Fed probe includes PulteGroup

Investigation of top homebuilders focuses on contractors' pay

Louis Aguilar/ The Detroit News

Michigan's largest new-home construction company is among four top homebuilders whose pay practices are being investigated by the U.S. Labor Department.

Bloomfield Hills-based PulteGroup Inc., Lennar Corp., D.R. Horton Inc. and KB Home received a letter last month from the department requesting the firms to provide the names, addresses, Social Security numbers, pay rates and hours worked for all employees during the past two years, according to the Wall Street Journal. A Labor Department spokeswoman Thursday confirmed the inquiry but declined further comment.

Pulte spokesman Travis Parman on Thursday acknowledged the company had "received a general inquiry" from the Labor Department and "still are working to evaluate its scope."

The investigation focuses on the pay of independent contractors, who are a staple of the construction job site, said Jack Micenko, an analyst for Susquehanna Financial Group/SIG who follows PulteGroup.

"I don't think there is material financial risk to the builders in regards to the Labor Department investigation," Micenko said in an email.

"Headcount is down significantly over the past five years, and builders have been pushing down subcontractors as well to lower construction costs.Construction costs are down 25 percent in the past year, partly by pushing supplies, partly by labor," said Micenko, whose firm trades Pulte stock for its institutional clients. "I think this is a byproduct of that frustration."

For years, unions have decried the pay levels and working conditions in the construction industry. Those protests increased after PulteGroup received $800 million in public funds under the Worker, Homeownership and Business Assistance Act of 2009.

A coalition of labor unions have protested various meetings of PulteGroup board of directors since then, demanding the company create more jobs.

Metropolitan Detroit AFL-CIO President Saundra Williams said in May: "We have shown up at virtually every public event attended by Pulte executives to ask one simple question: Where did the money go that Pulte got from the federal government to create the jobs? There needs to be accountability here."

PulteGroup's stock finished down 2.2 percent Thursday at $4.48 a share on the New York Stock Exchange. The Dow Jones average declined 1 percent.

But the lack of a clear new stimulus plan from Federal Reserve chief Ben Bernanke on Thursday, which translates into weak job growth and lower consumer confidence, is "what weighed on builder stocks," analyst Micenko said.

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