The cheaters are winning. The regulators are asleep.
Construction companies in North Carolina and across the country are gaining an unfair advantage over their competitors by treating laborers as independent contractors.
That saves the dishonest construction companies money (about 20 percent of labor costs) but typically leaves workers without Social Security contributions or workers’ comp coverage. The cheating deprives governments annually of billions of dollars of tax money.
It also breaks the law.
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You can read about our government’s drowsy response to this problem in our series, “Contract to Cheat.” The series is online now at nando.com/contracttocheat and starts in print Sunday.
To report the series, The News & Observer joined forces with seven other McClatchy newspapers from Florida to California, as well as McClatchy’s Washington bureau and ProPublica, an independent nonprofit news organization based in New York.
The N&O’s Mandy Locke was the lead reporter on the series. The entire project was supervised by Steve Riley, N&O investigations editor.
HUD fought release
Our reporting was built around payroll records submitted by private companies hired to build federally funded or backed affordable housing projects.
President Barack Obama’s Department of Housing and Urban Development attempted to block our access to those records, which are stored at dozens of public housing agencies and local governments across the state.
A HUD official in Atlanta wrote the local housing agencies in May 2013 and directed them to not give the records to us. She wrote, emphatically and incorrectly, that the records were not subject to North Carolina public records law. She wanted the federal government to control their release.
Local officials felt stuck. They knew the documents were public. But HUD provided much of their funding and could yank that funding if they found the local agencies broke HUD rules.
We had no choice but to sue the local agencies. We were joined by The Charlotte Observer. One by one, lawyers for more than 10 agencies ordered their clients to fill our records requests. The Fayetteville Metropolitan Housing Authority was the last to relent.
We collected tens of thousands of pages of payroll records for 64 projects larger than $1 million built from 2009 through 2013.
If only HUD had spent as much energy fixing the problem as it did fighting our request. The federal government has known for years that contractors were cheating. But it made no effort to prevent the fraud while spending hundreds of billions of dollars of stimulus money.
N.C. leaders quiet
In North Carolina, state leaders also have known about the problem. Our 2012 series, “The Ghost Workers,” exposed the cheaters. State Labor Commissioner Cherie Berry has napped as the flimflam continued.
In 2012, while he was running for governor, Pat McCrory spoke about the construction ruse and pointed out that it penalized honest businesses. He used it as an example of how state government was broken.
But after 20 months in office, Gov. McCrory hasn’t made any effort to fix the problem, even though several agencies he controls could do so. We wanted to talk to Gov. McCrory about the cheating, but he declined several requests.
Other states, most notably Illinois and New York, have moved aggressively to stop the cheating and have largely succeeded.
Unlike some challenges state governments face, this is not a difficult problem to fix. It just takes a few elected officials with the energy and will to do so. But our leaders keep hitting the snooze button.