Government assistance

Federal, state and city money fueled growth of raided New Bedford factory

Neal Simpson

In the early 1980s, Francesco Insolia was an Italian immigrant, a sailor of modest upbringing who followed his American sweetheart across the Atlantic to settle in Massachusetts.

Today, as the head of a multimillion-dollar corporation, Insolia stands accused of building a personal fortune on the backs of illegal immigrants willing to work for little pay under appalling conditions.

But in the month since hundreds of federal agents descended on the New Bedford factory of Michael Bianco Inc., Insolia’s leather company — arresting the owner, his office managers and 361 alleged illegal workers –– it has become clear that Insolia did not build his textile empire on his own.

At every step of the way, he had the help of a key ally –– the United States government. Over the last five years, Insolia’s leather company has received contracts, grants and tax incentives from the federal, state and municipal government. The company received an estimated $221 million worth of federal contracts alone.

Charged with hiring illegal aliens and encouraging them to live in the United States, Insolia and his office managers could each face up to 10 and-a-half years in prison. Many of the workers they hired now face deportation. Insolia and the three managers are due in federal court on May 4 for a probable cause hearing.

In the meanwhile, Insolia, his company and his office managers have been listed on the government’s Excluded Party List System, a database of companies barred from accepting federal contracts.

Federal prosecutors have painted Insolia as a sweatshop operator who maximized profits by imposing harsh penalties on employees who talked while working or spent too much time in the bathroom.

But supporters have described Insolia as a driven but generous entrepreneur who was friendly and well liked by employees. One longtime friend, Alessandro Bocconcelli, said prosecutors have it wrong.

“What they’re describing is not the real Francesco,” Bocconcelli insisted. “I mean, unless he’s a Dr. Jekyll and Mr. Hyde.”

Though immigration officials weren’t tipped off about hiring practices at Michael Bianco Inc. until May of 2006, the government had reason to suspect the firm of suspicious activity four years earlier.

In February 2002, the company submitted a questionable filing to the Social Security Administration. Of the 83 payroll records it submitted, 19 contained bad Social Security numbers. Some numbers were “invalid.” Others were filed with names that didn’t match federal records.

The Social Security Administration sent MBI a “no match” letter, the first of many the company would receive as it filed more and more bad numbers over the next five years. Only once, in 2005, did MBI respond with new numbers.

By then, MBI had found a better line of business: government contracts.

A meager beginning

The company had been launched in 1985 by Insolia and a partner under the name Gioria Inc., aiming to “design, manufacture, buy, sell, import and deal in leather products for personal or household use,” according to the Articles of Organization filed with the state. For two decades, Michael Bianco Inc. produced high-end leather goods for direct sale through its web site and for retailers such as Timberland and Coach.

But then business started to dry up.

“After losing a lot of business from U.S. brands of leather goods who took their business overseas, we began to compete for large government contracts,” Insolia said in a recent statement.

MBI had started receiving smaller government contracts as early as 1998, when it signed a $96,000 deal with the Federal Supply Service for “individual equipment,” according to the Federal Procurement Data System. Over the course of the next year, Michael Bianco won six contracts, including a $1.6 million Department of Defense contract for “men’s outerwear.”

The company started taking in more and more government money. Between 2001 and 2003, MBI won approximately $10 million in U.S. Department of Defense contracts, according to prosecutors. The New Bedford factory employed about 85 workers at the time, according to its filings with the SSA.

Increased government scrutiny came with the contracts. After MBI won its first defense contract, a government inspector opened an office in the factory to assure that the products met government standards and were completed on time and on budget.

While the inspector’s “sole function” was to assure product quality, Defense Contract Management Agency spokesman Richard Cole said, he would have been required to report illegal activities or unsafe working conditions he observed.

In fact, when the inspector noticed that MBI’s growing workforce was primarily Hispanic, he asked company officials how the workers were hired, according to Cole. The inspector was told the company used an employment agency and didn’t investigate further.

“He had no legal obligation or authority to investigate further,” Cole said.

So MBI continued to grow. In 2004, the company hit the jackpot with an $82 million Department of Defense contract, according to prosecutors. By the end of that year, the company had grown to 325 workers.

But Insolia wasn’t sure the available labor could keep pace with the government contracts.

“In fact,” he said in the statement, “when we received our first government contract in 2004 we considered relocating the company out of a concern for being unable to meet the labor demands.”

But MBI stayed in New Bedford, and by the end of 2005 the company was reporting 520 employees.

That December, MBI employees got a scare when rumors circulated that immigration officials were inspecting a nearby company, prosecutors say. According to an affidavit, a factory manager came on the loud speaker and told workers they were free to leave. About 75 fled, hiding in cars or boxes on the third floor.

Federal probe

In May 2006, one worker began talking with officials at U.S. Immigration and Customs Enforcement, accusing MBI of knowingly hiring illegal immigrants. That fall, a new woman came to MBI looking for work. She said her name was Yolanda Ramos-Mendez and told an MBI manager that she had come to the U.S. illegally from Mexico.

But Ramos-Mendez didn’t tell the manager about her other job –– as an undercover federal immigration agent.

Prosecutors say MBI managers told Ramos-Mendez how to buy fake documents, gave her a sewing job and even handed over a $150 advance for food. When she told Insolia that she did not have any immigration papers, according to an affidavit, he told her that “todo el mundo tiene papeles” –– “everyone has papers.”

That winter, three legal female workers went to a factory manager to request jobs for their grandchildren, according to an affidavit. But the manager shot them down.

She “told the women that MBI would not hire their grandchildren because Insolia only wanted to hire illegal aliens,” the affidavit alleges.

Then, on Feb. 1, 2007, MBI filed what may be its last payroll records. The company claimed to have 646 employees, but the SSA determined that 428 Social Security numbers, or 66 percent, were bad.

One month later, in an operation dubbed “United Front,” hundreds of federal agents surrounded the Michael Bianco factory, arresting four company managers, rounding up 361 suspected illegal immigrants and thrusting the factory into the national immigration debate.

With an estimated population of 93,000, New Bedford is the largest town on Massachusetts’ “SouthCoast,” a region west of Cape Cod.

It also boasts one of the worst unemployment rates in the state. In February, New Bedford Proper’s unemployment rate hit 11.2 percent, almost double the statewide rate of 5.8 percent, according to data from the state Department of Workforce Development.

Though New Bedford is still the nation’s top-producing fishing port, according to the National Oceanic and Atmospheric Administration, far more workers are now employed in the city’s factories than on its docks. Nearly one in five Greater New Bedford residents are employed in the manufacturing sector, accord to a 2006 Department of Workforce Development report.

But Greater New Bedford’s factories aren’t producing any new jobs. In fact, the industry lost 200 jobs –– not counting those at MBI –– last year alone, and is now at its lowest level since 1996.

Given those statistics, MBI appeared to have been an economic boom to New Bedford in 2004 when the company won the $82 million defense contract and Insolia began wondering how he would get enough workers for his growing factory.

But Insolia, worried that he would not find enough labor in New Bedford, began thinking about moving his factory somewhere else, even though there was an average of 5,798 unemployed workers in Greater New Bedford that year, according to state data.

The local government came to the rescue.

“State and local officials asked to tour our facility and then decided to initiate efforts to meet our workforce needs by helping to procure employees,” Insolia wrote in a statement. “With the aid and encouragement of local officials we were able to remain in New Bedford and continue to grow our business and contribute to the local economy.”

City officials helped MBI win a state tax benefit in exchange for keeping its factory jobs in the city. The deal, which hinged partly on whether the company won the $82 million contract, would have saved the company $80,000 in taxes over five years.

So far, the company has reaped about $53,000 in savings. The city now wants that back.

“We will be going after those dollars,” said Matt Morrissey of the New Bedford Economic Development Council. He said the agency is petitioning to decertify the company.

Though the program is regulated by the state, MBI’s request for a tax benefit had to pass through the mayor’s office, an EDC board and the city council –– all of which gave the go-ahead in 2004.

As part of the deal, MBI was required to produce a certain number of jobs for New Bedford residents. The company filed quarterly reports to the state and New Bedford EDC to document the job creation.

“They were able to produce names and Social Security numbers,” Morrissey said. “That satisfied our local requirements.”

In addition, the Boston Globe reported this week that Massachusetts twice awarded MBI grants to help train entry-level workers.

Department of Workforce Development spokesman Rob Lamontagne declined to comment on the grants, but published reports indicate that they were worth $111,150.

The second grant, worth $44,900, was reportedly awarded this January. By then, immigration officials had already begun meeting with state public safety officials about the impending factory raid, according to an ICE operation timeline.

As Insolia and his three managers prepare to go to trial, some unexpected allies are backing Michael Bianco Inc.

Last week, New Bedford Mayor Scott Lang met with local and state officials, including representatives for Sen. John F. Kerry and Edward M. Kennedy, to find a way to save the alleged sweatshop.

Lang proposed appointing a trustee to oversee the company while Insolia and his manager are on trial, hoping to reactivate the federal contracts that were suspended after the raid.

“It’s important for the city to have jobs available for the people who live here,” said Lang spokeswoman Elizabeth Treadup. “The mayor feels the priority is to keep the company in business and keep the jobs in New Bedford.”

Meanwhile, the Defense Contract Management Agency, which has had an inspector housed in the MBI factory for years, has countered claims that Insolia was operating a sweatshop.

“Our people in the plant certainly didn’t observe any unsafe working conditions,” said spokesman Richard Cole.

For its part, MBI has hired Rasky Baerlein, a politically connected public relations firm, to help salvage the manufacturer’s reputation. Last month, the firm produced a video press release showing a tidy factory and grinning workers who chat with Insolia as he meanders from station to station. The camera crew interviewed several workers who vehemently deny the charges against Insolia.

But the immigrant-turned-entrepreneur may have a harder time convincing a jury.