Lakeville Man Charged in Wage Theft Scheme

A Lakeville man has been charged with wage theft for stealing over $35,000 from his employees, Hennepin County Attorney Mike Freeman announced Friday.

Frederick Leon Newell, 57, was charged with Wage Theft (over $35,000) and Theft by Swindle (over $35,000). This is one of the first cases prosecuted under Minnesota's new wage theft law, passed in 2019 at the urging of the Hennepin County Attorney's Office. This case is being charged under a state-local wage theft partnership established through the Labor Advisory Council chaired by the Hennepin and Ramsey County Attorneys. That work is profiled in proceedings and materials attached.

"These are the kinds of cases that caused us to work with labor on a statewide system for prosecuting wage theft." Freeman said. "The working people of Minnesota deserve fair pay for their labor. If you are a Minnesota employer stealing from your employees, you will be investigated and charged."

According to the complaint, Newell owns and operates a commercial painting company known as Integrated Painting Solutions (IPS). IPS secured a bid to provide painting labor and materials in 2019 for the Redwell apartment complex in north Minneapolis. IPS subsequently signed a contract to provide cleaning services for the apartment complex in 2020.

Because the City of Minneapolis had approved tax increment financing (TIF) for the development of the apartment complex, contractors and subcontractors were required to pay employees a prevailing wage rate, the complaint continues. IPS received a number of documents from Minneapolis in connection with the contract to perform the services, including a Notice of Civil Rights Rules and Regulations. The Rules and Regulations advised that all contractors must comply with prevailing wage laws on the project; the schedule provided to IPS also indicated that the prevailing wage for painting was $55.62 per hour and $54.95 for cleaners. The initial cost of the labor and materials for the painting job was $223,681.00.

Despite receiving the funds due under the terms of the contract, Newell and IPS intentionally withheld payments that were to be paid to his employees. One victim worked as a painter for 32 hours in June 2020, labor worth approximately $1,779.84, but he did not receive a paycheck for that work. IPS filed a document with the City of Minneapolis indicating that the individual had not worked those hours. Later that summer, in August 2020, five employees performed painting and cleaning duties but were underpaid by an aggregate total of $35,221.60.

IPS was in clear financial distress during 2020, which resulted in unpaid taxes and a levy assessed against Newell by the Internal Revenue Service (IRS). In total, the general contractor paid IPS a total of $299,174 for labor and materials for the painting and cleaning contracts at the Redwell apartment complex. The general contractor also paid $30,000 directly to the IRS on behalf of IPS so that the company would be released from a tax levy. Newell continued to accept payments from the general contractor over the course of the painting and cleaning projects despite knowing his company was in financial distress, was not paying a prevailing wage, and was concealing hours worked by his employees.

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