The rich are different, and so are their bankruptcies. For most Americans, politicians and banks have made bankruptcy an onerous, embarrassing process with lifelong consequences. But bankruptcy means something very different if you’re a giant corporation like American Airlines, which is wringing millions in concessions out of unions after filing for bankruptcy with $4 billion cash on hand – or if you’re a regional sweatshop like Pennsylvania’s W&K Steel. The family that ran W&K has repeatedly gotten caught burning their creditors and endangering their employees. Their business even drew a boycott from its hometown County Council. But now they’re doing just fine, because politicians and banks keep giving them money. A bank they stiffed allegedly took months to make them give up equipment serving as collateral on an unpaid loan – while moving to foreclose on 400-plus area homes.
Rather than driving them out of the industry, a bankruptcy last year let the family wipe out debts, shed the label “sweatshop,” and get back to work doing taxpayer-funded construction.
Wilhelm’s steel sweatshop
Along with OSHA citations and various lawsuits, Edward Wilhelm has been involved in at least six bankruptcies since 2001. Most recent: W&K Steel, his steel fabrication company, and W&K Erection, his steel erecting company operating from the same Pittsburgh-area address in Pennsylvania’s Allegheny County. In February 2011, Allegheny County’s Council passed a resolution declaring it would do no business with W&K. The council cited evidence from workers that exposed conditions contrary to its “anti-sweatshop” policy, including “testimony suggesting that at least some refugee employees are paid roughly half the amount paid to US-born employees, leaving those refugees to depend on public assistance for the basic necessities of life.”
(Many of W&K’s employees were refugees from Burma and elsewhere. The website for the state of Pennsylvania’s Refugee Resettlement Program tells employers that refugees bring “strong work ethics” and “employer tax credits and training incentives are available in many cases.”)
Edward Wilhelm told the Pittsburgh Post-Gazette that Council’s action was “kangaroo court.” His wife, Celeste, the company’s human resources manager, said that no council members had visited the plant before voting. But the council’s resolution noted that W&K had “refused to allow access to the plant” to members and clergy who had shown up seeking to check out the working conditions.
Among those bringing the issue to council were two W&K employees, Timothy Hand and Aung Oo, who went on strike against the non-union company starting in 2009. In a statement, Oo said, “There is no safety in the plant and I am afraid of being hurt and not being able to support my family.”
Hand says that over 10 years at W&K, he witnessed constant safety issues: Workers standing on pallets to avoid the water pooled on the floor. Water sliding down the walls and into electrical panels. No safety glasses, and little ventilation, as workers sprayed toxic chemicals. Once, says Hand “we were actually told by the shop safety supervisor to stop spraying” because Celeste Wilhelm was on the shop floor, and she was pregnant.
In a statement, former W&K employee Sean Lehr-Nuth echoed Hand’s concerns: “I was never shown where to get a respirator, ear plugs, or safety glasses; work gloves were the only safety equipment I had access to. The roof leaked and when it rained, large puddles would gather on the floor, often near wall outlets. The electrical system was very outdated and the outlets were often loose in their housing or even hanging off the wall.”
But when workers raised these issues with management, Hand says, “They didn’t care. They just said, ‘Be careful, and go back to work.’”
For Hand, the last straw came at the end of the Friday shift before Labor Day weekend in 2009. While U.S.-born workers were allowed to go home, Hand says he watched the foreman walk up to a group refugee workers, who had clocked out and changed clothes, and scream, “What the hell are you doing? Get your asses back to work. This is not a free country!” The workers complied.
With support from local clergy and the International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers Union, Hand and others have been working to force changes. In its resolution, Allegheny’s Council pledged not to do business with W&K – or any business contracting with them – until the company showed that the allegations were wrong, or that they’d been fixed. But Allegheny County’s move couldn’t legally bar area school districts from doing business with W&K, and its example wasn’t enough to stop some from putting tax dollars in Edward Wilhelm’s pockets. At the point W&K went bankrupt, its projects included school construction for the Pittsburgh, Moon Township, and Pine Ridgeland districts.
One year later, there’s no “W&K” around to boycott, but the same family is managing many of the same workers, using the same equipment, out of the same office, and getting taxpayer funding from West Virginia – all without a public reckoning over the allegations.
Immortal zombie sweatshop: Meet American Erection
Three months after the council vote, a court placed W&K into a receivership for defaulting on a $2.5 million loan from Huntington Bank. Meridian Financial Advisors was appointed as the receiver, responsible for looking out for the bank’s interests. Receivership gave the bank a lead role in determining how – and whether – W&K would go forward. But what the bank didn’t know when the receivership began was that Wilhelm’s sister Janet Stojanovic had just begun the process of reincarnating the company beyond the bank’s reach.
According to a sworn affidavit from Stojanovic, on April 28, 2011, she incorporated a new company, Trinity Steel, with herself as president and with an office “on the same premises” as W&K. Her family owns the realty company that owns that property too. In her job as W&K’s controller, Stojanovic joined Wilhelm in May in meetings with the receiver. On May 25, she resigned from W&K. The same day, she and Edward Wilhelm proposed to the receiver that Trinity would buy back Huntington Bank’s collateral on the loan, which included much of the equipment at W&K’s plant (where Trinity now conveniently had an office). The next day, the bank rejected the offer, prompting Stojanovic to charge, in her words, that the bank was out to prevent “any future viability for the Wilhelm or Stojanovic family in the steel erection and fabrication business.”
But the family’s viability turned out just fine. After the bank refused Wilhelm and Stojanovic’s plan, Wilhelm filed for bankruptcy, effectively overriding the receivership. The bank objected, but a bankruptcy judge agreed to let Aegis, a bonding company, continuing overseeing school construction projects that were then being carried out by W&K. Aegis let Trinity – a supposedly new and distinct company – pick up the projects where W&K had left off. (Over email, a Huntington spokesperson declined to discuss its dealings with W&K.) “Basically,” says Iron Workers organizer Chadwick Rink, Wilhelm’s “scam is a shell game where he just starts one entity after another,” and opts for bankruptcy after “something goes wrong … He was found to be a sweatshop by the county, and that was affecting his business.”
In her own report, the receiver noted that, unbeknownst to her at the time, the same week that the bank rejected the family’s offer, “Trinity had approached the W&K [Steel] workforce and asked them to sign W-4s, in preparation for their being hired by Trinity to complete [W&K’s] bonded contracts.”
In other words: Meet the new boss, same as the old boss.
On paper, Trinity is a new company with a new owner. W&K’s sibling company, W&K Erection, has similarly been replaced by American Erection, a company formed in 2009 by Celeste Wilhelm. But evidence casts doubt on just how new Trinity and American Erection are. In her report, the receiver wrote that she “believes that there are issues surrounding the transfer of assets from W&KE to American and W&KS to Trinity, should the Trustee wish to investigate further.” For example: “The Receiver is not aware of any consideration that was paid to W&KE or W&KS for the transfer of assets (e.g., employees, customer lists, contracts).”
When he heard the news that the Wilhelm family was back at work, under a new name, Hand says, “My reaction was, once again, he got over the system.”
Hand notes that both Stojanovic and Celeste Wilhelm were in key positions at W&K during the abuses he witnessed; he says he raised them in meetings with Celeste Wilhelm in her role as human resources head. But Hand, and the union, believe Edward Wilhelm is still the key decision maker in the reconstituted companies. “He hasn’t suffered a bit,” says Hand. “He just opens up the doors the next day under a different name and continues working.” A call Wednesday to the main phone number listed on W&K’s (now defunct) website was answered by a receptionist for Trinity Steel, who said that Celeste would return the request for comment. She hasn’t.
Trinity is already getting new government work. In an April 17, 2012 filing, the Massaro Corp. lists American Erection among the subcontractors to be used on new construction in the Preston County school district in neighboring West Virginia. Asked about Massaro’s use of Trinity, the communications director for the state education department e-mailed that the county had followed state law in its bidding process, and Massaro “was the lowest responsible bidder.” She said that the county superintendent had since been “appraised of the allegations concerning Trinity,” contacted Massaro about them, and received a letter back “assuring him of the viability of Trinity Steel.”
Massaro has used - and vouched for - W&K in the past. According to Hand, he and staff from the Iron Workers got Massaro’s owner to meet with them about W&K early in the strike. After the meeting, Hand says Massaro called him by phone and said, “Ed’s a great guy to work with. I sent my safety guy in and check things and everything's fine. This is a whole bunch of bull. It’s over with. Drop it. And keep the union hacks out of my office.” (Massaro did not respond to a request for comment.)
Rink says that despite bankruptcies, labor abuses, and half a million dollars in unpaid taxes, Massaro continues subcontracting with the Wilhelm family because they know “it’s cheap, and that’s what construction’s all about.” Hand says that Massaro’s use of Trinity shows that’s something wrong with the standards used by government agencies to determine who’s “a reputable contractor.”
So Wilhelm’s family appears to have picked up where they left off: same building, same workers, same clients. The Iron Workers allege that Wilhelm is using his old equipment too. When it was put up at public auction as collateral for W&K’s loans to Huntington, says Rink, “He had other people there at the auction that purchased the equipment, and it’s all there back at the plant.” Rink says it’s been spotted at the plant and on job sites. Some large equipment like cranes, he says, appears to have been auctioned back to straw buyers working for Wilhelm without ever having been removed from the plant in the first place.
The Iron Workers also fault Huntington for being slow to come calling for the equipment, taking months being recently forcing it to be auctioned off. During the same period of time, according to a union tally, the bank filed for foreclosures on over 400 homes in Pennsylvania, Ohio, and West Virginia. “Every day the banks are evicting homeowners and throwing them out on the street,” says Rink, “and they’re allowing this guy to continue his business, because he has LLC after his name … You put a family out on the street, but you let somebody like Ed Wilhelm maintain his business and maintain his $700,000 home.”
Despite bankruptcy, the Wilhelm family has no cash flow crisis. Despite the workers’ strike and the Allegheny County Council’s stand, contractors continued working with the Wilhelm family, and other local governments continued to send taxpayer-funded work their way. Meanwhile, three years after he and Oo began their strike, Hand says no current employees will talk to him. Based on his own experiences, and his conversations with ex-employees, Hand says, “everybody in there is scared to death to even mention the word union.”
Given how kind bankruptcy – as well as big contractors and local governments – have been to the Wilhelm family, Rink expects the bankruptcy cycle to continue: “I guess he’ll do this again in another year or two.”