Howard contractor abruptly lays off all workers Layoffs follow tax evasion convictions of owners of Daedalean Inc. in Columbia

April 30, 1991|By Jon Morgan | Jon Morgan,Evening Sun Staff Kelly Gilbert contributed to this story.

A Howard County-based military contractor, threatened with a permanent loss of government business after its owners were convicted of tax evasion, last week abruptly laid off all of its 266 workers across the country, including about 100 in Maryland.

Employees of Daedalean Inc. said they were surprised late Friday afternoon when they were told that they would not receive paychecks due that day and that they should leave the building immediately and plan to apply for unemployment insurance.

The company is headquartered in Woodbine, with a manufacturing plant in Columbia and other operations in five other states. The firm primarily manufactures military equipment such as simulators used to train pilots, mechanics, tank crews and others.

"It's hard to say right now what is going to happen. They are negotiating to try and keep things going," said Missy Hall, personnel director for the company.

She said she was told about 2 p.m. Friday to tell everyone to go home and apply on Monday for unemployment insurance benefits. She said she was not told the reason for the shutdown or the whether employees will receive their back pay or benefits.

Other company officials did not return phone calls yesterday.

"It was mass confusion. . . . We have no idea what the situation is," said Margaret Handler, a computer programmer who worked at Daedalean for about two years.

Recent layoffs had alerted employees to trouble, but there was no warning of the closure, Handler said.

"There were rumors floating around. I don't think they ever told us everything that was going on," she said.

Robert Force, a project engineer who had worked at the company for about two years, said he was on vacation when he learned of the closure. Under the twice-a-month payroll system used by the company, he and the other employees were to have been paid Friday for work performed during the first two weeks of April.

He said he has been unable to learn if he will receive the money or the status of his health insurance. And a contraction in the defense industry has left the job market flooded with applicants, he said.

"The business market is not that great right now," he said.

The Columbia office of the Department of Economic and Employment Development -- which is located around the corner from the Daedalean plant -- was flooded yesterday with Daedalean employees applying for unemployment insurance, a supervisor at the office said.

The company's owners late last year pleaded guilty to income tax evasion and recently were the subject of Navy proceedings that could prevent the firm from doing business with the government. An announcement of those proceedings, known as "proposal to debar," was expected today from the Pentagon.

Such actions are deadly for firms that depend on military contracts. Even a proposal to debar usually deters any federal agency from doing business with a company until the matter is settled.

Ambrose Hochrein Jr., 51, of Olney, and Alagu Thiruvengadam, 56, of Ellicott City, had been charged in federal court at Baltimore with using outdated government equipment and a worthless patent to launder money in a series of donation/lease-back schemes.

Each pleaded guilty to a single count of tax evasion. Hochrein was fined $25,000 and sentenced to six months of work release, five years' probation and 750 hours of community service. Thiruvengadam was fined $25,000 and sentenced to four months of work release, three years of probation and 600 hours of community service, according to Assistant U.S. Attorney Susan M. Ringler.

Thiruvengadam is president and 60 percent owner of Daedalean Inc. Hochrein is executive vice president and 40 percent owner.

In a statement of facts presented in court in December, Ringler said Thiruvengadam claimed income of $30,245 on his 1984 tax return and paid $4,866 in taxes. He really owed the IRS $71,152 in taxes on taxable income of $179,533, Ringler said.

Ringler said Hochrein paid $6,668 in taxes on income of $36,729 the same year, when he really owed $51,844 on taxable income of $146,862.

The prosecutor said Hochrein and Thiruvengadam generated phony tax deductions by falsely inflating the worth of at least three pieces of expensive equipment and donating the equipment to Technology Associates or Cooksville Land Development, companies the two men were also partners in. They had acquired the equipment at Daedalean with government funds for work on defense contracts.

The two men took false depreciation deductions on the "donations" based on the inflated prices of the equipment, which they contended was worth hundreds of thousands of dollars, Ringler said. Then they leased the equipment back to Daedalean at inflated rental fees.

In a related scam, the defendants sold a worthless patent to Daedalean for $1, then sold the patent to Technology Associates for $526,000 and used the sale price as a tax write-off for their income from that company, prosecutors said.

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