Politically connected electrician charged

Posted: June 26, 2007

A Philadelphia electrical contractor was charged Tuesday with stealing $869,000 from a union benefits plan, bribing a bank executive, and "making illegal payments" to labor leader John J. Dougherty.

These "illegal payments," authorities said, included the sale of a house to John Dougherty for $24,000 below market value and $115,000 worth of electrical work on the labor leader's Philadelphia home.

Dougherty was not charged with a crime, but U.S. Attorney Patrick L. Meehan said that the case remains open and that the related transactions "are still of great interest to investigators."

The labor leader, one of Philadelphia's most powerful politicians, said later that he was "very comfortable with all the transactions" he had with the indicted contractor, Donald "Gus" Dougherty, a longtime friend who is no relation.

At a news conference, Meehan called the transactions between the two men "sweetheart deals," but he deflected reporters' questions about John Dougherty.

"Today . . . we are focusing on the conduct on the part of the contractor himself, and not making any specific comments on the union officials," Meehan said.

In fact, John Dougherty's name does not appear in the Gus Dougherty indictment. He is, instead, referred to only as "International Brotherhood of Electrical Workers Local 98 Official #1." Sources confirmed that "Official #1" is John Dougherty.

The 100-count grand jury indictment charges Gus Dougherty with making false statements, stealing union benefits, making unlawful payments to union officials, bank bribery, tax evasion and filing false tax returns.

If he is convicted, the advisory federal sentencing guidelines call for a term of 41 to 51 months, said Assistant U.S. Attorney Anita Eve.

Gus Dougherty's lawyer, Nicholas J. Nastasi, said that his client would surrender to the authorities Wednesday or Thursday.

"Mr. Dougherty is ready to face these charges, ready to get this behind him, and anxious to return full time to supporting his wife, his two children," Nastasi said. "This sounds like a white-collar case, but this is really a blue-collar guy."

Nastasi declined further comment and said he would address the charges in court.

According to the indictment, between 2001 and 2005, Gus Dougherty stole more than $869,000 from an IBEW employee benefit plan while maintaining an "under-the-table" cash payroll of more than $2.6 million.

By operating in cash, Gus Dougherty avoided paying more than $1.6 million in federal, state, and local payroll taxes plus the required employer contributions to Local 98's benefit plans, the indictment said.

Peter Alvarado, the chief IRS agent in Philadelphia, said that by skipping payments on payroll taxes, Gus Dougherty was able to underbid competitors.

Gus Dougherty, who had a low credit score, was also charged with bribing a bank official who approved more than $5.3 million worth of loans, including the purchase of a home in Sea Isle City, N.J.

But the charges in the case against Gus Dougherty that caught the attention of the city's political establishment are the ones related to John Dougherty, who bowed out of a potential mayoral run this year, citing the ill health of his mother and wife.

Despite recent political setbacks - Democratic Party chief Bob Brady recently ousted him as party treasurer - John Dougherty and Local 98 remain a powerful force in city politics. In the 2007 primary alone, Local 98 donated nearly $500,000 to various candidates and political committees.

In November, sources said, FBI, IRS and Labor Department agents involved in the Gus Dougherty investigation executed a search warrant at John Dougherty's home in Philadelphia.

According to the indictment, in 2003, Gus Dougherty's company performed $20,000 to $30,000 worth of work on a Wildwood condo that he planned to sell to John Dougherty. This included installation of flat-screen televisions, a stereo system and hardwood floors. Authorities say "the labor costs were buried in other electrical contracts" that Gus Dougherty's firm performed.

In October 2003, Gus Dougherty sold the property to John Dougherty for $206,000. Authorities said this price was $24,000 less than an appraisal by the bank that handled the mortgage, and a figure that did not include the renovations.

In 2004 and 2005, authorities said, Gus Dougherty performed about $115,000 worth of renovations on John Dougherty's home in Philadelphia. But, authorities said, Gus Dougherty did not send an invoice for the work until June of last year - months after federal agents searched Gus Dougherty's home and business.

It is a violation of the federal Taft-Hartley Act for a contractor to give anything "of value to an officer of employee of a labor organization which represents" a contractor's employees. Fair market-value transactions, however, are permitted.

John Dougherty's lawyer, Henry E. Hockeimer Jr., declined to comment on Tuesday's indictment. But the labor leader spoke briefly with reporters later Tuesday. He appeared calm and almost unbothered by the investigation.

"Look, I'm very comfortable with all the transactions that have occurred," he said. "The government's got a job to do, they're doing their job."

John Dougherty said that neither he - nor, as far as he knows, the union - was aware of the alleged cash payments. He also said he received no special favor when he bought the house.

"I had appraisals by two separate entities," he said. "It was the highest-paid condo in the area."

Of the ongoing case and his potential involvement in it, Dougherty said, "I'm out in front on a lot of issues, I'm a high-profile person in Philadelphia. I guess when you throw a couple of inside high fastballs you got to take a couple every now and then."


Contact staff writer John Shiffman at 215-854-2685 or jshiffman@phillynews.com.

Staff writer Marcia Gelbart contributed to this article.

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