Irish businessman battles to save New York building firm

Irish businessman Donal O'Sullivan has found himself in a high-stakes battle to save his New York building company, Navillus, following a ruling by a US court that it pay $76 million (€65 million) to unions that claimed it tried to skirt agreements to employ their members on construction contracts.

In September, federal judge Colleen McMahon ruled that Navillus used two companies, TSC and ACS, as “alter egos” – or fronts – to work on contracts in New York so it could avoid collective agreements with four unions.

As a result, she ordered it to pay the labour organisations $76 million. O’Sullivan immediately labelled the verdict a mistake and vowed to appeal.

In her 92-page ruling, Judge McMahon accused O’Sullivan of perjuring himself in evidence he gave about his relationship with ACS. In response, he says: “I have been truthful throughout this lengthy litigation and strongly deny any suggestion that I engaged in perjury.”

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The Ballinskelligs, Co Kerry, native is well-known in Irish US circles. He began Navillus with his brothers, Leonard and Kevin, in 1987, three years after he arrived in New York. He is now the sole shareholder in a company that had contract revenues last year of $240 million and employs up to 1,600 workers at peak. The business has grown by more than 60 per cent over the past three years.

He is a big supporter of New York GAA, sponsoring several football teams. After Storm Sandy struck the city in 2012, he and Navillus workers were first on the scene to provide aid in Rockaway, the Long Island neighbourhood once dubbed the “Irish Riviera” because so many of its citizens had roots here.

Community support

His work on supporting communities in Florida that suffered during this year’s hurricane season earned praise nationally.

So Navillus drew a lot of attention last week when it went into Chapter 11, a mechanism in US law that allows troubled businesses to avail of court protection to stay trading while they restructure.

O’Sullivan insists that the company only went this route to allow it challenge Judge McMahon’s ruling. “All our businesses are continuing as if nothing had happened,” he says. “We only applied for Chapter 11 to protect our jobs. It will allow us to continue our process on to our appeal. I really feel that this decision is going to be reversed on appeal.”

After Navillus sought protection, O’Sullivan wrote to clients, workers and suppliers saying that it was business as usual and pledging that the builder would continue to pay staff and meet all its commitments. While the courts oversee organisations in Chapter 11, O’Sullivan says that his company has leave to continue managing its cash as it would in the normal course of business.

Navillus will also be able to bid for new work as its bonding company, Liberty Mutual, which provides insurance against contractors being unable to complete a job, has put up an extra $100 million-plus line of credit. "They are 100 per cent behind us," O'Sullivan says.

There is a lot at stake. Navillus is working on some of New York’s highest-profile projects. One, Hudson Yards, backed by the transport authority and the city and state governments, is a $20 billion extension of Manhattan’s business district to the Hudson river. The Irishman’s company has a $120 million contract on the development.

Union contractor

Another, One Vanderbilt, is a 57-storey, 427m skyscraper close to Grand Central Station. Backed by one of the city’s bigger developers, SL Green Realty, it will be New York’s fourth-tallest building. Navillus’s work on this is worth about $150 million.

O’Sullivan says that his company is a staunch union contractor. It has collective agreements with 18 labour organisations and paid $182 million into their funds over the past five years. “No other contractor is paying that amount of money,” he says.

However, union power is waning. Last June, the Commercial Observer, a leading property magazine, pointed out that, in 1983, almost half the 244,000 building workers in New York State were organised. By 2016, that had dropped to 31 per cent of the 398,000 employed by the industry.

While organised labour still dominates public works, it has been pushed out of residential building completely. Rising costs are prompting a growing number of commercial clients to seek non-union contractors. Against that background, unions fear that some contractors are attempting to get around long-standing agreements.

This was at the heart of the case against part of O’Sullivan’s group, Navillus Tile. Trustees of funds operated by four unions, the Teamsters, Carpenters’ Journeymen, Cement and Concrete Workers and Metal Lathers, claimed that it used TSC and ACS as alter egos to work on contracts between 2012 and 2014.

O’Sullivan’s brother, Kevin, founded TSC. Donal had a stake in the business, but sold that to his sibling before it began work on the development, Sugar Hill, where it was supposed to have been a front for Navillus. Donal was never a director or executive of his brother’s business. Kevin was the sole officer named on company documents. For his part, Kevin sold his shares in Navillus to Donal in 2015, after the unions began their lawsuit.

Cement specialist

Navillus is a specialist in cement and concrete work and bid for Sugar Hill. The judge noted that the client, Mountco, specified that it wanted non-union labour. According to the ruling, Kevin had set up TSC as a non-union operation. It got the contract. Judge McMahon concluded that Navillus provided the skilled workers and managers needed for the work.

However, Donal O’Sullivan maintains that there is no connection between Navillus and TCS. He also points out that the brothers have been running separate businesses for more than 10 years. Kevin O’Sullivan is also active in the Republic, through Times Square Construction, which is working on a major development in the port of Cork.

The claim involving ACS focused on the fact that a former Navillus employee, Eoin Moriarty, established the firm. It worked on four projects, 21 st Street, Boston Road, City Point and 92nd Street. The judge argued it was, at all relevant times, Navillus’s alter ego, and would have gone under without $1.8 million in loans from O’Sullivan.

ACS gave O’Sullivan options over some of its shares as security for the loan. He denied their existence in a deposition, but later said that he had forgotten about them. This lead to the perjury claim that the businessman disputes so strongly. He told the court that the options were null and void in any case as ACS has repaid the loans.

The original case took about three years. O’Sullivan believes that an appeal could take at least another year to get to a hearing. In the meantime, he maintains that Navillus continue trading. “One thing that we’ve done is we have built a great reputation,” he says. “We have never not finished a job, we have never failed on a bond, we have never not paid back a loan.”