Former GOP Chair's Company Accused of Labor Violations
A major moving company led by former Maryland Republican Party chairman John Kane for years paid its workers less than required by federal contracts while submitting "false and fraudulent documents" indicating the company was in compliance, federal prosecutors have alleged.
The allegations are the latest bad news for the beleaguered party, whose current chairman, James Pelura, is facing calls to resign from some GOP legislative leaders after he abruptly fired the party's top staff member this week without consulting with other party leaders.
The recently unsealed federal complaint (.pdf file), filed under the False Claims Act, alleges that the Maryland-based Kane Company and its subsidiaries paid lower wages than mandated for numerous moving and office installation projects for the federal government dating back to 1998.
It charges that Kane, the company's chief executive officer and chairman of the Maryland GOP from late 2002 to 2006, had full knowledge of the "fraudulent pattern of practice" and took no action to correct it. If proven true, the company could potentially face millions of dollars in civil penalties.
Ronald Meliker, the company's chief operating officer, who returned a call placed to Kane, said the company is cooperating with prosecutors to resolve the matter and was aware of only "a couple of minor situations" where the company underpaid its workers.
Meliker said that Kane was not aware of any fraudulent practices by the company.
"I think when the day is over, we'll be vindicated," Meliker said, adding that the Kane Company had not have any previous problems with the federal government in the company's 40-year history.
Kane, a Potomac resident and one-time gubernatorial hopeful, served as party chairman during the tenure of former governor Robert L. Ehrlich Jr. (R). His wife, Mary Kane, was secretary of state during Ehrlich's administration, a promising period for the GOP in a state where the party has struggled for relevance.
Democrats have a more than 2-to-1 advantage in party registration in Maryland and sizable majorities in the legislature. Since Ehrlich's defeat by Gov. Martin O'Malley (D) in 2006, the state GOP has been beset with financial difficulties and internal strife.
According to the complaint, Kane's company and its subsidiaries, Office Movers and Office Installation, won numerous government contracts that require private contractors to pay a "prevailing wage" determined by the Secretary of Labor, as well as certain benefits. The company would have not won many of the contracts if it had not pledged to meet those standards.
The complaint says that Kane's company "routinely failed to comply" with the law "for most of its federal government contracts between 1998 and 2003 and a substantial number of those contracts between 2003 and the present. The complaints lists more than two dozen agencies with which Kane's company had contracts, including the General Services Administration, the Department of Defense, the Department of Health and Human Services and the U.S. House of Representatives.
Kane's company and its subsidiaries have also done a significant amount of contract work for the state of Maryland. Between 2000 and 2008, the state paid the state paid the companies nearly $2 million, according to records from the state Comptroller's Office.
That work is not a subject of the federal complaint.
The complaint was originally filed in 2007 by Anthony Head, a former employee of Kane's company. Meliler described Head, who at one point served as vice president of moving services, as a "disgruntled employee."
In April, the federal government took became a party to the action, typically a signal that prosecutors believe a false claims case is a strong one.
Staff writer Maria Glod also contributed to this story.
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