Immigration Crackdown Hits Fence Builder

Newsday.com

Immigration Crackdown Hits Fence Builder

By ELLIOT SPAGAT

Associated Press Writer

2:56 PM EST, January 12, 2008

SAN DIEGO

That the government wanted to put Mel Kay behind a prison fence is an

irony, though one that neither he nor his accusers would find amusing.

Mel Kay builds fences. His was the largest fence-building company in

Southern California; he rode the nation's housing boom to $150 million

in annual sales. His fences are just about everywhere -- at gated

subdivisions, on military bases, at prisons.

He even built fences at two immigration jails, a Border Patrol station

and the U.S.-Mexico border.

Which is the second irony, because he admits now that many of his

company's fences were built by illegal immigrants. Federal authorities

knew it, and they went after him tenaciously, determined to send him

to prison as an example to other employers who hire undocumented

workers.

They had plenty of evidence. Prosecutors determined that about a third

of his 750 workers were illegal immigrants. They told Kay's lawyers of

videotaped interviews with about a dozen employees who had been caught

in raids at Golden State Fence Co. in 1999 or 2004 -- exposed as

illegal immigrants -- and then were rehired by the company,

regardless.

Kay thought he was toast.

But this lean, sun-beaten 65-year-old had two things going for him: He

was tough, and he was tender.

__

The story of Kay's rise and fall -- based on court documents,

government records and interviews with his employees and associates,

federal investigators and Kay himself -- begins in the Los Angeles

suburb of Glendale, where he was born the fourth of 11 children.

His father, who moved to California from Oklahoma during the

Depression, had a gambling problem and died at 47 from a heart attack.

His mother, daughter of Italian immigrants, never drove a car or wrote

a check.

The Kays moved up and down California, farming almonds, tomatoes and

other crops. Mel began picking fruit when he was 7 and attended more

than 20 schools before dropping out when he was 16 to work at a lumber

yard; he recalls how his bosses would stiff him on payday.

Kay and a friend borrowed $8,000 to start a fence and garage-door

business in 1968. In 1977, he moved to Coeur D'Alene, Idaho, to open a

sawmill. It failed, but not before a saw severed a finger and part of

his right hand.

Kay returned to California to start Golden State Fence in 1984 with

five employees and was on a roll by the early 1990s. Almost from the

start, he relied on illegal immigrants.

Nearly all his workers took advantage of the 1986 amnesty but he soon

struggled to fill jobs. He shunned applicants who came in off the

street, instead relying on Mexican employees to recruit family and

friends.

"They were more trustworthy and more apt to stay long term," Kay told

The Associated Press at his office in Riverside, a sparsely furnished

room with a white linoleum floor and an empty desktop.

Kay admits depending on illegal workers as the housing market grew in

the 1990s and exploded in the first half of this decade.

"I'd never experienced any boom like that," he says. "It was almost

out of control."

Installing fences is punishing labor, especially in Southern

California's desert heat and rocky soil. Kay requires job applicants

to raise 60 pounds over their heads and move wheelbarrows of dirt.

About 75 percent of his workers are Hispanic.

But Kay compensated his employees well. New hires start at $35,000 a

year and jump to about $60,000 after three years. Full-time workers

get health and life insurance, sick leave and at least two weeks

vacation.

The business prospered. An array of small companies bought fences from

Kay's factory. Other customers include major homebuilders and the

government, which accounts for about 30 percent of revenue.

In letters to the judge in Kay's case, they lauded the variety of

Golden State's designs and materials and its track record on big

projects.

"Golden State Fence is able to take on the larger government fencing

projects that most other fence companies just simply could not perform

on," read one from the Army Corps of Engineers, which hired Golden

State for work on several military bases and, in 1997, on a mile-long

stretch of the U.S.-Mexico border in San Diego.

__

Joe Flores was Mel Kay's nemesis.

The El Paso, Texas, native and son of Mexican immigrants began

policing federal immigration laws in 1987 after 10 years as a Texas

state trooper. A year earlier, the government made it a crime to hire

an illegal immigrant; the offense became a felony in 1996.

Now, at age 53, he is a group supervisor for U.S. Immigration and

Customs Enforcement. From his office on the second floor of downtown

San Diego's federal building, he directed the raid on Golden State

Fence.

Flores strongly believes that American jobs should go to citizens and

legal residents. He is skeptical of Kay's claims that Golden State

couldn't find enough of them to dig ditches for $60,000 a year, with

benefits.

"If you're paying good wages, why risk your company? Why put yourself

in that situation?" Flores says.

The government's enthusiasm for punishing employers waned after

Flores' first few years on the job and, by the mid-1990s, his focus

turned to illegal immigrants who got into gangs and violent crime.

The Bush administration has renewed enforcement at factories and

offices but scored few legal victories. There are many reasons: some 7

million illegal immigrants are part of America's work force, making a

crackdown on more than a handful impossible for prosecutors with

limited resources; employers easily shield themselves by saying they

didn't know illegal workers had phony documents; prosecutors refuse

cases because it is extremely difficult to prove businesses are

complicit.

In one prominent case, a federal jury acquitted Tyson Foods Inc., the

nation's largest poultry producer, and three former managers in 2003

of conspiring to hire illegal immigrants. Some recent raids, from

meatpacker Swift & Co. last year to McDonald's restaurants in Reno,

Nev., in September, produced big arrest tallies but all were

rank-and-file workers.

Golden State Fence was different.

Investigators stumbled on the company when they were auditing military

contractors in a nationwide post-Sept. 11 crackdown and determined 48

of 182 workers at Golden State's Oceanside branch were illegal. In the

pre-dawn hours of Sept. 21, 2004, agents arrested 12 as they left

home.

As they pored over files, investigators discovered a government audit

in 1999 that found 15 employees were illegal immigrants, including

three they had just arrested. They needed to find them and have them

admit they were rehired with the company's knowledge. It is a crime

only if 10 workers are knowingly hired.

Investigators picked up two outside their homes. They staked out a

warehouse across the street from the Oceanside branch and videotaped

workers as they came and went for a week, resulting in six arrests.

There would be other evidence against Kay -- 368 workers had Social

Security numbers that did not match their names -- but rehiring

workers flagged in the audits would be the crux of the government's

case.

Kay says he ignored the warnings not to rehire the men: "They had been

working for me a long time."

"I didn't figure it was that big a deal," he says. "I didn't give it

enough thought. Poor decision on my part. Very poor decision."

__

Shortly after Kay arrived at work at 5 a.m. on Nov. 30, 2005, federal

agents stormed his 14-acre headquarters in an industrial part of

Riverside, 60 miles east of Los Angeles. In 14 hours, they would fill

a 16-foot truck with boxes of documents and computer hard drives.

Simultaneously, a helicopter with a loudspeaker circled over nearly

200 agents who raided the largest of Kay's 10 branches, in Oceanside,

north of San Diego. In all, agents arrested 17 employees at their

homes or as they came to load their trucks at 6 a.m.

Finally, Kay recognized he had a very serious problem. But it was too

late.

He signed up for a voluntary federal program to electronically verify

a job applicant's immigration status, which the White House wanted to

make mandatory under a proposed immigration overhaul that failed last

year. Only 37,000 of an estimated 7.5 million eligible employers have

enrolled.

Kay's new, high-profile immigration attorney insisted he stop relying

on employee referrals to fill jobs. The company put help-wanted ads in

newspapers and on its fleet of 225 trucks. It sought workers at job

fairs, halfway houses, probation departments, unemployment offices and

community colleges.

Kay offered to plead guilty to a felony and pay a fine but Carol Lam,

then the top federal prosecutor in San Diego, took a hard line. Lam

was one of eight U.S. attorneys who were fired last year by the Bush

administration after criticism that she was lax on immigration.

Kay says Lam wanted him to serve 18 months in prison. Prosecutors were

ready to file criminal charges against 10 to 12 managers.

The government relented, agreeing to recommend six months prison time

and charge only Kay and Michael McLaughlin, manager of the Oceanside

branch. McLaughlin, 43, dropped out of high school to work at Kay's

Idaho sawmill, followed his boss to California, and married his oldest

daughter.

Kay's wife and five children were split about whether to accept the

offer but Kay slowly reconciled himself to jail time. A daughter

helped him surf the Internet for accounts of life inside different

prisons. His workers had built fences at one of them.

Kay and his son-in-law pleaded guilty to knowingly hiring at least 10

illegal immigrants over a 12-month period.

"They give you some ground, you give them some ground," Kay says.

"That's the best I could get."

__

When Kay arrived at his sentencing in March, U.S. District Judge Barry

Ted Moskowitz said his initial instinct was to send him to prison.

Moskowitz joined the federal bench in 1986, the year that President

Reagan gave amnesty to 2.7 million illegal immigrants and promised to

crack down on employers who broke the law.

The crackdown never came, and the judge felt it was long overdue.

Neither the judge nor the young prosecutor could name even a single

U.S. employer who went to jail for hiring illegal immigrants even

though the practice is widespread.

Moskowitz knew Kay's prison term could set a national precedent to

determine how much time other employers would spend behind bars.

But Moskowitz noted Kay's strong work ethic and support from employees

who overflowed the courtroom into the hallway. The judge said he

couldn't ignore that Kay and McLaughlin treated employees like family.

After a federal raid forced them to fire about 200 illegal immigrants,

they paid each two weeks' severance, though they were not legally

obligated.

"Are these the poster children for being the first ones to get jail

time?" Moskowitz asked. "I think the answer is no."

Kay and McLaughlin were confined to their homes for six months with

permission to leave only to go to the office. Golden State and the two

executives forfeited $5 million in a deal with prosecutors.

Still, the government didn't get the six months prison time that it

badly wanted. Flores struggles to hide his disappointment.

"Jail time would have really sent a strong message," he says.

Kay, whose electronic monitor was removed from his ankle in September,

doubts the government can mount an effective crackdown on employers.

"On a smaller scale there are thousands of companies like me in

Southern California," he says. "Just go down, take out a company and

bust 'em. They won't do it. They don't have the manpower."

Kay has postponed retirement for three years, when he finishes

probation, and is trying to repair a business that was stricken by bad

publicity.

The Navy, his largest government contractor, wrote in February that he

was "lacking in the honesty and integrity necessary to do business

responsibly with the Federal Government." It banned him from seeking

federal contracts but allowed him to finish existing projects,

including a job awarded in 2006 for a chain-link barrier at a Border

Patrol station east of San Diego.

Golden State appealed, noting that it revamped hiring and that none of

its illegal workers were ever found on a federal job.

The Navy lifted the ban in June.

Golden State, now renamed Fenceworks Inc., has seen sales slow

severely amid the housing slump and its payroll has shrunk to 450. Kay

says most of the workers hired at halfway houses and job fairs didn't

pan out.

Kay, a longtime Republican, hopes the government overhauls laws soon

to permit some illegal immigrants to stay in the United States. If

not, he says, he may struggle to fill jobs when the housing market

rebounds.

Meanwhile, Kay is relying more on government work. One contract he bid

on, but did not get: a seven-mile extension of the U.S.-Mexico border

fence in California.

http://www.newsday.com/news/nationworld/wire/sns-ap-the-fence-mans-story,0,2996766.story?page=1