Friday, February 1, 2013

Villains, Scapegoats and Hypocrites - When politics and economic interest collide

Mike Howe is by all measure a successful man.  He owns Mike Howe Builders, Inc. , is prominent in his church and community, has run for State Assembly and is currently running for City Council in his home town of Manitowoc Wisconsin.  By his own claims he made a lot of money during the housing boom having "flipped" several houses that he built, lived in and then sold.  Those were the salad days when housing prices (in particular high end homes) seemed to jump monthly and every aspiring young professional was eager to get on the wealth elevator.  The art of extracting ever more equity out of homes had been perfected by Wall Street with their Collateral-ized Debt Obligations (mortgages sold as stocks).  Any common man (even the unemployed) could buy an expensive home so you could name your price because what ever it cost today - you could sell it for more tomorrow!  Never mind you couldn't afford it because it was a sellers market and AIG had it all covered with its Credit Default Swaps.

As a Republican candidate Mike stuck to the party line advocating less government regulation and lower taxes.  After all, he had earned the money and he felt he had the right to keep it.  Requiring him to give up a portion of it in his eyes meant he had charge more for the homes he built though charging more was what "flipping" his homes was all about.  Keeping more was the ultimate and obvious goal.

But when the home piggy bank market went belly up in 2008 things got a little lean.  Prices mattered again and like all good Republican businessmen Mike had to cut costs.  And again, like all good Republican businessmen in a labor intensive trade he looked to cut labor costs.

Inocencio Lara came here from Antempan Poeblo in Mexico looking for work.  He was what we now call an "undocumented worker".  He may have had a passport but no authorization to work in the U.S. that anyone can discover.  He (along with many others like him) worked for Mares Roofing of Manitowoc owned by Marcos Mares-Flores.  Mares was a sub contractor to multiple companies in Manitowoc including Mike Howe Builders, Inc.

Lara, like most foreign workers did not want to be identified to the government.  Neither did Mr. Mares.  His company had no federal ID number, no State contractor's license and no Workman's Compensation
Workman's Comp is the law in Wisconsin
insurance policy to cover his workers.  In effect, neither men existed for tax or regulatory purposes.  There are thousands like them here and in every state in the union.  The myth about them is that they work for less. In some cases that's true.  But the reality is that they probably receive comparable pay.  The great disparity is in the mutual anonymity both employer and employee enjoy by  evading taxes and insurance costs as well as other regulatory relief.  In many ways it is business as usual in the contracting industry.  Cash payments and layers of sub contractors are par for the course in that business.  Anyone who wants to see it need only ask for quotes and inquire about cash discounts.  It is that thin below the surface.

In any other normal July day the work would have continued.  The cash would have flowed even if the paper work didnt.  But on July 9th 2011 it stopped suddenly at a work sight where Mares Roofing (such that it was) was putting a roof on a house when Inocencio Lara - the non-existent employee of a non-existent company was pinned between a truck and a dumpster resulting in his death.

The problem with a dead body is that, unlike the fictional company and non existent workers in the undocumented trades, once they materialize they are hard to explain away.  Real people, citizens, legal workers have real rights and real protections.  Protections that cost money.  Costs that can be cut - as long as no one checks.  Corpses cannot be buried in paper work even when it belongs to a successful businessman, community leader and Republican candidate.  Even when it belongs to Mike Howe.

When a real worker is injured on the job the government has decreed that compensation is owed.  Insurance must be purchased.  When a phantom of the workforce is injured what insurance company pays that has not itself been paid?

How Law Suit
Case Number 2011CV00630
Click to expand
On September 21st 2011 Guillermina Serpio Toral filed a wrongful death suit against Mike Howe Builders, Inc., Mares Roofing and Marcos Alberto Mares-Flores.  It may not be possible to determine what the exact circumstances were in the accident.  Construction is in fact a dangerous business which is why the insurance rates are so high and (ironically) why they are so tempting to evade.  But since its obvious that no FICA taxes were paid there are no survivor's benefits for Lara's family.  With no WC policy there is no death benefit and nothing to defray medical and emergency  costs.  One has to wonder if the suit would have been filed if the protections were in place?

Libertarian Republicans like Howe like to play up the illegal immigration issue as their own.  They want to portray themselves as the defenders of American jobs and use the fear of foreign illegal/undocumented workers as a lurking menace and prescribe things like voter ID laws as the cure.  Only men like Lara are not at all interested in making themselves known to any government anywhere.  It is their competitive advantage. Yet without the blind eye the free market conservatives use to evade the realities of a hidden work force worker and their enablers like Mares would have to compete in a real labor market without the cash discount.

Who is responsible?  Is it the immigrant who comes here looking for work and finding an underground economy funded by cost cutting businessmen?  The black market in labor has willing partners on both ends but only one fully understands the risks and implications and that is the businessman who all too well understands the law and plays the risks like a roulette wheel.

As of this writing the DWD fines have not been satisfied
and I have not been able to determine the whereabouts of Mr. Mares
In a phone conversation with me Howe protested that "It's all the roofer's fault!"  Well the problem is that the "roofer" was a figment of Mr. Howe's creative business plan.  If you look at the corresponding court record for Mares Roofing the DWD has since fined "them" and now refiled the case in the personal name of Marcos Mares-Flores in effect stating that no such company ever existed.

Who is responsible for that?  Listen to what Wisconsin State Statutes have to say about it.

Independent Contractor Definition Under s. 102.07(8), Wis. Stats.
Under section 102.07(8)1 of the Wisconsin Statutes, a person is required to meet a nine-part test before he or she is considered an independent contractor rather than an employee. A person is not an independent contractor for worker’s compensation purposes just because the person says they are, or because the contractor over them says so, or because they both say so, or even if other regulators (including the federal government and other state agencies) say so. The nine-part statutory test set forth under s. 102.07(8) of the Act, must be met before a person working under another person is considered not to be an employee. To be considered an independent contractor and not an employee, an individual must meet and maintain all nine of the following requirements:
1. Maintain a separate business.
2. Obtain a Federal Employer Identification number from the Federal Internal Revenue Service (IRS) or have filed business or self-employment income tax returns with the IRS based on the work or service in the previous year. (See note below.)
3. Operate under specific contracts.
4. Be responsible for operating expenses under the contracts.
5. Be responsible for satisfactory performance of the work under the contracts.
6. Be paid per contract, per job, by commission or by competitive bid.
7. Be subject to profit or loss in performing the work under the contracts.
8. Have recurring business liabilities and obligations.
9. Be in a position to succeed or fail if business expense exceeds income.
Note: When requesting a Federal Employer Identification Number (FEIN) from the IRS, you must inform the IRS that you are required by Wisconsin Worker’s Compensation law to obtain a FEIN. A social security number cannot be substituted for a FEIN and does not meet the legal burden of s. 102.07(8).

With multiple State websites available to verify all of this information it would seem rather self evident that the  it is the prime contractor's responsibility to follow the law.

Then there is the puzzling focus on roofing on the Howe Builders web site.

"Mike Howe Builders Inc specializes in roofing services in the Manitowoc, WI area. We go beyond the basics with our innovative maintenance programs, extended warranties, and great customer service ensuring our customers' satisfaction and their roof's long term performance."

Mike Howe Builders web site

One has to ask the obvious.  If Howe Builders specializes in roofing then what is it doing hiring a sub-contractor to do its roofing work?

Auditing by the DWD is virtually non-existent.  Unless sub-contractor credentials are checked laundering money through fake companies like Mares Roofing is scarcely looked at by the Department of Revenue making it a tempting piece of cake for construction companies to taste since it does not take a shaded visor tax expert to implement.  Money paid out to alleged companies is simply taken as deductible expenses without any determination as to the legal status of that company what so ever.  With payroll taxes around 15%, State and Federal withholding taxes at least that again and construction Workman's Comp Insurance over 20% at least (fully half!) a hiring company can save tens of thousands in labor related tax and insurance costs on a large job.

In most cases the risk is minimal.  When illegal workers get hurt they show up at the local emergency room.  Because they often can't pay and fear detection simply leave the area.  The bills are then absorbed by local hospitals which add to legitimate costs of other companies that do abide by the law as well as providing health care benefits.

This is not a small problem and I suspect it runs much deeper.  The business address listed for Mares is an apartment building owned by yet another roofing contractor in Manitowoc who is noted for his Mexican crews.

I do not care much how this case turns out.  The events that lead to the death of Mr. Lara are for my purposes here largely irrelevant.  Accidents do happen.  I am considerably more concerned about the political duplicity in on one hand deriding illegal immigration, exploiting unfounded fears of voter fraud and criminal activity while then enabling and profiting from those same scapegoated people.  Beyond that, calling his demands for lower regulations and worker protections make the hypocrisy too kind a charge.

Men like Howe are unfit to hold public office not just because of their duplicity but more so because of the direction they would take us in the name of their own self interest.  They are the smooth faced villains of our time.