Feds: Contractor cheated IRS, union

A PROMINENT South Philadelphia electrical contractor was accused yesterday of cheating the government and the electricians' union out of millions of dollars, while giving sweetheart deals to union leader John Dougherty on the purchase of a Wildwood condo and renovations to his Philadelphia rowhouse.

While the federal indictment mentioned no union officials by name, it made clear that Dougherty, chairman of the city Redevelopment Authority and former treasurer of Philadelphia's Democratic Party, is another potential target of the continuing federal investigation.

The indictment focused on Donald "Gus" Dougherty Jr., 41. Gus Dougherty is the president of Dougherty Electric Inc. and a longtime friend of, but no relation to, the union leader.

Gus Dougherty was accused of maintaining a secret cash payroll, totaling more than $2.6 million over four years, which he used to evade hundreds of thousands of dollars in payroll taxes and avoid more than $1 million in payments to the union health and pension funds.

Some of the cash came from regular $3,000 bank withdrawals that Gus Dougherty obtained each week from Dougherty Electric's account at St. Edmond's Federal Saving Bank, according to the indictment, released at a press conference by U.S. Attorney Patrick Meehan.

Another big source of money, the indictment alleged, was a "Job Recovery Fund" established by the electricians' union to subsidize contractors who pay union wages while competing against non-union contractors for competitively bid jobs. Dougherty Electric collected $672,625 from the fund over a three-year period, according to the federal charges, but recorded only $145,000 of the payments in its financial books.

The charges in the 100-count indictment, approved yesterday morning by a federal grand jury,included tax evasion, filing false statements with the U.S. Department of Labor, making unlawful payments to a union official and bribery of a bank official.

Among the specifics, the feds charged that Gus Dougherty had:

_ Sold a condominium in North Wildwood to John Dougherty, the IBEW's leader and business agent, for about $20,000 less than it was worth.

_ Directed his employees at Dougherty Electric to do $115,600 worth of renovations at John Dougherty's South Philadelphia rowhouse, on Moyamensing Avenue. The repairs were completed about March 2005, the indictment alleged, but John Dougherty was not billed for the work until June 2006 - after Gus Dougherty's home and business were raided by federal investigators with search warrants.

While the indictment referred to the union leader only as "IBEW Local 98 Official #1," real estate records show that John Dougherty bought a North Wildwood condo from Gus Dougherty in 2003 for $206,000.

In the weeks before it changed hands, the feds allege, Gus Dougherty directed his employees to install multiple flat-panel televisions, including a 42-inch plasma model, an audio-video system and surround sound; a new gas furnace and water heater; and recessed kitchen lighting. As improved, the property was worth at least $20,000 more than the union leader paid, the prosecutors alleged.

Federal law forbids contractors with a unionized work force to provide gifts or other valuable items to officers of the union that represents its employees.

Any financial transactions between the employer and the union official are supposed to be done "at the prevailing market price in the regular course of business."

Gus Dougherty's attorney, Nicholas J. Nastasi, said his client would plead not guilty to the charges, but he declined to answer the specific accusations. "We believe the proper place for that is in the courtroom," Nastasi said.

Nastasi described his client as "a blue-collar guy," now involved in an indictment that "reads like a white-collar case . . . He's looking forward to getting this chapter of his life behind him."

John Dougherty talked briefly to reporters after presiding at a Redevelopment Authority board meeting - a position he's held since helping Mayor Street win election in 1999.

The union leader said he was cooperating with the federal investigation. He denied any favoritism in buying his condo from Gus Dougherty and said he was unaware that Dougherty Electric was doing any business in cash.

John Dougherty said he was unfamiliar with the indictment but suggested it was something that a high-profile figure like himself had come to expect.

"I guess when you throw a couple of inside fastballs you've got to take a couple every now and then," Dougherty said.

Besides his alleged dealings with John Dougherty, the feds also accused Gus Dougherty of providing gifts to a senior vice-president at NOVA Savings Bank to obtain a series of loans in spite of financial difficulties.

The indictment charged that Gus Dougherty provided the unnamed bank executive with $9,476 in free electrical and plumbing work, four tickets to the 2005 Super Bowl in Jacksonville and accommodations at a seashore condo. In exchange, the indictment charged, Gus Dougherty was granted loans totaling more than $4.5 million and a $500,000 line of credit. *

Staff writers Kate Ward and Dave Davies contributed to this report.