Contributing Employer Facing Criminal Charges for Alter Ego Scheme

November 2, 2016

The Massachusetts Labor Benefits Fund recently sued two companies for fringe benefit contributions alleging that the second company was a non-contributing alter-ego of the first company. The DOJ caught wind of this suit and brought criminal charges against the companies for mail fraud. The criminal charge is based on the fact that the DOJ believes that the use of the U.S. Mail system to file false contribution remittances is mail fraud. The companies are alleging that they are a part of lawful “double-breasted” organization and are two distinct entities. However, both the DOJ and the Fund believe that these organizations were actually one entity attempting to avoid paying some contributions. While there is no record of the alter ego theory being used to substantiate criminal charges, the court refused to dismiss the case.

 

If the court upholds the DOJ’s allegation that using the U.S. mail to submit false contribution remittances constitutes mail fraud, that may go a long way toward deterring companies from establishing alter egos to circumvent contribution obligations.

 

United States v. Christopher Thompson, Kimberly Thompson, Air Quality Inc. and AQE, Inc., 1:16-cr-10014 (D. Mass)

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