© 2018 The Texas Lawbook.
By Natalie Posgate
(April 3) – For lawyers like Joel Reese who’ve scored eight-digit verdicts before, a lawsuit that seeks only $1 million in actual damages can seem rather humdrum.
But we all know that in litigation facts are king; and so, over the course of the past year, a humdrum case he filed for a Dallas factoring company has unraveled a narrative whose most innocuous claim is a kickback scheme involving a key executive and his baby-momma-to-be (but not his actual wife).
The suit was filed last year on behalf of Landry Marks Partners, a Dallas-based financial services company, over invoices purchased under a factoring contract with a subcontractor for a janitorial services company. Since then, the case has become a tangle akin to Medusa’s snake-laden mane: chaotic and venomous — with potentially criminal implications for a Fortune 500 company.
The case began with a series of suspicious invoices. The invoices led to the executive kickback scheme. But in the course of litigation, Landry has discovered what appears to be a widespread effort by one of the nation’s largest building services providers, ABM Industries, to circumvent federal immigration and tax laws.
In January, Landry filed new claims against ABM under the Racketeer Influenced and Corrupt Organizations Act. Reportedly, ABM has previously been under investigation by federal authorities for violations of immigration laws. Moreover, the company has received national attention for its handling of complaints by some of its female employees of sexual attacks, including rape, while on the job.
And this week, a state court is expected to rule on Landry’s request for summary judgment against the former ABM executive, Clay Johnson. Landry is asking Dallas District Judge Carl Ginsberg for an award of $1 million in actual damagesto find Johnson liable of fraud and RICO claims based on wire fraud, tax fraud and violations of immigration laws.
Johnson’s lawyer, John DeVoss of Smith DeVoss in Richardson, did not respond to a request for comment.
But ABM has counter-sued, claiming that no contract exists between Landry and ABM, and that the company had been a victim — not a participant — in Johnson’s alleged deceit.
In an email, one of ABM’s lawyers, Andy Green, said “while the company does not comment on pending litigation, ABM is confident the court and jury will ultimately recognize the unethical actions and wrongdoings of the former employees, the subcontractor, and the factor lending company, Landry Marks Partners.
“Once all the facts are presented, ABM will prevail,” said Green, a partner at McCathern in Houston.
At the core of Landry’s complaint is a question of who, exactly, is doing the work.
“[Office buildings] want ABM because they think they’re getting a higher quality level of a janitorial company,” says Reese, a named partner at litigation boutique Reese Marketos in Dallas. “What they don’t know – and what some witnesses have testified – is they’re just getting subs.”
The Scheme
ABM Industries is a massive building services company that boasts $5.5 billion in revenues and more than 130,000 employees with more than 350 offices in the U.S. and abroad. It is publicly traded on the New York Stock Exchange.
In addition to janitorial work, ABM also supports office buildings through services such as engineering, parking, HVAC and electrical. According to ABM’s website, the company cleans more than 2 billion square feet of office space daily and has half of the Fortune 500 as clients. ABM employees clean more than 181 million square feet daily of offices in Texas alone, and services and maintains 4,600 buildings in-state. Dallas clients have included Amazon, CBRE, AT&T, Comerica Bank, the Crescent, City of Famers Branch, Intuit, Intel and Piedmont Realty Trust.
According to court documents, the original scheme began with a subcontracting arrangement between Clay Johnson, the head of ABM’s North Texas operations, and a former ABM employee, Jesse Godina.
Godina worked at ABM from 1997 to 2010 before starting his own company, Complete Facility Services. In 2012, CFS became a subcontractor for some of ABM’s janitorial work. The basic arrangement, as in most subcontracting, was that an office building would hire ABM for its cleaning services, ABM would pay CFS to do the job for a lower amount and ABM would pocket the difference.
In November 2012, Godina entered a factoring agreement with Landry after having issues keeping up with his payroll. Because there was often a lag between when CFS did a cleaning job for ABM and when ABM paid CFS for the job, CFS started bouncing payroll checks.
Per the factoring agreement, Landry would purchase accounts receivable from CFS, which gave the subcontractor the immediate cash needed to meet its payroll. In return, Landry would collect payment directly from ABM, the debtor, and also receive a small percentage of the receivables that Landry purchases, court documents say.
Landry conducted due diligence with ABM each time CFS submitted invoices to ensure they were valid before purchasing them. Every time, ABM confirmed the invoices were valid.
The kickback scheme, Landry alleges, began in early 2014, when Johnson approached Godina about sending CFS significantly more business. In return, Godina agreed to pay Johnson as much as $25,000 per month plus 50 percent of the profit generated by the scheme.
Because CFS’s business with ABM was not growing quickly enough for Godina to pay Johnson’s kickback demands while making a profit, they agreed for CFS to begin submitting fake invoices to ABM that Johnson or others would verify when Landry was conducting due diligence, according to court documents.
Landry thought nothing suspicious of any of the invoices until payment delays by ABM began. By fall of 2016, ABM had gotten so behind on payments that Landry talked about stopping its deal with CFS, causing the scheme to unravel.
During that same time period, ABM began investigating Johnson after two senior members of his staff abruptly left the company to join a competitor, court documents say. The investigation led to his termination in January 2017. ABM’s lawyers are yet to produce documents on what came from the investigation, Reese said, but testimony from a former district manager at ABM suggests that a confession by Godina was one event that led to Johnson’s termination.
According to the deposition of the former employee, Ana DeSilva-Hernandez, Godina reported the alleged kickback scheme to ABM’s HR department. This caused ABM HR executive Amado Hernandez, some of ABM’s in-house lawyers and Johnson’s supervisors to fly from Houston to Dallas to meet with Godina and other ABM employees.
The Confession
At the meeting, Godina confessed to the whole scheme, Reese said. ABM lawyers subsequently drafted an affidavit that Godina signed. In the affidavit, Godina made a flurry of admissions.
Godina said that in June 2014 he started making monthly payments of $2,000 to a woman, Vanessa Drennan, who was not an employee of ABM or his subcontracting company. Godina said Johnson described the woman as a girlfriend who was “pregnant with [Johnson’s] child.” Godina said he continued making the payments until August 2016, by billing Amazon $2,500 per month for “floor work.”
From December 2014 to January 2017, Godina said he gave Johnson $20,000 to $25,000 per month. Of that, $6,000 went to Johnson, $2,000 went to Drennan and the rest went toward supplies and the 50/50 profit split that Godina and Johnson agreed to. Most of the payments were made through wire transfers until August 2016, when Johnson – by then under investigation — began requesting cash.
Godina said that at some point he began purchasing business supplies with Johnson’s personal credit card so that Johnson could accumulate rewards. He also said he made payments to other senior managers in ABM’s Dallas office to cover wages for ABM employees who were not able to be on ABM’s payroll and employees who worked on “tag,” or one-time jobs for clients, and that in February 2015 he began submitting invoices for unperformed services or, as he described it: “anticipated work that never materialized.”
In addition to his affidavit, Godina handed over to ABM leadership screenshots of text conversations with Johnson and other ABM executives, wire transfer statements and copies of reports on invoices sold to Landry distinguishing valid invoices from fake.
That same week, Godina met with the owner of Landry Marks, Tom Landry, and again confessed the scheme, providing Landry both with the documentation and a sworn affidavit outlining the scheme.
Despite Godina’s confession, ABM continued to use CFS for several months, paying him more than $1 million even after leadership learned of the fraud, Landry argues.
Johnson remained mum when deposed, often invoking his constitutional protections against self-incrimination. Johnson did declare, under oath, that Drennan is a simply a long-term friend from elementary school and that the two have never had a romantic relationship.
Among the screenshots of text messages that Godina turned over, one from Johnson in April 2015 states: “Need to see Vanessa after lunch… No hurry on the transfer. Just need to get V taken care of.”
Cross Litigation Cross-Crossed
A few weeks after meeting with Godina, Landry filed suit against ABM, Johnson and Godina/CFS. The initial lawsuit accused Johnson and Godina of the kickback scheme and claimed ABM is liable for Johnson’s conduct, since he used company resources to execute the fraud and committed all of the tortious acts while he was employed at ABM as head of operations for ABM’s North Texas, Arkansas, Louisiana and Oklahoma offices and oversaw 2,000 ABM employees.
ABM countersued Landry, Johnson, and later, Drennan. ABM also countersued Godina who countered with a countersuit of his own.
In its counter-claim against Landry, ABM seeks a declaratory judgment that Landry’s factoring agreement is not enforceable against ABM because it was only an agreement between Landry and CFS. Plus, the factoring agreement violates a clause in ABM and CFS’ subcontracting agreement that states CFS’ “duties, obligations and responsibilities” cannot be assigned to a third party without ABM’s consent, which it claims was never given.
ABM also states that ABM never acknowledged Landry’s notice of its factoring agreement with CFS and that ABM continued paying Godina/CFS directly for invoices.
Landry says ABM’s argument is moot because ABM was fully aware of the factoring arrangement with CFS and never expressed any issues with it until litigation began.
In regard to the new RICO claims, ABM has requested for Judge Ginsberg to dismiss them because some of Landry’s grounds for the claims, such as its allegation that ABM violated the Internal Revenue Service Code by avoiding payroll taxes, has no standing under the RICO Act.
“Even if a reasonable person were to follow the pseudo-logic set forth in Landry Marks’ fifth amended petition and take everything alleged by Landry Marks as true, the Internal Revenue Code based RICO Claim would fail because the IRC violation is not a predicate upon which a party may bring a RICO claim,” ABM’s March 20 filing says.
“In a feat of imagination and creativity, Landry Marks has constructed a narrative whereby ABM, Godina, CFS and Johnson are all involved in a gargantuan conspiracy designed to somehow harm Landry Marks,” the filing says later on. “While Landry Marks has spun a salacious story, it is just that, a story. Even if one were to take everything Landry Marks has plead as true, most of the facts have no bearing on the legal issues at hand.”
Also, in regard to Landry’s RICO claims about ABM violating the Immigration and Nationality Act, “even if these allegations were true, Landry Marks cannot show a direct nexus between the alleged immigration violations and damages it suffered from the purchase of invoices from CFS, Inc. under its factoring agreement,” ABM’s lawyers write. “No direct nexus equals no standing.”
Landry has countered that there is indeed a connection between ABM’s alleged violation of immigration laws and the damages Landry suffered from the invoices it purchased from CFS because that money was used directly to pay illegal immigrants.
In addition to Green, ABM is also being represented by Houston McCathern attorneys Rodney Drinnon and Brittené Wilson.
ABM also shifts the blame to Godina, Johnson and Drennan.
In its counter claims against Johnson, ABM claims Johnson breached his fiduciary duty to ABM and violated many sections of his employment agreement, including his duty of loyalty and ethics, code of business conduct and ethics, promise to not engage in conflicting activities, and promise to protect trade secrets and confidential information. ABM also claims Johnson formed a new janitorial services company upon leaving ABM, also a violation of his employment agreement.
ABM also alleged that Johnson owns an interest in Edyma/Business Solutions Services, which Johnson employed as an ABM subcontractor without ABM’s consent.
Johnson has been pretty quiet on the filing docket but filed a general denial in response to ABM’s counterclaims last April.
As for Godina, ABM alleges he breached their subcontract agreement by “failing to properly perform the contracted for services, failing to properly bill ABM Onsite, creating false invoices, performing various unlawful acts, allegedly assigning the subcontract agreement and failing to indemnify ABM Onsite as agreed, among others.”
Because Godina, Johnson and Drennan received money from the kickback scheme that rightfully belongs to ABM, the janitorial company claims all three defendants committed fraud against ABM.
Godina claims in his counter lawsuit that ABM took advantage of CFS as a subcontractor so it could circumvent immigration and payroll tax laws and that ABM “completely dominated and controlled CFS from the beginning of the subcontractor relationship to the end,” partially because most of CFS’ income came from ABM and ABM’s policies were so cumbersome that they were a huge burden on CFS.
“It was as though CFS was the puppet and ABM was the puppet master,” Godina’s filing says. “CFS did what ABM told it to do.”
Godina also claims that ABM defamed him, “falsely calling him a thief and dishonest and not worthy as a subcontractor, all forms of slander per se.”
In the same filing, Godina also responded to Landry’s lawsuit. Godina wrote he “naively thought he could get Landry to keep funding him” while Johnson protected CFS from cutbacks Johnson alleged were being contemplated by ABM.
“Landry would get paid, as it deserves, CFS would be worth at least more than twice what it was and CFS would be in a position to serve ABM’s customers…everyone wins,” Godina wrote.
“Unfortunately for CFS, time ran out, Landry ‘cashed out’ CFS (no more funding) and alleged that Godina/CFS stole from and defrauded it with complicity by Johnson and ABM,” Godina continued. “While CFS agreed to take advantage of what appeared to be Johnson’s inside track advantage with ABM’s decision makers in Houston, it never had the intent to steal from or defraud Landry.”
Carlos Peniche, Godina’s lawyer, did not respond to a request for comment.
The ‘Dirt File’
What Landry didn’t know at the time, its filings allege, is that the kickback scheme geared up the same year that ABM’s Dallas office began relying more on its subcontractors — the result of an audit by federal immigration authorities that revealed ABM had been hiring undocumented workers for its janitorial services.
Under an agreement with the Immigration and Customs Enforcement agency, ABM vowed to use the Department of Homeland Security’s e-verify system on all of its prospective employees to ensure their eligibility to work in the U.S. before hiring them. ABM also agreed that it would send employees questioned in the audit to meet with ICE to verify their verification to work legally in the U.S.
Instead, Landry alleges that ABM “terminated” a group of its employees and had CFS put them on its payroll. Through the testimony of former employees, Landry also learned that ABM disguised their reallocation of workers by moving its hiring office from 1450 Regal Row to its adjacent security office, located at 1460 Regal Row.
In December, Reese deposed Ana DeSilva-Hernandez, who originally reported the kickback scheme to ABM. Hernandez brought with her, as Reese words it, a “dirt file”’ on ABM. Hernandez, a 20-year employee of ABM, was terminated from her job in 2017. Her testimony was key to the filing of RICO claims against ABM by Landry.
In her deposition, DeSilva-Hernandez, a former district manager, described a 2014 audit of ABM by federal immigration authorities and ABM’s reaction, including the “termination” of employees whose immigration status had been questioned.
In meetings that DeSilva-Hernandez says she attended, the company conspired to circumvent concessions the company had made to immigration authorities. In her testimony, DeSilva-Hernandez alleged that ABM:
- Treated janitors under subcontract as their own employees, controlling all of their operations, except for payment;
- Management above Clay Johnson approved the move of ABM’s employment office to deceive immigration authorities;
- ABM had contracts with some clients that specifically promised it would not use subcontractors to clean their buildings;
- Subcontractors wore ABM uniforms while cleaning buildings for such clients as the City of Farmers Branch, Intuit, Intel, Lincoln Centre, AT&T, the Crescent and Amazon – all of whom Johnson lied to about who was really cleaning their buildings;
- ABM had billed Amazon for overtime work but did not pay janitors the overtime. Instead, that money went to Vanessa Drennan;
- At the end of ABM’s fiscal year in October, no one in the office is allowed to order supplies so that ABM’s end-of-year financial results would be inflated (what ABM called a “cash conservation policy”).
For his part, Reese minces no words. He believes that the business practices described in the case are going to have consequences beyond his lawsuit, particularly in regard to the immigration violations he alleges.
“For as big of a company it is, I’ve never seen a dirtier company,” said Reese. “If ICE figures out they did this, they are toast.”
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