ATTORNEY GENERAL CUOMO SUES PEDRO ESPADA, JR. AND PEDRO G. ESPADA FOR FRAUDULENT AND ABUSIVE LABOR PRACTICES
Espadas Created a Sham Job Training Program to Cheat Workers, Maximize
Profits, and Shortchange Taxpayers
NEW YORK, NY (April 28, 2010) – Attorney General Andrew M. Cuomo today
filed a lawsuit against Senate Majority Leader Pedro Espada, Jr. and his
son, Pedro G. Espada, for violating labor laws by creating a sham job
training program that cheated workers and shortchanged State coffers.
The lawsuit alleges that Senator Espada created a personally owned,
for-profit management company, Espada Management, as a vehicle to siphon
money from Comprehensive Community Development Corporation
(“Soundview”), the Bronx-based not-for-profit where Espada is
founder and CEO. The money flowed from Soundview to Espada Management,
run by Pedro G. Espada, by means of a contractual arrangement that
called for Espada Management to supply janitors for the Soundview
medical clinics.
The lawsuit alleges that Senator Pedro Espada, Jr. and Pedro G. Espada
devised and operated a sham job training program to minimize costs and
maximize profits at Espada Management. The program mischaracterized
workers as trainees who were then paid wages that were far below what
New York State law requires. The trainees typically worked for a two
week period with little training or direction and performed tasks such
as cleaning bathrooms, mopping floors, and sweeping – the same tasks a
full-time janitor performed. During the program, the workers were paid
a fraction of the wages mandated by law, some making less than $70 per
week, or the equivalent of under $1.70 per hour. Paychecks were signed
by either Senator Espada or his son.
“This was a sham job training program pure and simple with workers
receiving no training and getting virtually no jobs,” said Attorney
General Cuomo. “Espada ripped off his own community in order to
maximize the amount of money he could siphon out of the Soundview
clinic, according to our Complaint. The Espada business model at
Soundview appears to have been based on lies and deceit, abusing
hardworking people for profit and cheating the state out of tax
dollars.”
The lawsuit alleges that the workers were lured into the program with
false promises of potential jobs and job training, but in the end, most
were just replaced by other trainees, also making below minimum wage.
Since 2005, at least 100 workers have been victimized by this program.
At the end of the program, trainees received a “Certificate of
Completion of Healthcare Maintenance Internship.” The certificates
were signed by Pedro G. Espada and were “for Fulfillment of JCAHO
standards maintenance training program.” The lawsuit alleges that
these certificates are worthless and misleading. The initials
“JCAHO” on the certificate stand for the “Joint Commission
on Accreditation of Healthcare Organizations.” That organization knew
nothing of the Espadas’ program, did not authorize its name to any
such program, did not provide or publish standards for janitorial
services that might be the subject of a training program, and has no
curriculum whatsoever that would support such a program.
The lawsuit also alleges that permanent employees of the janitorial
company were not paid proper overtime wages, and, in some cases, were
not paid for any of the overtime hours that they worked.
The Attorney General’s lawsuit alleges the Espadas have not only
cheated employees, but have short-changed New York State as well.
According to the lawsuit:
● No pay stubs existed.
● No state unemployment taxes were paid.
● No tax deductions were made as required by law.
● Workers’ Compensation coverage was not obtained.
The lawsuit seeks, among other things, to:
● Order the defendants to pay restitution and damages for unpaid
wages.
● Award interest as allowed by law.
● Order Defendants to implement new policies to prevent abuse of
workers.
● End the janitorial training program.
Senator Espada founded Espada Management in 2007. Pedro G. Espada, who
is also an employee of Soundview, was put in charge of the company when
it began operations in 2008. A bidding process was then rigged to
ensure that Soundview would award Espada Management with a contract to
perform janitorial work. That contract is worth almost $400,000
annually. In 2008, Pedro G. Espada earned more than $150,000 from
Espada Management and from Soundview.
The civil lawsuit was filed today in the Supreme Court of the State of
New York, New York County. The civil lawsuit alleges the defendants
violated Sections 195, 652, and 661 of New York State Labor Law by
willfully failing to pay minimum wages and failing to maintain proper
employment records. The lawsuit also alleges the all the defendants
violated Sections 142-2.2, 142-2.4 and 142.2-of the New York Codes,
Rules, and Regulations. Finally, the lawsuit also alleges that the
conduct at issue represented a persistent and repeated illegality in
violation of NY Executive Law Section 63(12).
BACKGROUND INFORMATION
Last week, Attorney General Cuomo filed a lawsuit filed against Senator
Espada for diverting Soundview’s charitable assets and using the money
for himself, his family, his friends, and his political operation.
Nineteen current and former officers and directors of Soundview are also
named in the lawsuit. The lawsuit alleges that in the past five years,
Senator Espada has siphoned more than $14 million out of Soundview,
including an unconditionally guaranteed severance package worth an
estimated $9 million that was put into a contract signed in 2005. The
lawsuit seeks to permanently remove Senator Espada and current CFO
Kenneth Brennan as officers of Soundview and, similarly, to remove all
of Soundview’s directors from the Board. The lawsuit also seeks
restitution from Senator Espada.
Also last week, the Attorney General served the New York State Senate
with a subpoena calling for the production of records related to ten
Senate employees who also served on the board or were employed or
retained by Soundview or its affiliated companies. The subpoenas seek
records pertaining to application and hiring, time and attendance, as
well as travel and expenses for the Senate personnel.
Additionally, last week investigators from the Attorney General’s
office, the Federal Bureau of Investigation, and the Internal Revenue
Service executed a search warrant on Soundview as part of an ongoing
criminal probe.
The lawsuit is available at www.ag.ny.gov.
The investigations into Senator Espada and Soundview are ongoing.
This case is being handled by Assistant Attorney General Nathan Reilly,
Assistant Attorney General Mina Kim, and Chief of the Labor Bureau
Patricia Kakalec.
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