debate.” “This is particularly concerning to us given Amazon’s approach to the competition for HQ2, in which the company has promoted a bidding war of jurisdictions competing with each other to offer greater incentive packages,” the letter read. “If Amazon were serious about its support for strong affordable housing solutions, it would fully back this tax proposal and chip in to help address Seattle’s homelessness crisis. By threatening Seattle over this tax, Amazon is sending a message to all of our cities: We play by our own rules.”

Read the full article here.

While traveling Thursday on an airplane from Washington, GOP Sen. Jeff Flake debated a voter in a wide-ranging discussion about the GOP tax plan, the issue of Dreamers, the Affordable Care Act and the Children's Health Insurance Program.

Flake spoke for 11 minutes to a person who identified himself on his Twitter account as Ady Barkan, of California, according to a tweet posted by his friend. Barkan explained his current situation having been diagnosed with Lou Gehrig's disease, or amyotrophic lateral sclerosis, and how the tax bill would affect his health care to Flake.

Read the full artilce here.

Wells Fargo CEO John Stumpf was on the hot seat Tuesday when he faced Massachusetts senator Elizabeth Warren and other angry lawmakers at a Senate Banking Committee hearing designed to investigate the bank’s widespread rip-off of its customers.

Warren told Stumpf, who earns $19 million a year: “You should resign... You should be criminally investigated.”

Wells Fargo is the nation’s fourth largest bank by assets and its leading home lender.

Warren’s verbal assault on Stumpf generated considerable publicity. But this issue wouldn’t have surfaced in the first place without the hard work of several grassroots community and labor organizations, especially the Committee for Better Banks, that first brought the scandal to the attention of the media, elected officials and regulators.

Warren demanded both the Department of Justice and Securities and Exchange Commission criminally investigate Stumpf for Wells Fargo’s practice of pressuring its low-level employees to create over 2 million unwanted checking and credit-card accounts without consumers’ knowledge or permission in order to grow the bank’s stock price. Warren reminded Stumpf that during the years Wells Fargo engaged in this “scam,” Stumpf’s own portfolio of company stock increased by $200 million.

She urged Stumpf to return the compensation he received while these practices went on.

“So, you haven’t resigned, you haven’t returned a single nickel of your personal earnings, you haven’t fired a single senior executive,” Warren told Stumpf. “Instead, evidently, your definition of accountable is to push the blame to your low-level employees who don’t have the money for a fancy PR firm to defend themselves. It’s gutless leadership.”

“You squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket,” Warren said.

Wells Fargo’s official line is that the employees were acting on their own to skim extra pay from the bogus accounts. Warren questioned Stumpf about the fraudulent accounts, asking how such an operation could have occurred without the knowledge of top management.

Wells Fargo employees say they did so because of what they call the bank’s “sell or die” quota system, which put pressure on employees to engage in these practices in order to keep their jobs. They said it was a routine practice employees referred to as “sandbagging.”

Activists are up in arms over Wells Fargo’s double standard in dealing with its employees. After the scandal was exposed by grassroots advocates, the media, and government regulators, the bank fired at least 5,300 employees and refunded millions of dollars to customers. But bank reform activists are skeptical that so many employees could have acted on their own without the knowledge of higher-up bank executives.

Meanwhile, in July, in the wake of the scandal, Carrie Tolstedt, Wells Fargo’s director of consumer banking, the operation that opened the fake accounts, abruptly left the bank where she had worked for 27 years. She took with her a $124.5 million bonus. After her retirement announcement, Stumpf praised Tolstedt as “a standard-bearer of our culture” and “a champion for our customers.”

Warren criticized Stumpf for failing to withdraw Tolstedt’s bonus (a practice known as a “clawback”) in light of the revelations about her division’s behavior. Stumpf said it was up to the bank’s compensation committee, comprised of board members, to decide whether to rescind Tolstedt’s bonus.

“If you have no opinions on the most massive fraud that’s hit this bank since the beginning of time, how can it be that you get to continue to collect a paycheck?” Warren asked.

Moreover, activists say that the problem goes well beyond Wells Fargo and is an industry-wide scandal.

Ruth Landaverde, a former employee at both Wells Fargo and Bank of America, said the pressure from her supervisors at both banks was so intense she developed a tic in her eye and had trouble sleeping. She told the Associated Press that in order to keep her job she was required to sell four credit cards and four auto loans each week in addition to three home mortgages or refinances.

“I wasn’t going to do something unethical, but the sales pressure was very real,” she said. “I can see why some employees did what they did.”

Landaverde is now a member of the Alliance of Californians for Community Empowerment, a statewide advocacy group that works on housing and banking issues and is a member of the Committee for Better Banks, a coalition of community and labor groups. In an email this week to ACCE members and supporters, she wrote:

“When I worked for Bank of America, I felt uncomfortable when I was given a list of bank customers and told to call them and push new accounts and credit cards that could end up sticking them with unnecessary fees and debt. What’s worse, we were targeting customers in low-income communities of color much more than the customers in more affluent zip codes.”

Landaverde said that “there are still many more banks that have not committed to stop requiring their employees to push unnecessary products in order to keep their jobs. And now, Wells Fargo CEO John Stumpf is throwing his own employees under the bus rather than accepting responsibility for the outrageous high-pressure sales culture that he and other Wall Street executives are creating!”

“I know first-hand that predatory sales exist across the U.S. banking industry,” said Cassaundra Plummer, a former teller at TD Bank and member of the Committee for Better Banks. “At TD bank, sales goals made it impossible for frontline bank workers to help customers find the financial products best suited to them. My manager would encourage customers to take out home equity lines to go on vacation which is the worst financial advice I’ve ever heard. We need to end predatory sales goals across the industry, not just Wells Fargo.”

Last year the Committee for Better Banks delivered a petition signed by more than 11,000 people to Stumpf, along with a letter noting that workers faced “pressures to meet sales quotas under strict monitoring and threat of losing their jobs, often forcing them to push unnecessary products and fees on to their customers, causing them stress and financial hardship,” and that loan servicing departments have been using similar tactics to push consumers toward riskier products they can ill afford.

The group has now launched another petition asking elected leaders in Los Angeles and other cities around the country to ban all city business with banks that force their employees to meet sales goals for high fee products such as credit cards, new accounts and home refinance loans. They say that these incentive programs create a system where bank workers are forced to engage in predatory practices against their professional and ethical beliefs.

“Wells Fargo’s action to eliminate sales quotas is a hard-won victory for front-line bank workers who have been denouncing abusive sales goals for over two years,” said Reuben Traite, an organizer with Committee for Better Banks. “The fact that Wells Fargo turned a blind eye is appalling. But these high pressure sales goals are rampant across big banks and we need to end it across the industry.”

Activists with the Los Angeles chapter of ACCE brought the issue to the attention of the Los Angeles Times, which broke the story in 2013. Once it made the papers, Los Angeles City Attorney Michael Feuer conducted his own investigation and then sued Wells Fargo.  All that got the attention of the Consumer Financial Protection Bureau, the federal agency created by the 2010 Dodd-Frank bank reform law.

Last week, CFPB director Richard Cordray, Comptroller of the Currency Thomas Curry, and Feuer announced that they had reached settlements with Wells Fargo over its “major breach of trust.” Wells Fargo agreed to pay CFPB $100 million (the largest fine the agency has ever imposed) in addition to $50 million to the city and county of Los Angeles and $35 million to the Office of the Comptroller of the Currency. Wells Fargo did not admit any wrongdoing in the settlements, although it issued an apology to its customers, promised to revise its sales practices, and agreed to refund consumers for fees assessed on checking and credit cards accounts they didn’t authorize.

Activists point out that the fines being levied against Wells Fargo are a drop in the bucket compared with Wells Fargo’s 2015 profits of $20 billion. It is even less than the more than $200 million in company stock that Stumpf owns. He serves on the board of directors of Target Corporation and Chevron Corporation, and until recently, on the board of the Financial Services Roundtable, a powerful industry lobby group.

The bank’s apology and refunds won’t make the issue go away. Many consumers are suing the bank as are former employees who say they were fired (or forced to resign) when they refused to engage in the fraudulent practices in order to meet the bank’s unrealistic sales quotas.

The issue first emerged in 2013 when the Los Angeles Times uncovered Wells Fargo’s illegal practices. In response to the Times story, Feuer initiated his own investigation and sued the bank, alleging it had “victimized their customers by using pernicious and often illegal sales tactics,” including unattainable quotas that pressured bank employees to “engage in fraudulent behavior.”

The CFPB undertook its own investigation and discovered that Wells Fargo employees opened as many as 1.5 million checking and savings accounts, and more than 500,000 credit cards, without consumers’ knowledge or permission.

The LA and CFPB investigations, the resulting media coverage, and Wells Fargo’s attempt to blame its lower-rung employees for the scandal led five Democrats on the Senate Banking Committee — Sherrod Brown (Ohio), Jack Reed (R.I.), Robert Menendez (N.J.), Jeff Merkley (Ore.), and Warren — to push its Republican chairman, Richard Shelby of Alabama, to holdTuesday’s hearings. They sent Strumpf a letter last week expressing concern that consumers and low-level employees will bear the burden of the bank’s misconduct “while senior executives walk away with multimillion-dollar awards based on what the company later finds out are fraudulent practices.”

The San Francisco-based Wells Fargo has long been a target of bank reform activists for its troublesome track record of risky and reckless behavior. For more than a decade, grassroots groups have challenged Wells Fargo’s racially discriminatory lending practices and aggressive foreclosures. They have picketed at the offices and homes of the bank’s top executives, sued the bank for violating laws against racist mortgage lending, and testified before Congress, state legislatures and city councils demanding that they investigate and rein in Wells Fargo’s troublesome practices.

The activists have primarily been bank consumers and residents of neighborhoods harmed by Wells Fargo’s redlining and other practices. But the two-year-old Committee for Better Banks is comprised of bank employees as well as consumers, representing a new and potentially powerful coalition. Not surprisingly, the Committee for Better Banks is now part of the broader movement to raise wages for service-sector employees like bank tellers to $15 an hour.

The CBB is aligned with the Center for Popular Democracy, a national network of local activist groups that work on housing, banking, and workers rights issues. CPD helped set the stage for the current campaign with its study of bank workers. The CPD report revealed that some of the nation’s largest banks, including Wells Fargo and Citigroup, pressure front-line employees to engage in fraudulent practices to keep their jobs. According to the report, the bank employees try to serve customers responsibly, but feel pressure from higher-ups to meet the quotas.

A report last year by the National Employment Law Center on banking industry wages found that almost three quarters (74.1 percent) of U.S. bank tellers and almost half (44.2 percent) of bank customer service representatives earn less than $15 an hour. The median hourly wage for bank tellers is $12.44. A study by the UC Berkeley Center for Labor Research and Education found that nearly one-third of the families of all tellers are on public assistance. In New York City, the capital of the nation’s banking industry, 39 percent of tellers and their family members are on some form of public assistance program.

Other groups involved in the better banking campaign include Move On, the Communication Workers of America, New York Communities for Change, ACCE, Jobs with Justice, Make the Road, and Americans for Financial Reform, a DC-based watchdog group.

GOP presidential nominee Donald Trump has called for dismantling nearly all of the Dodd-Frank reforms. In contrast, Democratic nominee Hillary Clinton last week touted the Consumer Financial Protection Bureau's “forceful response” to the Wells Fargo scandal, adding that it was “a stark reminder of why we need a strong consumer watchdog to safeguard against unfair and deceptive practices.”

Lisa Donner, executive director of Americans for Financial Reform, a DC-based watchdog group that has played an important part in defending the CFPB from its opponents, said, “The current Wells Fargo scandal reveals why we need a strong regulatory agency that has the backs of bank consumers as well as employees.”

“Wells Fargo’s action to eliminate sales quotas is a hard-won victory for front-line bank workers like me who have been coming together in the Committee for Better Banks and working to end to high-pressure sales goals that hurt our families and communities,” said Julie Miller, a former Wells Fargo branch manager and a member of the Committee for Better Banks.

“Wells Fargo got into this scandal because it turned a deaf ear to the alarms sounded by consumers and its own workers, and its experience proves that these sales goals have no place in the consumer banking industry,” Miller said. “Predatory sales goals are rampant at big banks across the country, and we will keep on working and organizing to make sure Wells Fargo makes good on its word and that other banks follow suit by implementing fair business practices for workers and customers.”

By Peter Dreier

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