Contractor with ties to Johnny Doc indicted for tax fraud and defrauding union benefit fund

A close associate of Philadelphia union leader John “Johnny Doc” Dougherty was indicted Wednesday on multiple counts of bank fraud, tax fraud and stealing from the benefits funds for union workers.

Donald “Gus” Dougherty, 54, collaborated with Michael McKale, an accountant working for his company, Dougherty Electric Inc., to alter financial records and lower the amount of federal taxes he was required to pay, according to the indictment filed Wednesday in U.S. District Court.

McKale, 47, has been charged with conspiracy to defraud the IRS and related offenses.

Dougherty’s attorney, Eric W. Sitarchuk, said Wednesday he “intends to vigorously contest the charges.”

Though Dougherty is not related to the prominent Democratic kingmaker, the two have been lifelong friends, and have been linked in the FBI’s ongoing probe against John Dougherty.

Gus Dougherty pleaded guilty in 2008 to defrauding John Dougherty’s Local 98 out of more than $500,000 in “market recovery” money, and for providing $115,000 worth of free renovations on his similarly named friend’s Philadelphia home.

Part of that plea deal included a provision to avoid testifying against John Dougherty. And after Gus Dougherty was released from prison in 2010, Local 98 continued to provide his company recovery funding, paying it $470,000 from 2010 to 2015.

Prosecutors objected to the payments at the time, saying they appeared to be an attempt to help Gus Dougherty pay off his restitution debts.

In Wednesday’s indictment, Gus Dougherty is also accused of giving his wife a “no-show” job at the company, which prosecutors say he hid by falsifying corporate records with McKale. When an anonymous tip to the IRS alerted federal authorities to the tampering, Dougherty directed McKale to file amended tax documents, writing off his wife’s salary and payments on her Cadillac Escalade and Range Rover as legitimate business expenses.

All told, Dougherty improperly wrote off $1.6 million this way, according to First Assistant U.S. Attorney Jennifer Arbittier Williams.

The alleged fraud also extended to union workers in Dougherty’s employ: In 2015, investigators say he employed nonunion laborers in Pittsburgh to avoid paying $500,000 in contributions to the International Brotherhood of Electrical Workers chapter there. He allegedly used similar methods in Philadelphia, dodging $26,000 for the local chapter’s benefit fund.

“Donald Dougherty’s alleged schemes to enrich himself had multiple victims: hard-working union employees, bank stakeholders, and honest American taxpayers who pay their tax obligations,” Williams said in a statement. “Further, he found an accountant to help him defraud the IRS by secretly changing properly recorded expenses into fraudulent ones. And when the defendants thought their scheme might be uncovered, they allegedly cooked the books even further to cover their tracks.”