The Hartford Courant has a lengthy piece today about the rise and fall of the Mortgage Lenders Network. From an employment perspective, the piece recounts how the Connecticut Department of Labor came across one of the largest cases in the state of a company failing to pay wages, at least $1.5 million.
Gary Pechie, the director of the state Department of Labor’s wages and workplace standards division, was used to dealing with minor cases of businesses – the pizza shops, the independent grocers – who didn’t pay their employees.
He rarely saw a case as a big as MLN. High-flying loan officers had been stiffed out of thousands of dollars, some hundreds of thousands, in commissions. And the complaints kept coming in.
Pechie sent two wage enforcement agents down to MLN on Jan. 23.
One of those agents, Frank Royce, had 17 years on the job. He and agent Mike Witkowski pulled up at MLN in Middletown at about 10:30. Human resources director Gary Porter told the agents that the company was "experiencing some problems" and that it wasn’t clear "if or when some of the employees would be paid."
Porter produced a partial list. Royce did a little mental math to figure out what employees were owed. He came up with about $1.5 million. Later in the day, Porter came up with more.
When he and Witkowski got back in the car, Royce was quiet for a moment. Then he spoke.
"Wow," he said. "This is going to be big."
The article goes on to report that:
On March 9, the labor department asked the chief state’s attorney to issue a warrant for [MLN head Mitchell] Heffernan’s arrest for failing to pay nearly $3 million in wages, mostly commissions. Failing to pay wages in Connecticut is a Class D felony and can lead to jail time, fines or both….
[The DOL] and Attorney General Richard Blumenthal pursued the criminal charge in Connecticut. Heffernan fought the state’s right to seek such a warrant while MLN was in bankruptcy. After a federal bankruptcy judge ruled that the matter didn’t belong in that court, Heffernan appealed. A trial is pending on the legal question.
A look at the actual court documents reveals some more details and, from a legal perspective, Heffernan’s tactics have staved off action by the DOL. So far, it appears to have bought him several more months of legal limbo.
Upon learning of potential criminal charges against him, Heffernan filed a motion to enjoin the state from criminal prosecution. The State of Connecticut, led by AAG Robert Clark, filed its objection on April 5, 2007. Heffernan filed a supplemental brief a few days later with many more details and claiming that the criminal prosecution was a result of intense media scrutiny. On April 10, 2007, the bankruptcy court denied Heffernan’s request.
However, Heffernan’s appeal of that decision has bought more time for him. He appealed to the District Court of Delaware. A briefing schedule reveals that it is unlikely the state will get any resolution of this matter until next year because final briefs are not due until late December 2007. (It is unclear where the Courant’s notion of a trial comes into play; the scheduling order of the court only referred to motion practice.) Because of the elevation of the assigned District Court judge to the matter (Judge Kent A. Jordan), the case does not yet have a district court judge formally assigned to it, which may further delay resolution of this matter.
For MLN workers, the case is surely a frustrating one. But the state’s continued pursuit of this employer demonstrates that failing to pay wages is one type of action that the state won’t tolerate. For employers in the state, its a good lesson and one that more employers would be wise to follow.