SAN DIEGO -- In what may be the first case of its kind in the federal court in San Diego, one of California's largest fence-building companies, its founder, and a vice president were sentenced Wednesday to probation and large fines for knowingly hiring illegal immigrants.

Melvin Kay Jr., 64, who founded Golden State Fence Company, and Michael McLaughlin, 42, Kay's son-in-law and a company vice president, also were sentenced to six months of home confinement and more than 1,000 hours of community service within the next two years.

Golden State, which is based in Riverside and has a branch in Oceanside, was ordered to forfeit $4.7 million to the U.S. government. That total represents the amount of profit the government believed the company derived through its use of undocumented workers. Kay was ordered to pay a $200,000 fine, and McLaughlin must pay a $100,000 fine.

The company, Kay and McLaughlin pleaded guilty in December to knowingly hiring at least 10 illegal immigrants within a 12-month period.

"I would like to apologize for my company and my behavior," Kay said in a courtroom filled with family and company employees. Dozens more employees waited outside the courtroom because no seats were available.

Golden State's sales soared from $60 million in 1998 to $150 million in 2004, according to a biography of Kay provided by the company.

Kay's attorney, Richard Hirsch, said Golden State's sales have dropped 40 percent since the case gained publicity in December. It has lost 12 to 15 "substantial contracts" and has been forced to lay off 150 employees, Hirsch said. About 30 percent of the company's work came from government contracts, but the company is no longer allowed to obtain those contracts, Hirsch said.

Golden State's work for the government included work on a border fence in 1997.

"There's never been a suggestion, your honor, and I don't believe there ever will be, that any undocumented workers were used on government contracts," Hirsch told the judge Wednesday, adding that the government screened all of those employees.

Copies of the plea agreements in the case, provided by the U.S. attorney's office in December, stated that federal immigration officials gave a "no hire letter" to Golden State after reviewing company documents in 1999 and again in 2004. Both letters identified immigrants who were not authorized to work in the United States, the plea agreements stated.

At least one of the workers named in the 1999 letter was arrested by immigration agents at the company in 2004. Federal immigration agents saw another employee who had been named in both letters working at the company's Oceanside office in June 2005, and two other employees who were named in the 2004 letter also were working for the company in Oceanside on other dates in 2005, the plea agreement stated.

Federal agents searched the company's Riverside and Oceanside offices on Nov. 30, 2005, seized evidence and arrested 16 employees. Many of the company's former employees told agents that the company hired them despite knowing their immigration status did not authorize them to work, the plea agreement stated.

Kay's and McLaughlin's attorneys emphasized in court Wednesday that the company did not employ day laborers. They said all of the company's employees, including undocumented workers, were well compensated -- with salaries as high as $60,000, $70,000 or $100,000 a year -- and benefits that included health insurance, life insurance and vacation time. The company also withheld income tax and paid Social Security for all of its employees, the attorneys said.

"This case is not about the exploitation of employees," Hirsch said.

Assistant U.S. Attorney Christopher Alexander said in court that Golden State is not the worst company in terms of employing illegal immigrants, but it did violate the law.

"It's companies like Golden State that continue to contribute to the (illegal immigration) problem," Alexander told U.S. District Court Judge Barry Ted Moskowitz. "Make sure that these individuals know that violating the law is not something that is acceptable."

Moskowitz noted efforts the company has undertaken since 2005 to prevent hiring illegal immigrants, including hiring a full-time immigration attorney to advise the company and its officials, conducting seminars to educate company employees, and participating in an employment verification pilot program run by the federal Immigration and Customs Enforcement agency.

- Contact staff writer Scott Marshall at (760) 631-6623 or smarshall@nctimes.com.

Links:

http://www.goldenstatefence.com/index.php

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