Kane defends company against wage violation allegations
Former GOP chairman said any underpayments were unintentional
John M. Kane said Monday that allegations that his moving company falsified documents to hide wage violations on government contracts are unfounded and complained that his former role as chairman of the Maryland Republican Party should not be an issue.
Federal prosecutors filed a complaint in U.S. District Court in Washington, D.C., in April alleging that The Kane Co. and its subsidiaries filed fraudulent documents stating that they were in compliance with the federal prevailing wage law while failing to pay workers the amount required by federal contracts.
"The Kane Co. was never the chairman of the Maryland Republican Party," said Kane, who is the company's president and CEO and who led the state GOP from 2002 to 2006. "These are two mutually exclusive issues."
The complaint, filed under the False Claims Act, was first reported on The Washington Post's "Maryland Moment" blog on Friday. The report noted the ongoing troubles of the state Republican Party, whose current chairman, James Pelura III, faces calls for his resignation after he fired the party's executive director last week without first discussing it with party officials.
The complaint alleges that The Kane Co. and its subsidiaries, Office Movers and Office Installation, "routinely failed to comply" with the federal prevailing wage law determined by the U.S. Secretary of Labor "for most of its federal government contracts between 1998 and 2003 and a substantial number of those contracts between 2003 and present."
At the same time, the company submitted "false and fraudulent documents to various federal government agencies," stating compliance with the law, according to the complaint.
The Kane Co. held contracts for moving and installation services with 25 federal agencies requiring compliance with the prevailing wage law, including the General Services Administration and the Department of Defense, the complaint says.
The company has never before been sued by the government in its 40 years of government moving, for which the company has won numerous awards, said Kane of Potomac.
Any underpayments were unintentional and the result of a frequently changing wage rate that is required, along with certain benefits, for employees on federal contracts, Kane said.
"We did not have any intent," he said.
Errors in "administrative payroll" on "three, four, five cases" were discovered by the company during an audit conducted five years ago, said Kane, who described the underpayments as: "The rate was $9.80 and we paid $9.40."
"Are there perhaps administrative errors? Absolutely," Kane said. "That's not what the government is contending."
The company conducted the audit after Anthony Head, who once served as the company's vice president of moving services, filed a complaint with the government, Kane said.
The government, which is joining as a party to Head's original complaint, is seeking triple the damages allegedly sustained and civil penalties of $5,500 to $11,000 for a yet-to-be determined number of alleged violations.
"The catalyst for this is one individual who was disgruntled for being fired," Kane said.
Head was fired in January 2005 after more than seven years with the company, according to the complaint.
He was fired for "poor performance," Kane said.
Attempts to locate Head were unsuccessful.
The complaint details attempts by Head to bring the issue to the company's officers, including Kane, as early as 1998.
"CEO Kane despite having full knowledge of the Company's fraudulent pattern or practice, took no corrective measure, nor did he ever seek to make restitution to the government or employees for benefits unlawfully withheld from [Service Contract Act]-governed contracts," the complaint says.
The complaint has nothing to do with $1.9 million in state contracts that the company held with the state of Maryland between 2000 and 2008.
The company's contracts with the state were investigated when Kane's wife, Mary D. Kane, served as secretary of state under Gov. Robert L. Ehrlich Jr. (R) from August 2005 until January 2007 and were found to be properly waged, John Kane said.