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APPENDIX • Remarks before Senate Oversight Committee on Decision to Award Contract for Enhanced Inspection System to Parsons Infrastructure an...

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APPENDIX



Remarks before Senate Oversight Committee on Decision to Award

Contract for Enhanced Inspection System to

Parsons Infrastructure and Technology Group, Inc.

July 29, 1998

by James A. DiEleuterio, Jr.

State Treasurer

MR. CHAIRMAN, MEMBERS OF THE COMMITTEE, THANK YOU FOR INVITING ME TO DISCUSS MY DECISION TO AWARD THE BID FOR THE STATE'S ENHANCED MOTOR VEHICLE INSPECTION SYSTEM TO PARSONS INFRASTRUCTURE AND TECHNOLOGY GROUP OF PASADENA, CALIFORNIA.

I WOULD LIKE TO BEGIN MY REMARKS THIS MORNING BY MAKING THIS CLEAR: MY DECISION TO AWARD THE CONTRACT TO PARSONS INFRASTRUCTURE AND TECHNOLOGY GROUP IS BASED SOLELY ON: THE FINDINGS OF THE EVALUATION COMMITTEE; THE RESULTS OF THE BACKGROUND INVESTIGATION PERFORMED BY THE DIVISION OF PURCHASE AND PROPERTY; AND, ON MY DETERMINATION THAT IT IS IN

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THE BEST INTEREST OF THE STATE OF NEW JERSEY TO AWARD THIS CONTRACT.

LAST YEAR WE RECEIVED ONLY ONE BID FOR THIS PROJECT WHICH I REJECTED ON THE GROUNDS THAT IT WAS NOT TECHNICALLY COMPLIANT WITH THE RFP. FOLLOWING THAT ACTION, THE DIVISION OF PURCHASE AND PROPERTY, AT MY INSTRUCTION, PROVIDED EVERY PARTICIPANT IN THE PRE­ BIDDERS CONFERENCE WITH THE OPPORTUNITY TO IDENTIFY THEIR CONCERNS WITH THE PROJECT SPECIFICATIONS. OUR GOAL IN THIS PROCESS WAS TO WRITE A NEW RFP THAT ADDRESSED THE CONCERNS OF THE ENTIRE INDUSTRY. WE ADDRESSED QUESTIONS RAISED BY EVERY PARTICIPANT WITH EX4CTLYTHE SAME DEGREE OF CONSIDERATION.

IN FEBRUARY OF THIS YEAR THE DIVISION ISSUED A NEW RFP. A MANDATORY PRE-BIDDERS CONFERENCE WAS HELD IN MARCH AND, AS YOU CAN SEE BY THE LIST OF ATTENDEES



INCLUDED IN YOUR HANDOUT, NUMEROUS COMPANIES EXPRESSED AN INTEREST IN THE PROJECT. AS A MATTER OF 2

FACT, I WAS, FRANKLY, SURPRISED THAT WE RECEIVED ONLY ONE PROPOSAL ON JUNE 12 WHEN THE BID WAS OFFICIALLY OPENED.

NEVERTHELESS, THE PARSONS BID UNDERWENT THE SAME PROCESS WHICH GOVERNS THE CONSIDERATION OF EVERY PUBLIC BID. A TEAM OF CAREER STATE OFFICIALS FROM: THE DEPARTMENT OF TRANSPORTATION; THE DIVISION OF MOTOR VEHICLES; THE DIVISION OF PURCHASE AND PROPERTY; AND, THE DEPARTMENT OF ENVIRONMENTAL PROTECTION, REVIEWED THE PROPOSAL TO ENSURE THAT IT WAS TECHNICALLY RESPONSIVE TO THE RFP. I WOULD LIKE TO NOTE HERE THAT OFFICIALS FROM THE FEDERAL ENVIRONMENTAL PROTECTION AGENCY AND THE FEDERAL HIGHWAY ADMINISTRATION PARTICIPATED IN THE DEVELOPMENT OF THE RFP AND THE REVIEW OF THE PROPOSAL.

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AFTER A CAREFUL REVIEW OF THE BID, THE COMMITTEE ADVISED ME THAT IT WAS RESPONSIVE TO THE TECHNICAL SPECIFICATIONS OF THE RFP.

IN ADDITION TO THE TECHNICAL REVIEW, THE DIVISION OF •

PURCHASE AND PROPERTY UNDERTOOK A COMPREHENSIVE REVIEW OF PARSONS INFRASTRUCTURE AND TECHNOLOGY. THIS REVIEW FOCUSED ON TWO CRITICAL QUESTIONS: IS THE COMPANY QUALIFIED TO DO THIS WORK; AND, IS THE COMPANY FREE OF ANY LEGAL ENCUMBRANCES WHICH MAY AFFECT ITS ABILITY TO EXECUTE THE TERMS OF THE CONTRACT.

WHAT WE FOUND - AND WHAT, IN MY OPINION, HAS BEEN GROSSLY UNDER-REPORTED - IS THAT NOT ONLY IS PARSONS A LEADER IN THE FIELD OF ENGINEERING AND CONSTRUCTION, BUT THAT IT HAS THE KIND OF LEGAL RECORD OF WHICH VIRTUALLY EVERY OTHER MAJOR CORPORATION WOULD BE ENVIOUS.

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ON THE QUESTION OF WHETHER PARSONS HAS THE FINANCIAL RESOURCES AND EXPERIENCE TO UNDERTAKE THIS PROJECT, CONSIDER THIS: THE COMPANY IS RANKED FOURTH IN THE •

COUNTRY IN THE CATEGORY OF DESIGN AND ENGINEERING AND IT IS RANKED 29 TH IN THE COUNTRY IN THE CATEGORY OF CONSTRUCTION.

BY ANY MEASUREMENT, PARSONS' QUALIFICATIONS AND ITS EXPERIENCE ARE QUITE IMPRESSIVE. THIS IS A CRITICAL POINT BECAUSE IT IS ABSOLUTELY NECESSARY THAT A PROJECT OF THIS SCOPE AND SIGNIFICANCE BE ENTRUSTED TO A COMPANY WITH A PROVEN TRACK RECORD. BASED ON THESE FACTS, I HAVE TOTAL CONFIDENCE IN THE ABILITY OF PARSONS TO EXECUTE THE TERMS OF THE CONTRACT.

YOU MAY FIND IT INTERESTING TO KNOW THAT THE CALIFORNIA DEPARTMENT OF TRANSPORTATION FEELS THE SAME WAY. IN FACT, IT GAVE PARSONS ITS "EXCELLENCE IN

TRANSPORTATION" AWARD FOR "OUTSTANDING ACHIEVEMENT" 5

IN THE DEVELOPMENT OF A MAJOR STATE-FUNDED PROJECT IN LOS ANGELES COUNTY IN 1997.

LET ME QUOTE A LETTER TO PARSONS FROM THE PROJECT DEVELOPMENT SUPERVISOR IN THE CALIFORNIA DEPARTMENT OF TRANSPORTATION:

"IT GIVES ME GREAT PLEASURE, ON BEHALF OF CALTRANS, TO CONGRATULATE YOU AND YOUR STAFF FOR OUTSTANDING ACHIEVEMENT IN THE DEVELOPMENT OF THE METRO RED LINE WILSHIRE EXTENSION.

"THE CALIFORNIA DEPARTMENT OF TRANSPORTATION IS PROUD TO ACKNOWLEDGE THE ACHIEVEMENTS OF EVERYONE WHOSE PROFESSIONAL TALENT, DEDICATION AND COMMITMENT TO EXCELLENCE CONTRIBUTED TO OUR STATE'S CONTINUED LEADERSHIP IN TRANSPORTATION SYSTEM DESIGN, DEVELOPMENT, MAINTENANCE AND OPERATION."­ SIGNED, R.P. WEA VER. DEPUTY DIRECTOR, PROJECT DEVELOPMENT, JUNE 20, J997.

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INCIDENTALLY, CALTRANS GAVE THE AWARD AND COMMENDATION TO PARSONS FOR THE VERY MTA PROJECT WHICH IS NOW AT THE CENTER OF SO MUCH DISCUSSION, AND IF YOU WILL NOTE THE DATE ON THE LETTER, YOU CAN SEE THAT IT DID SO AFTER THE SO-CALLED WHISTLEBLOWER LAWSUIT WAS FILED.

IN THE COURSE OF ITS RESEARCH, THE DIVISION OF PURCHASE AND PROPERTY CONTACTED THE FEDERAL GOVERNMENT, WITH WHOM PARSONS IS A MAJOR CONTRACTOR. THE FEDERAL GOVERNMENT DOES NOT HESITATE TO FINE, PENALIZE OR SEEK JUDGMENTS AGAINST COMPANIES WHICH IT BELIEVES HAVE VIOLATED FEDERAL CONTRACTS OR PERFORMED UNSATISFACTORILY.

ONCE AGAIN, THE DIVISION FOUND A REMARKABLY CLEAN

.

RECORD. THE FEDERAL GOVERNMENT HAD NO CLAIMS AGAINST PARSONS; IT HAD TAKEN NO ACTIONS TO SUSPEND OR DEBAR PARSONS; AND IT CONTINUES TO CONTRACT WITH

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PARSONS ON MAJOR CONSTRUCTION AND ENGINEERING PROJECTS AROUND THE COUNTRY.

NOW I WOULD LIKE TO DISCUSS THAT PART OF OUR EVALUATION WHICH FOCUSED ON CIVIL MATTERS.

THE STATE CONDUCTED A THOROUGH SEARCH OF THE NUMBER AND NATURE OF CIVIL JUDGMENTS RENDERED AGAINST PARSONS. THE DIVISION OF PURCHASE AND PROPERTY COMMISSIONED DUNN & BRADSTREET TO PERFORM A COMPUTER SEARCH FOR ALL JUDGMENTS OVER $1 MILLION LEVIED AGAINST PARSONS IN THE PAST 10 YEARS.

WHAT WE FOUND IS THAT WITH OVER 100,000 CONTRACTS IN FORCE DURING THIS PERIOD, THERE WERE ONLY TWO SUCH JUDGMENTS RENDERED. ONE OF THEM WAS SUBSEQUENTLY OVERTURNED. THE ONLY REMAINING JUDGMENT WAS FOR $3 MILLION AND IT CAME AS THE RESULT OF A PERSONAL INJURY

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SUIT WHICH HAD NOTHING TO DO WITH THE COMPANY'S PERFORMANCE OR INTEGRITY. THAT IS A REMARKABLE 8

RECORD FOR A COMPANY OF THIS SIZE AND COMPLEXITY. INCIDENTALLY, PARSONS HAS PERFORMED 18 PROJECTS FOR THE STATE OF NEW JERSEY IN THE PAST 10 YEARS, AND WE HAVE BEEN MORE THAN SATISFIED WITH ITS PERFORMANCE IN ALL OF THOSE CASES.

THE SUITS IN CALIFORNIA WHICH HAVE BECOME THE FOCUS OF SO MUCH CONTROVERSY ARE ALSO WORTH MENTIONING. FIRST, LET ME CLARIFY SOMETHING: THESE PENDING SUITS ARE NOT CRIMINAL CASES, THEY ARE CIVIL MATTERS. UNDER NEW JERSEY STANDARDS, A PENDING CIVIL MATTER IS NOT IN AND OF ITSELF REASON TO DISQUALIFY A COMPANY. THE EXECUTIVE ORDER AND REGULATIONS GOVERNING DEBARMENT AND SUSPENSION DO NOT PERMIT SUCH AN ACTION AGAINST THIS FIRM BASED ON THE EXISTENCE OF THESE ALLEGATIONS.

WITH RESPECT TO THESE SUITS, IT WOULD BE INAPPROPRIATE FOR ME AS STATE TREASURER TO CHARACTERIZE THE LITIGATION. THE QUESTION OF WHETHER A CHARGE HAS 9

LEGAL MERIT IS NOT MINE TO ANSWER. HOWEVER, IT IS MY JOB TO DETERMINE WHETHER LITIGATION INVOLVING A POTENTIAL OR CURRENT STATE CONTRACTOR REFLECTS NEGATIVELY ON THE COMPANY'S INTEGRITY, OR WHETHER THE OUTCOME OF THE LITIGATION COULD PLACE THE STATE OR THE PROJECT IN JEOPARDY.

IT WAS CLEAR TO ME BASED ON ALL OF THE FACTS AT MY DISPOSAL, AND BASED ON A COMPREHENSIVE REVIEW BY THE STATE, THAT THIS LITIGATION WOULD NOT AFFECT PARSONS' ABILITY TO MEET THE TERMS OF THE CONTRACT. INDEED, THE UNPROVED ALLEGATIONS MADE IN THESE CASES APPEAR TO BE INCONSISTENT WITH PARSONS ' INTERNATIONAL REPUTATION AND RECORD OF PERFORMANCE.

THE FACT THAT THE STATE OF CALIFORNIA AND THE FEDERAL GOVERNMENT REFUSED TO JOIN THE SUIT AGAINST PARSONS, DESPITE THE USE OF STATE AND FEDERAL FUNDING FOR THE

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PROJECT, IS INSTRUCTIVE, PARTICULARLY IN VIEW OF THE CALIFORNIA DEPARTMENT OF TRANSPORTATION 10

"EXCELLENCE" AWARD WHICH I MENTIONED EARLIER IN MY REMARKS.

IT SHOULD ALSO BE NOTED THAT THE KIND OF OVER-BILLING ALLEGED IN THE CALIFORNIA CASES WOULD BE VIRTUALLY •

IMPOSSIBLE UNDER THE TERMS OF THIS CONTRACT.

IN THE CALIFORNIA CASE, THE CONTRACT IN QUESTION WAS A COST-PLUS CONTRACT. A COST-PLUS CONTRACT ESSENTIALLY PERMITS THE CONTRACTOR TO BILL THE STATE FOR ALLOWABLE COSTS AND ALLOWABLE OVERHEAD. IN OTHER WORDS, IT DOES NOT SET A FIRM PRICE FOR THE PROJECT. IT ALLOWS THE CONTRACTOR TO BE REIMBURSED BY THE STATE AS THE PROJECT ADVANCES.

THE CONTRACT WHICH WE ARE PREPARING TO AWARD, LIKE MOST OF OUR CONTRACTS, IS WHAT WE CALL A FIRM-FIXED­ PRICE CONTRACT. IN THIS TYPE OF CONTRACT, THE COST TO It

THE STATE IS FIRMLY ESTABLISHED. THERE IS A FIRM-FIXED PRICE ESTABLISHED FOR THE COST OF CAPITAL

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CONSTRUCTION AND A FIRM-FIXED PRICE FOR EACH INSPECTION PERFORMED.

THE STATE WILL NOT BE LIABLE FOR REIMBURSING PARSONS FOR ANY UNANTICIPATED COST INCREASES IT MAY INCUR

• EITHER FOR DESIGNING AND BUILDING THE FACILITIES OR FOR OPERATING AND MAINTAINING THE SYSTEM. THIS FORM OF CONTRACT ENSURES THAT THERE WILL BE NO SURPRISES. BOTH PARTIES ARE BOUND TO THE PRICES AND CONDITIONS ESTABLISHED IN THE CONTRACT.

THE ONLY WAY OUR COSTS COULD BE INCREASED IS IF THE VENDOR IDENTIFIES AN UNANTICIPATED CHANGE IN CONDITIONS. FOR EXAMPLE, IF DURING THE BUILDING PHASE OF ONE OF THE FACILITIES PARSONS AND THE STATE DISCOVER AN UNANTICIPATED CONDITION WHICH REQUIRES ENVIRONMENTAL REMEDIATION, PARSONS COULD REQUEST A CONTRACT MODIFICATION. THE BASIS FOR THAT MODIFICATION WOULD HAVE TO BE VERIFIED BY THE PROJECT

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MANAGERS AND THE CONTRACT MODIFICATION WOULD THEN

HAVE TO BE APPROVED BY ME.

IF, ON THE OTHER HAND, PARSONS DETERMINES AT SOME POINT THAT IT MUST HIRE MORE EMPLOYEES TO HANDLE AN UNEXPECTED INCREASE IN VOLUME, THE COMPANY - NOT THE STATE - WOULD BE RESPONSIBLE FOR THE ADDITIONAL COST.

NOW I WOULD LIKE TO SHIFT YOUR ATTENTION TO THE STATE LAW UNDER WHICH I HAVE PROCEEDED TO THIS POINT.

THE CLEAN AIR COMPLIANCE ACT OF 1995 ENACTED BY THIS LEGISLATURE MANDATES THE USE OF AN ENHANCED MOTOR VEHICLE INSPECTION SYSTEM FOR BRINGING NEW JERSEY INTO COMPLIANCE WITH THE FEDERAL CLEAN AIR ACT. WHEN YOU CONSIDER THE ALTERNATIVES TO THIS SYSTEM - A FEDERALLY IMPOSED BAN ON NEW HIGHWAY CONSTRUCTION OR, EVEN WORSE, SWEEPING FEDERAL RESTRlCTIONS ON NEW BUSINESS CONSTRUCTION OR EXPANSION - IT IS CLEAR THAT THIS LAW WAS NECESSARY.

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UNDER THAT LAW, THE NEW JERSEY STATE TREASURER IS CHARGED WITH SOME VERY CLEAR RESPONSIBILITIES, AND I HAVE BEEN CAREFUL TO MEET THEM AT EVERY STAGE OF THIS PROCESS.

FIRST, I WAS CHARGED WITH COORDINATING THE ISSUANCE OF AN RFP WHICH SETS AMBITIOUS BUT REALISTIC GOALS. THAT WE HAVE DONE - TWICE -- WITH THE EXPLICIT APPROVAL OF FEDERAL REGULATORS.

SECONDLY, AS TREASURER I AM RESPONSIBLE FOR ENSURING THAT THE REVIEW PROCESS IS COMPREHENSIVE AND EXHAUSTIVE. AS I DEMONSTRATED EARLIER IN MY REMARKS, THIS BID, AS WELL AS PARSONS INFRASTRUCTURE AND TECHNOLOGY, WAS EXAMINED WITH PAINSTAKING SCRUTINY.

THIRDLY, THE LAW REQUIRES THAT THE TREASURER AWARD THIS CONTRACT. THIS PROVISION IS UNIQUE BECAUSE THAT

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RESPONSIBILITY NORMALLY FALLS TO A PURCHASING OFFICER WITHIN THE DIVISION OF PURCHASE AND PROPERTY.



IN CARRYING OUT THIS RESPONSIBILITY, THE TREASURER MUST CHOOSE BETWEEN THREE POSSIBLE CONTRACT SCENARIOS: TO DESIGN AND BUILD ONLY; TO DESIGN, BUILD, OPERATE AND MAINTAIN; AND A HYBRID COMBINATION OF THE TWO PREVIOUS SCENARIOS. I WOULD ALSO NOTE THAT A SERIES OF MEETINGS WERE HELD WITH THE AFFECTED UNIONS TO PROVIDE THEM WITH SUFFICIENT INFORMATION TO PREPARE A PROPOSAL.

WE RECEIVED ONE BID. THIS BID. TO DESIGN, BUILD, OPERATE AND MAINTAIN A NEW MOTOR VEHICLE INSPECTION SYSTEM. IN MY JUDGMENT, IT IS A RESPONSIVE BID FROM A RESPONSIBLE BIDDER.

THEREFORE, IN THE ABSENCE OF A LEGALLY SUSTAINABLE BASIS FOR REJECTING THE BID, I AM LEFT WITH TWO CHOICES: TO AWARD THE CONTRACT; OR, TO REJECT IT AND PLACE THE 15

STATE IN JEOPARDY OF FEDERAL SANCTIONS, INCLUDING THE LOSS OF SUBSTANTIAL FEDERAL FUNDS, AND LEGAL ACTION BY THE BIDDER.

BASED ON THE FINDINGS OF OUR REVIEW AND INVESTIGATION, I BELIEVE THAT THERE IS NO COMPELLING LEGAL, TECHNICAL OR PRACTICAL REASONS FOR REJECTING THIS BID. I AM ALSO CERTAIN THAT THROUGHOUT THIS PROCESS, I HAVE BEEN FAITHFUL TO THE LETTER AND SPIRIT OF THE CLEAN AIR COMPLIANCE ACT OF 1995, AS WELL AS THE PURCHASING LAWS UNDER TITLE 52 OF THE NEW JERSEY STATUTES.

I WOULD BE HAPPY TO ANSWER ANY QUESTIONS FROM THE COMMITTEE.

THANK yOU.

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DEPARTMENT OF TRANSPORTAnON OFACE OFlME D1RECTDR '12llN~

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523 West 6th Strut, Suit. 400 Los Anleles, CA 9001"

Ladies and Gentle.me=: It lives me ll'u1 pleuure, on behalf of C&1tl&m. to COI:lgl'&tulat. you anl your Ita!! for outctandinr aW&'gem-.Dt bl the d.evelopment efthe Metro Red Line, W"1lshire Extension. .

This project waIll'KOgmzed as the wiDDer in Cattrcry 1 - Intermodal Tn.nsportation in the 1997 Ex.cellance in Tranipa:tUion Awards competition. The ~s noted that, "By ~ cnly two mil. ana three 'tatiOt1S to the MTA's rail tran:sit ~t.em, the subway's ridClnh~ numhcn m.c:r.ued from 18,000 a day too 56,500 the first m.ontb. The jury lItU &leo impruMd wi1h the aesthetic t:t'e.I.bJlent ~t mvolva.d the creation oflandseaped all.d .....atll" amwty in the oomml.:.ni ty...

The California Department ofTn.nsportation is proud to ackDowledte the achievements of everyone whose profeuioIW talmt, dedi.ation. and coCnUtment to e:x.celle.nce contributed to our statc'~ colItinued la.denhiJl in trmsport&tioD system design, development, maintenaIl.ce, &nd operation.

Please c.onvey ~ congratulations to all those respamible for a jab weU dClDc. Information regudillf prue.t\ta.tion oftht Excellecca Awards will be forwmed to you s.hortly.

1J.dl~

&.P. WEAVER

Deputy Dinttm" PrQject Development

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APPENDIX L

t\llleric~n

.

Official List of Those Who Signed in nt the 11M Bidder's Conference

Decal & Mfg. Co

I'\ SO (iarrell Dr.

Wrlll NJ 07719

ATTN: Willirlm II. Thomas

I'hone: 732-280-7?44

Aspire, Inc. 925 Lincoln Highway Morrisville PA J 9067 AlTN: Rinaldo Minicucci Phone: 215-295-0722

'

Classic Vehicle Advocate Group 48 Bush Ave. West Pallerson NJ 07424-33 II ATfN: Butch De Zuzio Phone: 973-881-8838

de J;J lorre Klal/smeir Consl/lting 1401 foxlail Cove AI/stin TX 78704 ATTN Rob KI"usme;n

Deloille & Touche 144 West Slate Street Trenton NJ 08608-1102 ATfN: Virginia Stillwell

[A Engineering Science & Technology 3 W;Jshinglon Cenler Newburgh NY 12550 ATyN: Art Vatsky

Environmenlal Systems Producls 7 Kripes Rd. East Granby CT 06025 ATfN: Rinaldo Tedeschi

Envirotest Syslems Corp. 246 Sobrante Way Sunnyvale CA 94086 ATfN: Joe McKeon

Ilunter Engineering Co. 995 I'lowsh~re Rd. Y;}fl/ley I'A I?OG7 ATTN: DOl/g Woolvenon

J. L. Associates, Inc.

1201 Edwin Ave.

Allnnlic City NJ 08401.

ATfN: Patrick Nolan

Keating Technologies, Inc. 4525 E. Skyline Drive, Suile 109 Tuscon AZ 85718 ATfN: Thomas Fournier

L. R. Kimball & Assoc.

1150 Rrlrilrln Rd., Suite 102 (mnford NJ 07016 FAX: Gnry R. Pillman

Local518 S.E.I.U 880 E. 5th Street Florence NJ 08518 AlTN: Kevin P. Mattis

MAHA Barfield Court Marco Island FL ATfN: Jerry Aman

Mnxwell Emissions Test Systems J 18 Pickering Way, Suite 104 Exton PA 19341 kITN: Geri Courington

MCI Telecommunicalions 2495 Natomas Park ~rive. Suile 550 Sacramento CA 95833 AlTN: Richard A. Storiek

MCI Telec9mmunicalions 979 East Park Drive Harrisburg PA 1711\ ATfN: Joseph Ballista

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Dynamometer Car

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3I Nonhampton Drive I Willingboro NJ 08046 ATfN: Russell F. Bent

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.

Parsolls Enl;,,,eering Science

100 W. Wainul SI.

Pasadena CA 91 121\

AI TN: Jim Shappcll

Phone: 626-41\0-6000

Parsons Infrastructure & Technology Group 2233 Wall Avenue, Suite 330 Sacramento CA 95825 AlTN: Larry Shemood

ProteclAir, Inc,

5830 Campus Rd.

Mississauga Ontario Canada L4V·

102

Sherman rngillccrillg, Inc.

2700 W. Lawrence Ave., Suite M

Springfield II. 62701\

AT/'N: rrank Sherman

Siemcns 400 Atrium Drive Somerset NJ 08873 AnN: Tom MichlilC

Techni Systems, Inc. 116 Woodview Lane Cinnaminson NJ ATTN: William 8. Young

TeslcOfll. Inc.

25 Walker Way

Albany NY 12205

AITN: Edmund Trifari, Jr.

QCSC 52AvenueE Ladi NJ 07644·1908 AllN: Daniel Buckley

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I

STATEMENT OF ALAN KAUFMAN

Senate Legislative Oversight Committee - July 29, 1998

Good morning. My name is Alan Kaufman. I am a National Staff Representative with the Communications Workers of America. CWA is pleased to have the opportunity to speak to the members of the Senate Legislative Oversight Committee. We never called for hearings because we don't think the process should have gotten this far. We never should have been in the position to even contemplate privatizing inspections. The Parsons bid should be rejected, period. However, we are at this point in the process, a hearing was called, and we are prepared to speak with the Committee on all the important issues this contract raises. We are here to provide you with evidence that this contract will cost the taxpayers of New Jersey millions more than to keep inspections public as they have been for sixty years. We are here to provide you with evidence that the allegations that have been made against Parsons go directly to the issue of their integrity, honesty and ability to do the job. And we are here to say that it is unconscionable to privatize a workforce that has given years of dedicated and honest service to the state and that has been trained at the expense of the New Jersey taxpayers. To turn this workforce over to a private company from California that has contributed nothing to New Jersey is something that the elected ~epresentative of the people should stop. But the Administration is bent on going forward, despite the slew of criticism that appears daily in the press. The philosophy of privatization must be implemented at all costs. And the cost will be borne by the taxpayers and the inspection workers. With me are CWA District I Research Director Dr. Kenneth Peres, and CWA Supervisor with the Division of Motor Vehicles Jerry Jagger, who each have relevant, but separate points to make. Out in the audience are other CWA supervisors. Parsons spokesperson Carl Golden was reported in the press as saying CWA didn't represent any motor vehicle inspection workers, but we just go around throwing out numbers and opposing privatization. Let me briefly address these points. Well, CWA does oppose privatization. Privatization is neither in the public interest nor in

the interests of the workers we represent. And I think it is very clear that the public sentiment has

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shifted against privatization as it has become clear that it does not save the taxpayers money and that private companies, whose primary concern is profit, do not provide the same quality of service as public run entities. The working public of the private sector have also experienced the attack on their own living standards through subcontracting of production to low wage countries. That is the private sector version of privatization. It's about wiping out unions and good paying jobs in the name of corporate profits. However, just as the taxpayer saves no money when public services are privatized, nejther does the consumer save any money when jobs are taken overseas to be produced by workers making a dollar an hour and less. That Nike shoe that costs $5 to make costs from $75 to $150 as the discount store. But we are here today because in 1995 there was a privatization frenzy and the Legislature enacted legislation, mainly along party lines, which let the Treasurer explore the possibility of privatizing a new enhanced vehicle inspection system for New Jersey. The Federal Clean Air Act Amendments led to the decision to clean up car exhausts. However, Privatization was definitely not part of the Federal mandate. It was part of the political landscape that the current Whitman Administration pushed with Carl Golden helping to lead the charge. And so we have a law that Mr. Golden and other well connected corporate politicos stand to financially benefit from. And while the members of this commjttee split their vote along party lines in enacting the 1995 law, it is clear from the current bipartisan effort against budget privatization, from letters from both sides of the aisle against awarding this bid, plus the outspoken opposition of Speaker Collins to privatizing inspections, that the political mood has shifted, reflecting the unfavorab:le experience the public has had with the privatization of various public services, and the displacement of experienced and dedicated public workers to private companies who pay less and .do not provide equal health care and pension benefits.

The CWA research Department, under Dr. Kenneth Peres, has been the sourc€"of numerous documents on the NJ Budget and State Health Benefits Plan, such as Do the Right Thing and Good Medicine. Some of these research documents have been used officially in public hearings conducted by the Legislature and have been used by the Division of Pensions to bring about health care savings which saved taxpayers mjllions of dollars. We have fought battles with both Democratic and Republican Admjnistrations over contracts, health care and pensions, without being accused us of throwing numbers around.

Even if we did not represent any inspection workers we would say that the Parsons contract is a Bad Deal for New Jersey. The workers we represent live here and pay taxes and we feel confident that they want us to address the issues which affect them. But, I am also pleased to say that we do represent the supervisors of the motor vehicle inspection program, most of whom have come up through the ranks. They are citizens of New Jersey whose taxes helped secure the land and build the infrastructure of the motor vehicle inspection program. And unlike the Parsons Corporation from Califorrua for whom Mr. Golden speaks, which has contributed nothing to this

program, the CWA supervisors have given years of dedicated, honest service to the task of inspecting vehicles. There are no lawsuits against them or the State alleging fraud against the public. We have provided each of you a packet of infonnation which includes copies of my statement, the statement and report on costs by Dr. Peres, a long and detailed letter from CWA counsel Steven P. Weissman which outlines why the Treasurer should not sign the contract and Parsons should be barred from receiving the contract, copies of the lawsuits from California, Permsylvania and North Carolina and copies of some articles off the Internet relating to the lawsuits Parsons disclosed in their bid and those they did not disclose. As soon as the Treasurer forwarded his report to the Legislature through Senate President Difrancesco and Speaker Collins, CWA held a press conference and pointed out how the state would lose money during the period of continued regular inspections in the year between October, 1998 when Parsons was scheduled to take over and October 1999. We also pointed out some of the political cormections involved in the contract and distributed copies of the lawsuits alleging fraud we had obtained from California, since all the Parsons had done was provide the cover sheets. Since then, we received some numbers from the Treasurer on State costs which fonn the basis of our Research Department report. And we discovered and made public the undisclosed lawsuit from Permsylvania. Our general position on this bid is well known. Privatizing motor vehicle inspections is not in the public interest even if Parsons was a squeaky clean corporation. There is no good reason why a California finn should make profits inspecting New Jersey cars by paying long term, dedicated employees less in overall wages and benefits while paying no rent, gas, water, electric, non-routine maintenance and trash pick up costs on a system they contributed nothing of their own resources to build. But Parsons is not squeaky clean. And it is mind boggling to see how the Administration is bent on going forward with this contract despite the allegations out there about Parsons. I won't go through all the legal problems that Parsons has. I ask that you spend the time to read Steve Weissman's letter to the Treasurer. The allegations raised in both California and especially Permsytvania raise serious questions about the integrity of Parsons and their ability to perfonn what is required under the contract. I don't represent these problems as any more than allegations but the allegations are ofa very serious nature such that this committee should assure itself that they have been fully and adequately researched. This committee owes that to the public. Further, the failure to disclose the Pennsylvania lawsuit should be considered a non­

waivable non-conformity to the bid requirements and the basis for denying the contract outright.

And Parsons will cost more than the state. We do not believe that the Administration

figures provide you with an accurate cost analysis. They have underestimated Parsons costs by millions and overestimated the State costs by millions. Dr. Kenneth Peres will speak to that Issue. And Parsons cannot do a better, more honest job than the state workers who have been running this program from the trenches since its inception in 1938. CWA Supervisor Jerry Jagger will speak to that issue. We will all be available to answer any questions you might have. First, I would like to present CWA District One Research Director Dr. Kenneth Peres who has presented testimony on budget and money matters numerous times in New Jersey over the last ten years.

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.~"'D Vl.-\ OVE~""lGHT M.AIL (FEDER-U. EXPRESS)

J:u::.es Di:C:c..lteno. D~puc,,! liC3.surei De~~ii.rn~::t or" Tre:lSllry PO. B(.1:(. C02

Parsol!5 Corp. C outra,,'t O~r File :"ia. lJ-98~1l i

Re:

De.?:- \-t:-. 1YE;e:..:te:lo: p~~~~ ~

.~.s you ::.re

3.Gvised t..hJC I represer.( the Cor:;.muruc:i(iocs Worke:-s of .-i..!!1erica, A?L-CIO .

:'W;l.fe.

CWA

rcpres~ms

supervisory e:n;J!oyees who work

~(

DMV

i.n.s?'"--eucn

Oc: July I7. 1998 you :;igned ;; ferler of intent to award a seven ye3r contract

s:"s~::m.

it:5 ,):.!r

l~dc~t.1I!di.ng

to

Lb¢

that the contract with P:l.rsol!S win go into effeci: on August 3,

iQ~C ........ v.

i~>J ~0!!f c,f C~~;.i'..

to

:->Z:.rsv~

0)

I a.rn r~que.qing mat you re~i!1d your cecisioD r~ a.;.'ard the con~-act

[or the foUo·.,f,'Ulg re3.SODS: Parsco.s' bid COOL1i.n..s a mater:.l oon-conform1ty which may not be waived;

The fJct !.hac wdl-connecrc:d New Jersey Republic:ms. including Carl Golde:J.

(:)

Frank Holman and Anthony Sar::or. sund to reap enormous economic benefits

from

me

Parsons' contract. creates chc a.ppearance of impropriety: and

Public employe-..s can operate and maintain the enhanced i.nspection mtions more

(3)

e:;~r..omic:llly

and more efficiently than a prince company.

F:lnh~. pursuant to ~U.S.A. 17: 12-3.1. CWA requests mat debarment hearings be

cor.duc:cd wit.h ~spect

PlrSOns. E3ch of the above items will be addressed in wrn.

(Q

?:u-sons Failed to Fully Disc!ose Pending Litigation

,

\l,r::lUe m.:my f::.ctors 5650 G"~i!Jicll rjo!1a..~ to

J

lIlUSt

be weighed in awarding a comract valued at be~e~n 5550 a...'1d

pnv:He ::Qmpa...'1Y. at th~ ve:-y top of the liSl must be L'1e com~2.ny' s

the Sl3te ~.;og:lli::s Wat iO ;nak~ s"Ucn judgments :t is imperative that tbe ?ast pe:forwance of a bitlde:

::-e

st.:t.jc:~:d (0

ciose 5Cr'..ltiny. 70 faciJiute

(rjs

?rocess. §5.5.5 of ~1e R.q> requires

L~t:

[E]ach Bicder shall disclose any

C"~nt

prosec:.ltion, pending

ch.a.:g~.

or. OL~r leg:11 proc-~d ings. in any jur:sdicrioD, con-:'::IT'.L'1g u~c 3idcc",. any irldividuaI associated wtth the Bidde:, any sutx::-mtr.tci.or. or any fmancial backer of th~ Bidder wUlch IT'.ay bear u~on the Eicdc:'s ability to perform the contrac~. Tnis is a cominuing disclosure requirement. Any litigation or inves-Jg"tion cCrr'..mer:cing :ltter submission of a proposai. must also be disclosed by (he Ridde! in a written statement to the Di~tor of the Division 0f Purcb.:Lse a:;d Property.

F:m.her. §5.5.6 of

oe!;c·.;es \;.;culd

me

:l~sist

In rcsp0O$e

to

RF? provides iliat the bidder sban prese:1t :my other ir.forr;-..atioo chat it

lhc St.:lte in evaluating the viabiiity of its qualifications. the above sections of the RFP. Parsons disclosM ilir~ lawSlics pending

2

in California, two of wbich W(::~ tiled in sute court lIld oae in fede:-al court.

Unforrunately,

you have cavalierly dismissed the significance of these lawsuits, SUting, "Parsons is a big company and corporations get sued all the time. Pl:ople are suing New Jersey all the time. I

don't mow what the contract was in California. That's up to the courts out there.· The Times, "Tre:lsure: Defends S-WOM Auto Pact"

the

COi1t~-act was

(Jul)~16,

1998). ne

fac~

in Califomia," and apparemly have no interl:St in fmding out is. to say the least,

troubling. The public interest demands thac pending 1icigarion --

Claims of t',:md, cost OVI:IT'..lP..5 and Qvercbarges - be fu[ly of ;:, ccm::lc:or. lNhile such Ijcj.,;(.:ltion

-

ur:;J~C: u~on

lMt you don't k.now ·what

vi.r":uzlIy every

imo such J.lkg3.1ior..5.

ljc~:1Se.d

ffiL!..S"

~aily

inves;:iga~

be t:l.ken s:::iousiy

to dc~ennine ut:e fimc:ss

re2~less

-

litigation involving

of che

.'i~

and scope .

drive:-. it is i...n~:"'2tive th;;.t a full investig:.uion be conduc:ed

If Tr\:2.St:ry has unde:-..a.ke:1 any

t:r~e

of investigation. please provide a

copy of l.:~C D~;Jar::-ne:ll'S rC?0r.: or analysis. Of e::;ual. if

L~

;lC~

gre3te" signiiic.anc\: is that Parsons did nct dis(:!o~ a ;e:lding lawsuit

S LOO GliIlicn in damages from Parsons Corp. and a Parsons' subsidiary. Parsons Main.

The complaint levers twelve separate

aCC'.l~tions

agair.5r P3ISOt"'..5. including fraud, negligence.

cOnspi::lCy and breach of contract. At issue in this litigation is the al!esedly faulty consrruction

of J paper recycling pl:ml. The project was fLDaOC-.""Ci through the sale of Pennsylvania Econcmil;

DeveJopn-,C:li BOiKis :LS1 cquiry contri'vmiocs froCl Ponderosa's geoer:tl par.ncrs.

FonJeroSJ. alkges mat Parsons Corp. represented itself as a IQding intemational comractor, with e:'C1=~r.en~ handling tbe e:J.glle::ring, proc:lrerneot, coOStr'..Iction, commission.

3



tesring and start-up of a complex processing plant such as the recycling faciliry.

Parsons also

provided assurances thaI. its wholly-
Ho . . . .ever, according to the lawsuit. the engineering and design of

L~e recycling faciliry

were defe~:ive and Parsons Main fell behind schedule. Ie is further alleged that Parsons la:ew or should of kuo\J,TJ iliat t.!:le design. engineering and construction defects were so signifiC3.nt that major re~:1ginee:ing. redesign and rerrofining would be required to achieve ilie peri'ormanc=

requi..re:ne:1ts of u1e

COnTr.i~L

On June 27. 1997 Pondercsa noclrled ?:l!'SOI"'.5 lbac ille re::ycling

[;,lc;ilt;-' "h:..lC i:C{ mer a."y of the performance guswme=s" a.nd L.~~ Parsons sbould S"oJomi: l -.~:.:ii
its

plan of 2.C:iOO... lO address tr,e. deficier:cies." Howe'/e:-, on kly 2, 1997

S".;ssiG;~r:1

and

• uri !.1ter:J.l1y , abruptly a.r:d without (orewa!Ti..~g cedared. that the FacIlity bad

:ic::.iev<:~ COrr:mC~i2! ?c::c~;csa

?~ons

for

CZl::.

opc:-ation aod

notifi~d

eustocy and concrol.

n

Ponderosa that it was Lll.."TI.ing the faciliry ove~ ,0

According to

POlide~csa.

If}e

3.brup~

2bandor.rnem of

\be- f;lCjl~ry '.V\;bout nVl:c.::: jeopardized the ~safe~j and imegricy of [be facility ar:d placed cr.tic~l SYS~C::iS

and proc::sses in the facility in risk of tLmuge. "

C!euly. lhc f.1iiure ro disclose L.'1e ~:::uin:me~L5

of lhc:RPF.

shcuJd be rejected.

Ponde~Qsa

law$Ui~

by Ponderosa violar.::s the

As such. Parsous' bid is non-cori'orrni.!!g and 00 this basis alarie,

Additionally, Parson.s' failure to disdose this critica1 information raises

troubling quesrions about the company's integrity and its abilicy

per:or.n Lhe work at issue.

to

faith..l'i.llly and

ccmpe~ntly

Further, the Ponderosa lawsuit itself calls ioto question Parsons'

rrack record of perfcr.nance.

',.\Jj]c cer<.aL'1 ;-cqui.rc::::lents in bidding spccifiC4Iioos may Ix: waived without frusrrating

4

the policies which underlie competitive bidding, the waiver of other conditions may encourage -improvidence or e:<:lr:lVagance, - as weH as "corruption or favoritism. - Tennii1.al Canst. Corp. v. Acla.nric Cry. Sewe,age Autb .. 67 N.J. 403, 412 (1975). As ~e appellate 'COUrt noted in Marter of On-Line Games Conrract, 279 N.J. ~ 566, 595. -[ijf the non~ompl~ is



substantial and thus non-waivable. the inquiry is over ~use the bid is non-eonforming and a non-conforming bid is

00

bid at all. -

B-\lt, 'on the oilier hand.

if the non-compliance is noe

mJ,(e:-ial and may be waived, a coun: must determine whether a

d~ision

to grant waiver

constiruces an abuse of discret:on. As a

man~

You :nus: therefore be

w~tved.

of law, it must be ~ither

r~ogr'..ized

that the bid by Parsons is non-.:onforming.

rejec: the bid or End th.c.t Lbe non-complia.nce is not

But sure!:". the :aiiur:: (0 disdose ilie ?onde:-csa lawS'uit

mace:-:al devi:iiic!1 from u'1e requL.-e:ne:m of the R..l:? cle:l:-:Y :r.J?propr.ale.

~?~:;.[S

mate~al

2...tid may

a stlbsL.3.mial and

Under such c~illDSta.!lCes, Wdiver is

Irldeed,:l major objective of all bidding

s~[mcs

is "to promote the

honesry c...nd imeg:-icy of !..'iose biddLig aDd of u,1e syS!em itself.· Keves Marrin, 99 ;-.i .J. 2 ~ ~,

2.56 (1985).

~ct

only do the rawsuits pe:>dillg against Parsons cast doube upon the hocesry and

Lncc;r.ry of [he company, the failure J.ae:7lpt 10 avoid the cype tb~

[0

disclose the Ponderosa action appeus to be a biat.ant

of sen-Hilly that the bidding law is designed to e:lcouragc. Moreover,

infor.TI:J.tioQ requir---d by §§5.5.5 and 5..5.6 of the RFP is a material condition and it is fi.nn.Jy

establisbed tr...at

SllCh

conditions may not be waived. Tenninal COrulL. 67

!:iL. at 41l.

A ppa.rently. this is not the fIrst time that Parsons failed to disclose pending litigation.

On Geober 31. 1996 the Los Ajlgeles Times reponed that Metro East Consultants, a Parsons' subsidiary. did not reveal that another subsidiary, Deleuw, Cawer & Co., was the subject of a

5



false claims lawsuit. (Metro 8Ist had subrnj~:d a bid co th~ Los A..nge!t:S ~TA to perform work:: on the subway system). The lawsuit accused the Parsons' subsidiary of overbilling the MTA by nearly 520 million.

Upon le3rning of this lawsuit. the Transit Chief withdrew his

recommendation to award a coarracr. co Mecro East. This pattern of non-disclosure militates in favor of rescinding the letter of intent and sUbjecting the entire Parsons' bid co closer scrutiny. The In'l"olvement of Prominent Republi~ in the Bidding Process Creates the Ap~ara.'1ce of Impropriety

2.

Cor'lJ1ict of imc::"::st and patronage issues also com~l L'Je rec:sioT1 of LfJe Ierter of intent. Tnro:.;gh legislation and else law, New Jersey h.1s should avoid c'Ien the

ap~earance

S'::iC-ire. :'i JS ...l... 52.13D-12

f~r...t~"

~iJ.S.:\. 5:':13D-~7

posltiun in

~ove:::unent.

~mph:llically

of a cantlie! of intc:esr.

et~,

requires tbat

Tulls, we Cor.f1ic!.S of fmeresl

gov~:-:l.rn(;:1c

F0vides th.:l.t;10 State

()ff!c~~

should provide represenution in

declared L'1at public officials

officials avoid conduce which

0. e:npluyee, after leaving

:::mr.ec~ion

wim a

~ar. .e r

in

~hich

L~eir

they

rL2d direc: or S".lbs~~:al ~volYe;n~~t during the coursc of tbeir e:::nplcyme~t. IDe c:Jnrlict of

COGllic[

is to

~ e.schcwe~.

i'kvert..~e!ess.

well-connected New Culy 16, 1998).

as h2s been widely reponed, l~rsey

Parso~

has

~pU!

togetbe:- a dre.:!.!n

Reyublicans." The St2r Ledger, "Auto Tester Relies on GOP

~e2.r!!

of

Aides~

Parsons was represented a~ DOT bidding conferences by Frank HoLman. a

former GOP State duinnan. who continues to collect S5.000 a Glomh as a consultant [0 L~e

6

government just 18 months ago. stands to coUecr S178,OOO.OO per month over tbe course of seven y~rs on ~half of his communications finn.

Golden's fum. whose principals include

Roger Bodman. a DOT Commissioner under Governor Kean. ~s hired by Parsons this past P3.rsons h:ls also designated Amhony Sartor, a dose politicl1 and pcnc~l friend of

Janu.lry. S~nJce

Pr-:sideut DOC3.ld DiFranc::sco, as its engineer. Moreover, Parsons contributed S64,lOO

to Republican ornpaign cammine--..s during last year's State de:;:ions. Further exacerba!ing u.'1e :lppeJranc:: of impropriery is that Dave Mortimer, the State official

in charge of the new

i.n5pe~~ii,)n canrrac~. is the chairman of lh:: Sc.sse~ COUDry Republican Party. :e~'..:ie

D..mr.g CiJlden's

"5 t1:e GoverTlor's sp<:>kesman he bad diro~
pe:-..aming to

pr.vaci.z.atioD i.-l102;:ves, a.nd.

to

t.:."!e construc:ion and operation of

cn.r..accej iJ".5ge~!ioG facilities. In:m a,r.ic!e emirJed "Governor Jump-sw..~ Aum Bill: rns'P~ior. Would Change

(0

Ever! Two Years," published in '-he March 31, 1995 edition cf !!:!e R~()rd,

th~ cnbJlicd ir.5~tioo bill was dC5C~bed as a politic:!l power s-uugg!e, pirring ~e St.1te

Golden. servmg

2S

the Gvvernor's spokesman. told The Re(:0rd !J'1ac the vOte on u1e

c:1b3r.c:d insp~ticn bid cemol1.5L.'H.ed that WhitmLiD. has" the political clout to pez-:;uade lav"l:"'..a.'{:::-s

om

'.11::15

coope;-.lte with her on key issues.· Ac~()rding to Golde~, the ~nh.a..,c~ i...~s;e~on

sorceiliing "the GO.... e7iJor wanted, felt

~rsuading

GCCe.."

10

v~-:y

:!trongly about,

3~ w~s

successful i.:.L

t...1e Se'..;iTc to S'uppurt... it really 'Jemonst:3.tes the Governor's ability ro

ge~

iliings

The:], in Dec°mber of 1995. when legislatIon was introduced to repe:1l the enhanced

ir.s~~ion law,

CDlden d~lared that the proposal advanced by three Democratic Assemblymen

7

3()~



• reelc.s of demagoguery· and the Governor will not back away from the bill. Golden continues to scrve as a chief spokesman relative to the enhan~ inspection system. only now, he is, at least in weary, speaking on behalf of Parsons. Yet, there is simply no doubt that from the public' S point of view there is an acrua! conIlic~ of ·interest.

Just 18

montP.5 earlier. Golden func::ioned as the Governor's mournpiec::, and during his tenure he comm~nted, on the Governor's behalf,

precess of imple.. ne:1ting.

with respect to the very kgislation that the S~te is in the

Accordingly. CWA CJ.lIs upon you to rejec: the bid submitted by

ParsoQ5 bc::::H~.se Golden's prominent role as a Parsons' spokesrr.an. coupled wiLt1- the involveme~t

of a for.ner DOT Commi.ssione:, the Slat.:: GOP chai~ and a close pe~cnal

rrie:::ld of S~:lJtOr DiFrancesco, undoubred1y cre:H.es the appe3.ranc:: of ioproprie~.

J.

Absent Demonstrated Ecooomies or With Private W orke:-s :s illegal

Effici~cie.s,

Repl:1cing Pubiic Worke..rs

Additionally. the Ierter of intent should be rescinded because it will cost more to ~se a ;r:vate CJmp:lr.y to employees.

ope~te

and maintain the

ifl.spe~tion

s<.ations UJan it u,lill to use ?ublic

As per the repoI1 ~""rltly prepared by tbe CV·iA rese:ffi;~ deiJanmem e~titIed,

-P:-iv:Hizi.ng Vehicle Lcspections - A Bad Deal for New Jersey.· the Star= b.as

ove~s"'J.mated

own costs for enb.an~ inspections by at least S7. 6 million per year, or S3. 76 per

C3r.

its As

CW A r:::searcbe:-s demofl5tr:lre. public employ~s can perform enb.aIl~ ins-~ction.s at a rate of

S22.56 per ca;-, while

me

Parsons' comract will cost the Slare at least 528.36 per

C:ll".

In oilier

words, the ParsoQ5' contract will cost taXpayers an additional $5.80 per car or S11. 72 million per year. While you have dismissed CWA's cost comparison as flawed. you have yet the basis for your conclusion in this regard. inc~bent upon you to explain

to

explain

Before the Parsons' contract is awarded,

why CWA's calculations are incorre::t.

8

3/ }<

it iii

For ex.:unpie. how do you address CW:'.·s contention that lhc Statc incorrectly calculated

its labor cos~ based upon n'/e, as opposed to four safety specialists per lane. resulting in an overestimation of 53.63 million?

For that maner. upon what data. did the Sta.te rdy when it

anributed ten ove:-timc hours per we::k to every worker? As CWA points out i~ its rcport. the State is assuming that it will pay overtime to workcrs who win not be on the line or working .

.-\c;:ordingiy. the St:.!c has O'.er-esri.rnAcerl overtime requiremcms by at least S2.2 million. ?'.1nh-:=" why liidn ':, Lhe S<.1{C include $5.49 million for additional operating costs and other

indirec:' ~xpen.ses, which

me Sc.::HC

will be required to pay under thc

To cmble CW A, legislators and members of the public

(Q

of the RF??

te=:r.s

independently analyze the

SL2.1e 's .:os~ .::.1:c:.JI.::.tions. ki.ndly Ulake 3.vailabie all data. analyses and r~or:..s reviewed or pre?ar~d ;:;y Tre3.sury. comparing LI-Je costs of operati..ng and sa.im.::.i.cing inspection stations using

pubiic

''''''or~ers ve;su~

.~ lhe

(1982). .sta(~

J

;i

Sup~ITle

private ccmpany .

Coun

:Jo,~d

:.n

In re IF?Tc.

?ublic e.!TIployer does not c:njoy .. iimitless

Lc.c~l

f~dorn·

co

195 v.

SL1{(~,

S".lbc:)Qrrac~

88 N.J. 393, 4.11

fer any reason. Tne

may not s~bcoQC"act in. bad faith for the sale purpose of laying oF. public e:::1ployees or substlrming private workers for vubiic workers. St.1ce actiol1 must be ratiou.aUy related to a legitim;re governmental puQO~. Our decision reday d~s not kaye oublic eulDIlJv~s vuLne:-able to arbitr:lry or capricious substi~cioDS of 'pri~ate workers for public employees.

Here. (he Gover;;or is LnteIll upon substirudng public workers with privatc workers. Why else have you di.smissd. without any i.nvestigatior~ the lawsuits pending in Califomia which allcge L1l2~

Parsons

engag~

in fraudulent practices and overcharged government entities? And, why

e!~e Gc.I;~ YCl: chosen no, to pursue

Parsons' failure to disclose the llwsuit m~

9

m Fenasyivania

by Ponderosa Fibres against born ?mons and one of its subsidiaries? The Pennsylvania lawsuit

r.lises serious questions regarding Parsocs' business practices, reliability and competence. If you are mak.ing a decision based upon the public interest. as you are bound to do by statute. you would rescind the leaer of intenr in light of Parsocs' failure to conform to the requirements of the Rr7. The Constitutional Requir"err':"'1t That Appointments Be Made Baserl Upon :'vf~rit and Fitness Res-J'icts the State's Authority to Contract "Vith Private Entitiei to Perform Se.r-vices TIult the State Has Historicill)' or CUStomarily Perfonned and \'\'bich Can Be Adequately and Competently Performed by Public Employees

4.

.-\rtic!e 7, § 1,

12

of

Lh.e

New Jersey ConstirutioG provides that appoincrnenr.s and

promotic::.s In. gove;xr..ent service shaH be made ;,c::ording ro merit and fitness to be ascertained, as far J.S pr.lc!icablc, by ex;uni.naoon. which. as far 2.S practiCJ.ble, shall be ccmpe~itiYe.

The 30a 1 of a cornpc~itive appoim:me~{ system based upon merit and fitness is LO eliminate pclitic.:d ;Jatror'-'lge and corruption. AJ"hougb the New Jersey courts have afforded public entities co:-.side:-ab(e 2UtbOriry

in

de~ic!ing whc~'1e::

servic=s lYpic.a!!y pe:forrned by public

shou Id :x SUbcODlI'2cted, govemme:Jl officials

Unfornm.atdy,

th~

may not abuse their dis:::-etion in this area.

Governor's credo appears to be that privatization is an e:J.d unto itself,

l7'.3.Gcr what the cost to

t.h~

taxpayen, the public imeresr or dedieated govermIJenr

.':"pparenuy, the Governor \\."~!l-heele.j

~;.lployees

wor~rs .

b<:!ieves that privatization is a CDQVe:liem me!.bod of rewarding

Republican p:~. . .r·J contributors and funcrionaries. Since there are a fUlite o~ber of

p0sirioc.s ~ Stat:: zovemruent to wpjcb outright patronage appcinane.nts may be ffi.1d:::, C~ITerH

DO

!be

Administration has expanded the opporrunities for patronage through privatiDtion. 10

C~ru.mjy, this was the underlying motivation for the privatization of DMV a.gencies in 1995 and

is one: again the re31 reason for privatizing the maintenance and operation of inspection faci1iries. A:i a resulr, the Governor is literally dismantling the constirutional requirement that appoinunents be based upon merit and fimess. Prec~~!y for this reason me California Supreme Court has fouod that California.'s

cons,irurioru1 r,ivil :>e:-vic:= provision conr.ains an implied mandate limiting the sute's aucIl.oriry to

contn.ct wit.h private entities

(Q

per-fonTI services that the Siate has historically or customarily

~:ior.lled and which public employees can perform adequ:Lte!y lnd compefentJy.

Engine::rs In Califorrja Gvve:-nmenc v. DOT, 15 "J.

Rile';. 9 (.31.2': 1:6,

~:3..:.-t36,

wI.

P:-ofessional

4th 543,936 P.ld 473.474 (1997); Fund

69 ?2d 985 (1937); California Stare Ernnlovees' .:...:ss'n. v.

Sp,e \)f C;;ljfcj"!1l:;. I ~ C:ll. !\pp. A.3d 840, 844, 245 Cll. Rprr. 232 (1988). Signifiwntly, CtliforT<1a's me:-it 211G times5 pr:JvisicQ is vt.rrual1y idemiol to .'unc!e 7, §1. '1 of the New Je:-sey COf1SC!Uoltion.

T~e

Califor:lia COI!S~iru!ioo requires that appoinc:ncms and promotions -be

made under a general >ysre::n based on me:ic asceruined by C~;]sl.,

ccmpe~itive

examinar.ioD. - CaL

Al1..!cic '.,11, §l, SUDC. (5). ,~ c.!~e

SuprC1e COW1 of California observed in Professional

E.~gineer-s,

the patronage

hir'..11g of public employees ·c,:)r.'.1pts tbe political process. leJds to waste. and depletes the qualicy

or the public work force .... Early on the California Supreme Court recognized that: civil

servic::. provisions

w~lJ

no, work if the merit appoinane:lt

syste~ can

be circumvenred by simply

coot:acting out civil sC:-/ic: jobs." (Quocing from the dissenting opinion of the Court of Appeals

TIl:: COW"! fu~her observed th.a{ most states pretcc! their civil ~;--.. ice

systems ;wm :=sc:-oacment through private contracrlng and by imposing an "~onomy

11

3Lfx

..

and efficie:Jcy requirement before government services may be privatized. ~. Michigan Slate M

Emplovees v. Civil Service Com'n.. 141 Mich. App. 288, 67367 N.Y.2d 850. 852 (1985); Universirv of Nevada v. Stare Emplovees' Ass'n, 90 Nev. 105. 520 P.ld 602.604-607 (1974); N:lSSJ.u

Ed. Chap. v. Gre:H Neck U. Free Schools, 85 A.D ..2d 733. 445 N. Y..S.2d 812. 813

(1981); C:mer v. Ohio Deparnnenr of Health• .28 Ohio St.3d 4.63. 504 N.E.2d 1108. 1109-1110 (1986): L.x=!1 4501. Comm, Workers

v.

Ohio State Univ .• 12 Ohio St.3d 274,466 N.E.2d 912.

19.:!.-9l5 (1984); Stump v. De!)(. orubor and Indus~, 154 Pl. Commw. 471, 62}A.2d 229,

::.; 1 1,1993). !:l light of the: GQver:1or's imem to privatize wiu.1.out regard to achieving e-"..,onoI!1.ies or ~frlc:t:ncies.

it is time to u1te:-pre! New Je~y's Consrirutio~l provjsion to prohibit

5ub-:OOl::iC:ing with private ~:1[ities wbe:J servic.=s. historiwUy performed by public e:nploy~. C~ cJf:[inue to be adequately and competently performed

by such

employ~.

Only in that

ffiailn.::r will Lhe Ac.:ninis!ration· s rdemless drive to reinstar.e a sp
Proc~dings Should

Be Conducted With Respect to Parsons

Pursuant to N.J.A.C ii: 12·6.1 the Division of Purchase and Property may debar disqualify a company from pe:fonning services under State conrract based upon:

10. A

ro-..cord of failure to perform or of unsatisfactory performance in a~ordance wirh the ~rms of one or more contracts. provided that such faiJure or unsatisfactory perf
12

Oi

violations of such laws or contracts; 17. IIl11uenc: or :lttempl to influence or cause to be influenced. any State officcr or employee or special State officer or employee in his official capacity in any manner which might to tend to impair the objc:~tivicy or independence of judgment of said officer or ~mployee.

Clar!y. there is a basis for debarring Parsocs Corp. The allegations in the lawsuit tiled by Fl)nderosa f~b~s. if lrue. ~w.blish a record of f:lilure [0 ~rforrn and of unsatisfactory perforwanc~,

which st:lnding aloce. compel the debarment of Parsons. Fu~..hcr. by failing to

disclcs~ Ulc Pond.;:o$..1 lawsuic.

P1ISons is guilty of a material false representation in a bid.

Omissions of critical L..r1i"onnauon In a bid proposal may canstirute ~erial misrepresentations

and. as at

5ilC.tl.

provide

basis for detlarulent. Finally. by lite:-ally ti'..rv"''':J1g millions of dollars

:r.r.lJ':~li;>j Reyublic2!"'~.

S(.;ll~

PJrsoos Da.:; cle:lrly svught to :""Ult;enc: or c;;,use.d to be in..f luenced

ufficiaLs resool'.:;ibJe for a warding ibe contract iJ1 question. .

Direc!or oi l1C

,0

:l

(h~ Oftic:~

6.

A~ordingly.

Di.. . ision to convene debarment hearings. or alternatively

of Aeminisu.,nive

we call upon . the

to c:-ansfer !.his mauer

u.w ior Oe:lring before an Adminisu.-auve Law Judge.

The Award of the Contr::lct to Parsons Should be Stayed Pending Appeal

In :he eve:l[ th:1t you bid ::Jr..c decic.k

(C

public wa:-ke:-s

[0 OpCI"at'=

::J'.l::l.rJ

CWA reql1es,s m..r you

CJoo~e

to ignore or waivc thc material non-ccnforrrllt'J in Parsons'

:.hc c·:;otract to ParsollS. notv.liibstanding

.?TId

ill2.lnt:l.in

i.'lspection stations more

me

demonstrated ability of

~onomically and

efficicntly,

St4y the award of the contract pending the disposition of an appeal to

13

the Superior Court. Appellate Division. At the request of either pany. appellace pr~dings

may be e:cpeditet1. 1 look forward to your

p~mpt

.

response.

Very truly Y9urs~/

~z:a~_. Steven

__..

P. Weissman. Esq.

SPWijmw cc: Larry Mancino. V.P. District 1 (via facsimile and overnight mail) Roben W. rouse!I. Are:l Director (via facsimile and overnight ;nail) Hetty Rosenstein. EVP. CWA l.ocl.l 1037 (vla facsimile and overnight mail) Percr Ve:nic:D. Arrorncy Gener.ll (via facsimile and overnight mail)

14

37;<

, .

2 3

DANIEL ROBERT BARTLEY California Bar No. 79586 101 Larkspur Landing Circle Suite 223 Larkspur, CA 94939-1750 (415) 464-1382

SUMMONS \$SU~D

4

5 6

File under seal for 60 days Cal. Gov't Code § 12652 (c) (2)

SHARON GREEN, LAWYER California Bar No. 43392 :EP 05 Ei?

1721 Waldman Avenue ~O -/ V '~---:Y"SEM~.. ---c"'_L2 \ ., .... r:·.:c'~ Las Vegas, Nevada 89102 "r.IO~S· (702) 387 - 8124 ~O ~~\'l\ .... ~-.;. ,",ijF.:::~!CI1 COUr:iT

:-

7

MAY 20 1SSS

At torneys for Plaintiff (s) 8

JOI.J~='

9

SUPERIOR COURT OF THE STATE OF

.... j . ~.(,..

. -...\,., ""~.';":~" .S.. _

•.)......

"'l.11'1~ ~ .

C't'DV

Cll.LIFORNTA;;~'

10

IN

ll~

FOR THE COUNTY OF LOS

ll~GELES

BcisoZ98

11 12 13 14 15 16

STATE OF CALIFORNIA; COUNTY OF LOS fu~GELES; CITY OF LOS fu~GELES; LOS ll~GELES METROPOLITAN TRANSIT AUTHORITY; u~ITED STATES OF AMERICA; DOES 1 - 10; e~rel. J. MARTIN GERLINGER, and J. ~~TIN GERLINGER, Individually and Personally,

[Cal. Gov't Code

vs.

19

PllRSONS-DILLINGHAM METRO RAIL CONSTRUCTION MANAGER JOINT VENTURE; THE RALPH M. PPRSONS COMPANY; DILLINGHAM CONSTRUCTION, N.A., INC.; and De LEUW, CATHER, INC.

22

1. False Claims Act Violations; 2. Employment Retaliation §§

12652 et

~.]

18

21

: Civil No. :I i VERIFIED COMPLAINT FOR I:I D~~GES WITH DEMAND FOR JURy TRIAL: :

Plaintiffs,

17

20

I I

Defendants

23 24

Plaintiff, J. MARTIN GERLINGER, alleges: 25

INTRODUCTION 26

.

.

~

~

~g

~

This action arises from the wro~u~onduct of the -.,"" -.c:­ :»(;; £ defendants in overbilling more than $19,tt1,~ as joint venture 0" -;~ 1.

27 28

partners in the construction of the Los

Arlge~

c::v.

~MPLAINT FOR DAMAGES

:IARON GRn:N. LAWYER

721 Waldman Avenue
Metrorail system

387-8124

o

o

1

("the Metrora.Ll project") being constructed in Los Angeles. PARTIES

2 2.

3

~

The plaintiffs in this action are (a) the STATE OF

4

CALIFORNIA, the COUNTY OF LOS ANGELES and the CITY OF LOS

5

ANGELES, which are political subdivisions of the State of

6

California, LOS ANGELES METROPOLITAN TRANSIT AUTHORITY, which

7

relator-plaintiff is informed and believes is a political

8

subdivision of the State of California within the meaning of Cal.

9

Gov't Code

§

12652(c) (3);

the UNITED STATES OF AMERICA, and DOES

10

1 - 10, ex reI. UNITED STATES OF Jl.MERICA ("collectively referred

11

to here in as the Government") via aui tam plaintiff' (·"relator")

12

J.

13

and personally.

14

party for notice purposes because of the UNITED STATES' close and

15

intertwined funding partnership with the State plaintiffs, and

16

because of GERLINGER's related federal cui tam action filed under

17

the Federal False Claims Act, in the U.S. District Court, now

18

unsealed, U.S.A. et al. v. Parsons-Dillinaham et al., Civil No.

19

94-6678 JSL.

20

3.

MJlRTIN GERLINGER; and (b) J.

~ARTIN

GERLINGER, individually

The UNITED STATES OF Jl.MERICA is here named a

Relator J. MARTIN GERLINGER is, and at all relevant

21

times was, a resident of California, with his home in Sierra

22

Madre, California since September 1991.

23

by defendant Parsons in July, 1991 as Finance Manager for the

24

Metrorail project.

25

Parsons from August, 1980 to April, 1982 as Project Finance

26

Manager for Parsons' mining and metallurgical projects worldwide,

27

and for all of Parsons' projects in South America.

28

Gerlinger's personnel records indicate that his performance at

Mr. Gerlinger had previously worked for

Mr.

COMPLAINT FOR DAMAGES

SliAAON ~ . I.;UoiYER

1721 ~aldman Avenue Las Vegas. Nevada 89102 (7021 387-812'l

Mr. Gerlinger was hired

2

OBERT BARTLEY ia Bar No. 79586 ,spur Landing Circle

File under seal for 60 days Cal. Gov't Code § 12652 (c) (2)

'3

STATE OF

, CA 94939-1750 ,4-1382

SUMMONS l$SUE.D

REEN, LAWYER ia Bar No. 43392 dman Avenue s, Nevada 89102 7-8124

Angeles.

OF LOS

&05g;i

,..\ \"l"lO~S

.--

tate of

~

,..\ \~O ...... , i E-(r-a ~. ----.s.......·5_"

\S~t.;.,

.. ,.. C:~:..~: SUF.~r:'II-I~

NO ~\'4,\'4\

- • .. '-J ~

,

RITY, which r­

I.CUriT

MAY 20 ISSG

s for Plaintiff (s)

J01.J~' ~ .">j,~~ • •.:....... !"'~"l;(~ C'I:'OIl'

."-: .. :.

.'

~

,

--'li"

SUPERIOR COURT OF THE STATE OF cAiIFoRNrA~", IN AND FOR TEE COUNTY OF LOS _ CALIFORNIA; COUNTY OF CITY OF LOS ; LOS ~~GELES LITAN TRANSIT TY; UNITED STATES OF ; DOES 1 - 10; e~rel. IN GERLINGER, and J. 3ERLINGER, Individually sonally,

~LES;

: Civil No. :I VERIFIED COMPLAINT FOR : DAMAGES WITH DEMAND FOR JURy ::I TRIAL: 1. False Claims Act Violations; 2. Employment Retaliation

[Cal. Gov't Code

ERICA, and DOES

ff' (,-relator")

BC1S 0Z98

Plaintiffs,

meaning of Cal.

ively referred

~~GELES

I I

litical

§§

12652 et

~.]

individually ere named a ATES' close and intiffs, and ion filed under Court, now

h, Civil No.

-DILLINGHAM METRO RAIL eTlaN ~ANAGER JOINT ; THE RALPH M. P_~SONS ; DILLINGP.AM CTION, N.A., INC.; and CATHER, INC.

1 relevant

in Sierra nger was hired

Defendants

3"er for the ::lrked for

intiff; J. MARTIN GERLINGER, alleges: INTRODUCTION This action arises from the ts in overbilling more than

~

t Finance

wro~u~onduct of -e­ ~

::>0'

::£"

0-

I~

$19,tJ1,~

:r:-g

in the construction of the Los

=cts worldwide,

M

the

as joint venture

~

Arlge~ q:;:;

r:-formance at

Metrorail system

~MPLAINT FOR DAMAGES 1

Mr.

INT FOR DAMAGES

1

Parsons was

Q~

all times exemplary.

In December,

2

1991 his performance was rated "outstanding",

3

the highest possible rating.

The first annual performance review

4

by his superior, Mr. Clark, rated GERLINGER'S overall performance

5

as "very good"

6

progress has been made in the financial program since Martin

7

became Finance Manager.

8

the program has been brought into the modern business world."

9

Mr. Clark noted that "Martin has a very good background and

(the second highest rating) and stated "major

Achievements have been significant and

10

knowledge of financial management and project requirements" and

11

he attached a two-page description of Mr. Gerlinger's

12

accomplishments, detailing how Gerlinger had transformed an

13

outdated system with tremendous operational problems, lacking

14

adequate procedures into a system which brought all of the

15

financial accounts current and implemented needed procedures and

16

controls.

17

4.

!

Defendant PARSONS-DILLINGHAM METRO RAIL CONSTRUCTION

18

fv1AN'AGER JOINT VENTURE ("Joint Venture")

19

joint venture between defendant THE RALPH M. PARSONS COMPANY,

20

defendant DILLINGHAM CONSTRUCTION, N.A.,

21

PARSONS, DE LEUW.

22

Venture is 523 West Sixth Street, Suite 400, Los Angeles,

23

California.

24

the construction management consultant contract for the Los

25

Angeles County Metrorail project.

26

and 14) a second contract was awarded to the Joint Venture for

27

continuation of the Metro Red Line Rail Project through September

28

1998.

SlU.RON GlU:F:N.

INC. and defendant

The principal place of business of the Joint

The Joint Venture was formed in 1984 and was awarded

In May 1991 (by amendments 13

COMPLAINT FOR DAMAGES

I.AHYER

1721 Waldman Avenue Las Vegas. Nevada 89102 (702) 387-8124

is an unincorporated

3

'-I-/r

5.

1

Def(::ndant THE RALPH M. PARSONS COMPANY ("PARSONS")

is a

2

corporation whose principal place of business is at Pasadena,

3

California. 6.

4

Defendant DILLINGHAM CONSTRUCTION N.A.,

INC

5

("DILLINGHAM")

6

is Honolulu, Hawaii; doing business in Los Angeles, CA. 7.

7

is a corporation, the principal place of business

Defendant DE LEUW, CATHER,

COMPANY (" DE LEUW")

INC. formerly DE LEUW, CATHER

8

&

9

business is Washington, D.C.; doing business in Los Angeles.

10

is a corporation the principal place of

FACT ALLEGATIONS COMMON TO

11

8.

P~L

CAUSES OF ACTION

The two construction management consultant contracts

12

awarded to the Joint Venture are "cost plus" contracts; the first

13

one has a fixed fee and the second one contains an incentive fee.

14

The Joint Venture had two clients, The Southern California Rapid

15

Transit District

16

contract and the Rail Construction Corporation, a subsidiary of

17

the Los

18

contracted for the Segment Two work.

19

me!""ged into the Metropolitan Transit Authority (MTA).

20

LACTC and MTA are collectively referred to in this complaint as

21

the "client".

22

funding for the project.

23

believes, and on that basis alleges, that the balance of the

24

funding is paid one-half by the STATE OF CALIFORNIA, and one-half

25

of the balance of the funding, plus overruns, was paid by LOS

26

ANGELES COUNTY from sales taxes and by the CITY OF LOS ANGELES.

27

Such federal funding formed the basis for GERLINGER'S action

28

under the federal False Claims Act, filed in U.S. District Court,

~Bgeles

(RTD) was the signatory on the Segment One

County Transportation Commission (LACTC) In 1992 the RTD and

~_CTC

The RTD,

The United States Government provides part of the Plaintiff GERLINGER is informed and



SHARON GREEN. I.AWY1m

1721 Waldman Avenue Las Vegas. Nevada 89102 1702J 387-8124

COMPLAINT FOR DAMAGES

1.

which is refeLred to in paragraph 2 above.

2

The Joint Venture was awarded the contract for construction

3

management of the Los Angeles Metro project, and work commenced

4

in 1984.

5

9.

Relator J. MARTIN GERLINGER was hired by Parsons to

6

serve as the Finance Manager for the Joint Venture on the Los

7

Angeles Metro Project in July 1991.

8

was directed to develop an integrated computer accounting system

9

for the project. 10.

10

At the time he was hired he

The Joint Venture had no employees, the members of the

11

Joint Venture assigned their employees to work on the Joint

12

Venture project.

13

project, reported to other Parsons employees; he reported to

14

Larry Fincannon until Dennis Hedberg was appointed Project

15

Finance Manager and became relator's direct supervisor.

16

11.

Relator, in his work as finance manager for the

Soon after assuming the position of Finance Manager for

17

the Metro project, GERLINGER began discovering contract

18

violations, which he reported to Deputy Construction Manager Jim

19

Clark, who was also a Parsons employee. 12.

20

In early 1992 GERLINGER received a report authored by

21

Alex Borra, entitled "Metrorail Project Office Review January 21,

22

1992."

23

Parsons Corporation.

24

apparently unethical practices of the Joint Venture.

25

terminated by Parsons shortly thereafter.

26

for the termination was that Mr. Borra's job was being

27

eliminated.

28

given Mr. Borra's job title and responsibilities.

SHARON GREEN.

Mr. Borra was the Manager of Internal Audit for The Mr. Borra's report questioned some

Parsons stated reason

A short time later another person was hired who was A clear

COMPLAINT FOR DAMAGES

LAWYER

1721 Waldman Avenue Las Vegas. Nevada 89102 (7021 387-8124

He was

5

l

message was c0nveyed to the finance office of the Joint Venture

2

that comments about the administration of the project would be

3

harshly dealt with by Parsons. 13.

4

GERLINGER, in the course of his employment as Finance

5

Manager for the Metro project, uncovered numerous illegal and

6

improper contract practices, whereby the Joint Venture had

7

overbilled the government an estimated $19,741;000.

8

his findings to Jim Clark,

9

in management positions at Parsons on June 23, 1993.

He reported

T.V. Haig and Dennis Hedberg who were In response

10

to Mr.

11

for Parsons, met with GERLINGER on

12

provided GERLINGER with a written agenda listing ten of the items

13

GERLINGER had reported to Parsons management.

14

through the list at the meeting Mr. Harmon refused to discuss the

15

items with

16

that the item (a)

17

accepting party;

18

relator's findings were "not true";

19

Manager's decision";

20

Relations Manager who was in fact a political operative;

21

the finding was "not verifiable";

22

"would have to be audited";

23

auditing change"; or that

24

be audited."

GE~LINGER'S

14.

25

report, Mr. Jesse Harmon, Manager of Contracts

G~RLINGER.

Septe~er

(b)

the item "had to be settled yet";

(e)

(d)

that

that "it was the Project

(f)

that

(g) that GERLINGER'S finding

(h) that the finding was "due to an

(i)

GERLINGER'S finding "would have to

On April 2, 1993 GERLINGER was terminated from his job

"released back to your parent company."

28

off.

("102) 367-8124

(c)

that it was being handled by a Public

27

LAWYER

When they went

"had been accepted" without identifying the

with the Joint Venture project.

;lURON GREEN.

He

1993.!

Harmon simply went down the list and said

26

~721 Waldman Avenu~ 4S Vegas, Nevada 69102

24,

He filed a grievance.

He was notified he was being Parsons then laid him

GERLINGER retained a lawyer who COMPLAINT FOR DAMAGES

~

wrote a let teL to Parsons threatening to

2

reinstated.

3

headquarters.

4

15.

5

if GERLINGER was not

GERLINGER was retained to work at Parsons' corporate

The illegal practices of the Joint Venture which

GERLINGER has identified are as follows:

6

A.

Segment One costs billed to the government were

7

$1.5 million more than the Segment One costs incurred.

8

Costs incurred on Segment One work were billed during

9

Segment Two.

Relator is informed and believes that as of

lO

July, 1994 no credits have been passed through to the

II

government to correct this.

l2

Venture was precluded under the contract from billing the

l3

project for costs incurred on Segment One work,

l4

Joint Venture was contractually obligated to absorb any such

l5

costs

l6

the Joint Venture illegally billed Segment One costs as

l7

Segment Two work.

l8

December 31, 1993 was $1,000,000 and relator is informed and

19

believes that an additional $500,000 has been similarly

20

improperly billed to the government since that date.

2l

afte~

B.

that date.

After a certain dateJthe Joirtt

and the

In contravention of the contract,

The amount of such overcharges through

Since January l, 1992 the Joint Venture has been

22

billing the client on an accrual basis.

23

not allowed under the contract, and is a violation of

24

Federal Acquisition Regulations ("FAR").

25

practice is to bill the government before the costs are

26

incurred.

27

until after they are paid.

28

approximately 90 days, and the resulting "cost of money" is

SHARON C = . LAWYER

1721 Waldman Avenue Las Vegas. Nevada 89102 (7021

~ue

387-8124

This practice is

The effect of this

The contract requires that costs not be billed The time difference is

COMPLAINT FOR DAMAGES

1

2

borne by the client rather that by the Joint Venture.

C.

Defendant Dillingham illegally charges 50% mark-up

3

on premium labor costs.

4

overtime as well.

5

the contract with L.A.C.T.C. and violates F.A.R. rules. See

6

F.A.R. 31.105, 31.201, 31.202 and 31.203.

7

informed and believes that the total overcharge to the

8

government which has resulted is approximately $1,200,000.

9

D.

The 50% mark-up is charged on

This practice is clearly not allowed by

Relator is

The government is being charged a fee on sub­

10

contractors' overcharges.

11

that "the improper billings to the government for fees on

12

sub-contractors overcharges have exceeded $100,000.

13

E.

Relator is informed and believes

Legal fees and costs expended in the defense of

14

wrongful termination suits are illegally being charged to

15

the project.

16

overhead.

17

Mr. Harmor:. stated that this allegation was "not true".

18

GERLINGER knows that it is true, because while he was

19

Finance Manager he paid billings in excess of $40,000

20

submitted by Gibson, Dunn & Crutcher and Mills & Schroeder

21

for the defense of wrongful termination actions.

22

F.

These costs are properly attributed to

At the meeting with Mr. Harmon set forth above,

Defendant Parsons overcharges 8.5% of non-declared

23

profit margin as payroll burden.

24

invoiced to the client, Parsons, at the end of the fiscal

25

period (a month), transfers 8.5% of the 60% from labor

26

recovery to profit.

27

limited and clearly defined.

28

contractually disallowable charge and a breach of F.A.R.

AROH CREEN, LAWYER

21 Waldman Avenue s Vegas, Nevada 89102 [702] 387-8124

Of the 60% payroll burden

Chargeable profit is contractually This practice results in a

COMPLAINT FOR DAMAGES

1

31.105,

2

Harmon, Mr. Har~on stated to relator that this is "not

3

true."

~1.201,

31 .. 202, 31.203.

Ac the meeting with Mr.

However, GERLINGER knows that it is true from his

personal experience.

GERLINGER is informed and believes

5

that the illegal billings set forth in this paragraph have

6

resulted in an overcharge of approximately $500,000 per

7

annum, for an estimated total overcharge of $4,500,000. G.

8

After having entertained a client representative

the Project Manager ordered GERLINGER to make an

9

10

unidentified payment of $1,000 to the General Manager's

11

secretary.

12

but the purpose was never identified.

13

circumstances of the events, GERLINGER formed the opinion

14

that it was a "payoff" of some sort.

15

H.

This expenditure was charged to the gcvernment, Due to the nature and

A political contribution was made from the project

16

to Los Angeles' then Mayor Tom Bradley's political campaign.

17

This contribution was paid through a Parsons employee who

18

was placed on the project as a Public Relations Manager.

19

the meeting with Mr. Harmon, Mr. Harmon stated that this

20

matter was being handled by the Public Relations Manager.

21

I.

At

The Joint Venture hired former government

22

consultants who had been terminated by the government for

23

budget reasons.

24

their fees were charged back to the government at double the

25

original cost.

26

J.

They were hired through subcontractors, and

Parsons De Leuw overcharged payroll mark-up of

27

approximately 112%, when the contractual limit was 105%.

28

1992 alone this overcharge reached $100,000.

SlIARON GREEN.

Thisbilling

COMPLAINT FOR DAMAGES

UwY1m

1121 Waldman Avenue Las Vegas, Nevada 89102 P021 381-8124

In

9

is a viulation of F.A.R. 2

3 4

K.

31.105, 31.201, 31.202 and 31.203

Parsons improperly charged overhead as payroll

burden in the claims it submitted to the client. L.

Under the contract administration

set up

5

in the contract and government regulations,

6

estimated and charged in advance.

7

the estimated costs which have been paid by the government

8

are supposed to be compared to the actual labor costs, and

9

any overcharges are to be repaid to the government by the

10

Joint Venture.

11

adjusted,

12

overcharges exceed $9,000,000.

13

M.

labor costs are

At the end of the year

The labor overcharges have never been

and GERLINGER is informed and believes that such

Dillingham has never followed the contract

14

procedures in billing labor costs to the project.

15

Joint Venture partner does not

16

invoiced to the project by straight time, overtime and

17

double time.

18

properly allocate and bill the client because inadeauate

19

information is provided by one Joint

20

billings to the Joint Venture.

21 22

N.

The Joint

This

summa~ize di~ect labo~

Ventu~e

finance office is ur-able to

Ventu~e

partner in its

The contract provides that home office time billed

to the project must be authorized at the project level. ~a3

~e~er dc~e,

a~d ~6l~t0L

is informed and belleves

24

that the resulting overcharge to the government is in excess

25

of $1,000,000.

26

O.

As of September 1991 the purchase of capital items

27

like automobiles, cellular phones, computers, office

28

furniture and the like were not scheduled and pre-approved COMPLAINT FOR DAMAGES

lARON CREEN. LAWYER

721 Waldman Avenue 1S Vegas. Nevada 89102 (702)

pro~edures

387-8124

10

1

by the 9~~ernment as called for by amendment number seven to

2

the first contract.

3

government without pre-approval exceeds $2,300,000. P.

4

The amount purchased and billed to the

Costs to attend political events and government

5

penalties were charged to the government without required

6

legal approvals, and without formal approval by the Joint

7

Venture committee.

Q.

8

The Joint Venture billed the government for direct

labor time spent by its employees while participating in

9

10

lunches and dinners with the clients' personnel at the L.A.

11

Athletic Club, outings with the LACTC at the Sky Mountain'

12

Resort, Rose Bowl Parade and football games. Parsons did not follow its own relocation policies

R.

13 14

for employees assigned to the Metrorail project.

15

employee was defined as "permanent" over 180 days, but an

16

employee assigned to Metrorail was entitled to relocation

17

benefits for 365 days.

18

ship or store 150 lbs.; employees assigned to Metrorail were

19

entitled to 9,000 lbs.

20

"settling in-days"; employees assigned to Metrorail received

21

60 days.

22

23 24

S. costs, T.

P8~Benemployees

A Parsons

were entitled to

Parsons employees received 30

Government funds were used to pay non-reimbursable in violation of F.A.R .. The Project Manager charged his spouse's costs at

25

L.A. Athletic Club to the project, and violated Government

26

Procurement Regulations by hiring his friends as consultants

27

without purchase orders and without utilizing the bid

28

process, all in violation of F.A.R.

SRARON GREEll.

COMPLAINT FOR DAMAGES

I.AWYJ::R

1721 Waldman Avenue Las Vegas. Nevada 89102 (702) 387-8124

11

u.

1

when the defendants learneu, through

2

communications from GERLINGER and others, that they had

3

obtained excess monies as a result of false claims

4

which had been files,

5

they failed to disclose the subsequently discovered

6

false claims in violation of Cal. Gov't Code §

7

12651(a) (8).

8

V.

9

Defendants,

12653(a)

as alleged in this complaint,

in violation of Cal. Gov't Code §

interfered with GERLINGER'S investigation and

10

disclosures and retaliated against him for such disclosures

11

(i)

12

on JI..pril 2,

13

(iil

14

PARSONS laid him off; after GERLINGER retained a lawyer and

15

filed a grievance hie was retained on the payroll and given

16

an office at

17

(iii)

he was excluded from his department's circulation

18

list,

(iv)

19

a week, and (v) he was given no meaningful work which would

20

enable him to keep his skills current, and this treatment

21

continued until (vi)

22

in violation of Cal. Gov't Code § 12653(d).

23

when the Joint Venture terminated him from the project 1993, and he was "released back to" PARSONS;

the course of retaliatory conduct continued when

w.

PJl.~SON'S

corporate headquarters.

his supervisor never spoke to him more than once

he was terminated on November 1994, all

Some of defendants' managers and employees filed

24

claims with actual knowledge that the information was false,

25

while others deliberately ignored or acted in reckless

26

disregard of the falsity of the information contained in the

27

claims.

28

played "ostrich" by ignoring "red flags" indicating that the

Some of defendants' managers in certain instances

COMPLAINT FOR DAMAGES

:AItON G'RZEN. LAWYER

·21 Waldman Avenue .s Vegas. Nevada 89102 (702)

However,

387-8124

12

50~

.

1

informa~~on

2

deliberately chose to feign ignorance of the correct process

3

through which claims were required to be handled; they also

4

failed to make simple inquiries that would have alerted

5

defendants to the false claims that were being submitted.

6

16.

7

separate Los

8

Raloh M. Parsons Company, Civil No. 136717, pending in Dept. 53.

on claims might not be ciccurate, and

Gerlinger's wrongful termination is the subject of a ~~geles

Superior Court action, Gerlinoer v. The

FIRST CAUSE OF ACTION

9

KNOWINGLY FALSE STATEMENTS TO GET A FALSE OR FRADuULENT CLAIM

10 11

PAID OR APE?ROVED IN VIOLATION OF THE FA..LSE CLAIMS ACTS',

12

Gov' t Code § § 12 652 e t s eo. and 31 U. S . C.

~

Cal.

3729 (a) (2) .

13

17.

E?laintiffs reallege paragraphs l through 16 herein.

14

18.

By virtue of the acts described above, defendants have

15 16

knowingly made, used or caused to be made or used, a false record . or statement to get a false or fraudulent claim paid or approved

17

by the Government in contravention of the False Claims Acts.

18

Further,

19

upon subsequent discovery,

20

defe~dants

were the beneficiaries of false claims, who, failed to disclose it.

19. Because of these acts, plaintiff Government has suffered

21

damages in a sum not less than $19,741,000 in excess payments to

22

the Joint Venture on the Los Angeles Metro project.

23

20. Through the wrongful conduct described herein,

24

defendants acted fraudulently, maliciously, oppressively and in

25

conscious disregard of Plaintiffs' rights.

26

be permitted to escape and consequences of its conduct by simply

27

having to reimburse Plaintiffs for their compensatory damages.

28

Defendants' oppressive conduct should not be rewarded by limiting

S IlAROI{ GIU>E:N.

COMPLAINT FOR DAMAGES

LAWYER

1121 Waldman Avenue Las Vegas. Nevada 89102 (102] 381-8124

Defendants should not

13

51y

,

1,

their liabil~L.Y to the amount they weree"ntitled to receive under

2

their contract obligations.

3

liability from this type of conduct is to have to live up to the

4

contract they entered into in the first place, there is no

5

deterrent to keep defendants from similar misconduct in the

6

future.

7

against defendants in a sum to be determined by trial, by way of

8

example, and as a deterrent to future misconduct.

If defendants' only exposure for

Plaintiffs request that punitive damages be assessed

SECOND CAUSE OF ACTION

9

10

EMPLOYER INTERFERENCE WITH EMPLOYEE DISCLOSURE

~BD

RETALIATION

11

21.

Plaintiffs reallege paragraphs 1 through 16 herein.

12

22.

By virtue of the acts described above, defendants have

13

knowingly interfered with GERLINGER'S investigations and his

14

disclosures and wrongfully retaliated against him in his

15

employment in violation of Cal. Gov't Code

16

23.

§

12653(a).

As a legal result of the Defendants' wrongful conduct

17

Plaintiff GERLINGER has individually suffered special damages,

18

including lost wages, the amount of such damages has not yet been

19

fully ascertained and is subject to proof at trial; such damages

20

are in excess of the jurisdictional limits of this court.

21

24.

As a further legal result of Defendants' wrongful

22

conduct plaintiff GERLINGER has individually suffered general

23

damages, including loss of his reputation as a businessman; in

24

addition, as a direct and proximate result of such conduct

25

GERLINGER has experienced, and continues to experience,

26

tremendous embarrassment, humiliation, mortification, anguish and

27

distress for which he is entitled to recover damages in a sum

28

subject to proof at trial.

RON CltEDf.

1 Waldman

COMPLAINT FOR DAMAGES

LAWYER ~venue

Vegas. Nevada 89102 (702) 387-812'l

14

S~y

25.

1

Tt_Jugh the wrongful conduct aescribed herein,

2

defendants acted fraudulently, maliciously, oppressively and in

3

conscious disregard of Plaintiff GERLINGER'S rights.

4

should not be permitted to escape and consequences of its conduct

5

by simply having to reimburse Plaintiff for his compensatory

6

damages.

7

by limiting their liability to compensatory damages, as that is

8

no deterrent to keep defendants from similar misconduct in the

9

future.

Defendants

Defendants' oppressive conduct should not be rewarded

Plaintiff requests that punitive damages be assessed

10

against defendants, and awarded to GERLINGER, in a sum to be

11

determined by trial, by way of example, and as a deteDrent to

12

future misconduct. PRAYER

13

WHEREFORE,

14

15

plaintiffs demand judgment against the

defendants and each of them, as follows: 1.

16

Judgment in favor of the STATE OF CALIFORNIA,

17

COUNTY OF LOS

18

METROPOLITAN TRFBSIT AUTHORITY, UNITED STATES OF

19

and DOES 1 - 10 against defendants,

20

for recovery of the excess charges, and civil penalties as

21

are allowed by law in the amount of $10,000

22

(i.e., each false claim for payment)

23

2.

~~GELES,

CITY OF LOS ANGELES, LOS

~BGELES ~~ERICA,

jointly and severally,

pe~

violation

i

Judgment in favor of J. Martin Gerlinger against

24

defendants,

25

award, and special and general damages for employment

26

retaliation and interference with reporting;

27 28

SlDUl.ON CREEN.

3.

jointly and severally, for a QUi tam statutory

The greater of treble damages, double damages, or

punitive damages as may be recoverable pursuant to each COMPLAINT FOR DAMAGES

l.l\WYr.:R

1721 Waldman Avenue Las Vegas. Nevada 89102 (7021 387-8124

15

53y

claim ;

1

4.

2

at Pre-j udgm ent inter est and post- judgm ent inter est

the judic ial rate;

3 4

5.

Cost s of suit incu rred herei n;

5

6.

e Atto rney s' fees and expen ses unde r any appl icabl

prov ision of law, with a reaso nable mult iplie r;

6 7

7.

Tria l by jury; and

8

8.

s Such othe r and furth er relie f as the Cour t deem

9

10

iI

prop er.

!

Dated : May 18, 1996

I,

11

~~ ~N6 GREEN, Atto rney

12

SHARO for cui tam Plai ntiff , J. MARTIN GERLINGER

13 14 15

16 17

18 19 20 21

22 23 24 25

26 27

28

l.ARON GRI:Dl,

I

COMP LAINT FOR DAMAGES

t.AJ
121 Waldman Aver.ue IS Vegas, Nevada 89102 ("702) 387-8124

16

1

PLAINTIFF'S

0U~V

TRTAL

DE~p~u

2

Plaintiffs, by counsel, cem~nd a trial by ju~ in the above

3

action.

4

Dated: May 18, 1996 5

6

7

~ 6~ SHARON GRED", fl_ttomey

8

=or QUi ta~ Plai~tiff, J. MARTIN G~RLINGER

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

SHARON GREEN.

LAWYER

1721 Waldman Avenue Las Vegas. Nevada 89102

(702) 387-8124

COMPLAINT FOR DAMAGES :"7

1

VERIFICATION

2 3

STATE OF CALIFORNIA

4

COUNTY OF LOS ANGELES

5 the

6

pursu ant to I, J. MARTIN GERLINGER, unde r pena lty of perju ry laws of the State of Calif ornia , hereb y decla re:

10

ORNIA, I am the aui tam plai ntiff for the STATE OF CALIF ANGELES COUNTY OF LOS ANGELES, CITY OF LOS ANGELES, LOS AMERICA, DOES 1 METROPOLITAN T~~SIT AUTHORITY, UNITED STATES OF in my own right - 10 and a plai ntiff indiv idua lly and perso nally

11

in this actio n.

7

8 9

I have read the foreg oing VERIF IED CO~P~_INT FOR

15

cont ents. The DAMAGES a~d DEMAND FOR JURY TRIAL, and I know the know ledge , and matt ers state d there in are true of my own perso nal etent to testi fy they are matt ers to which I am willi ng and comp ers which are if calle d upon to do so, excep t as to those matt

16

matt ers, I state d on infor mati on and belie f, and as to those

17

belie ve them to be true.

18

Dated : May 19, 1996

12 13 14

19 20

21 22 23

24 25

26 27

28

;ulON GREEN.

COMPLAINT FOR DAMAGES

I.l\WYER

21 Waldman Avenue s Vegas. nevada 89102 (702) 387-812 4

18

1 PROOF OF SERVICE 2

The undersigned hereby certifies that on May 20, 1996 she 3

served a copy of the VERIFIED COMPLAINT FOR DAMAGES AND DEMAND 4

FOR JURy TRIAL and WRITTEN DISCLOSURE OF ALL MATERIAL EVIDENCE 5

AND INFORMATION upon the Attorney General of the State of 6

California by depositing a copy in the United States mail at Las 7

Vegas, Nevada certified mail, return receipt requested, postage 8

fully prepaid, addressed to: 9

10

11

Daniel E. Lundgren Attorney General State of California P.O. Box 944255 Sacramento, CA 94244-2550

12

13

I declare under penalty of perjurf that the foregoing is

14

true and correct and this declaration is executed on May 20,

l5

1996.

16

~o~

17

SF.ARON GREEN

18

19

20

21

22

23

24

25

26

27

28

GRl!=. Avenue

SHJUU)N 172~ Waldman

~

LAWYl:R

Vegas. Nevada 89102 (702) 387-8124

2

57y.

PROOF

O~

. ! '.,:.

r .

SERVICE

1 2

3 4

BRlAN M. BROWN LAW OFFICES OF BRIAN M. BROWN 17541 E. Seventeenth Street Tustin, California 92680 (714) 730-3411 Attorneys for Plaintiff QUI TAM REAL TOR., tvrrCHAEL QUINT

5 6 7

UNITED STATES DISTRICT COURT

8

FOR THE CENTRAL DISTRICT OF

9

CALIFO~~

10 11 12

UNITED STATES OF A..\1ERJCA ex. rel. )

)

MlCHAEL QUINT, under 31 U.S.c., §3729, Qui Tam Realtor, ) )

Plaintiffs,

13

COMPLA.J:iIJT FOR VlOLAnONS OF THE FALSE CLAIMS ACT [31 U.S.c. §3729(a))

) ) )

14

v.

15

22

RALPH M. PARSONS CONfPANY, THE PARSONS CORPORATION, DILLINGHAM CONSTRUCTION, NA., INC., DILLINGHAM CONSTRUCTION, INC., De LEUW, CATHER & ASSOC., individually, and as Joint Venturers in the Joint Ventures knOWTl as POCO, P-O and PARSONS-DILUNGHA..\1, ruTOR SALIBA, INC., S.J. GROVES, INC., PERINI CORPORATION, Individually, and as Joint Venturers in the Joint Ventures known as TUTOR-SALIBA, TUTOR-SALIBNGROVES, and TUTOR-SALIBA-PERJNl,

23

Defendants.

[UNDER SEAL PER 31 U.S.c. §3930(A)(2)]

)

16

17 18

19 20 21

) ) ) ) ) ) ) ) ) ) ) ) ) ) )

JURY TRIAL DEMANDED

)

) )

24

25 Comes now Qui Tam Realtor, MICHAEL QUINT, suing on behalf of the United St;'ltes

26

27

of America, pursuant to 31 U.S.C. §3729 et seq., who pleads and alleges as follows:

28

/ I / 1

....

'

~

e 1

COl\1;\fON ALLEGATIONS

2

Jurisdiction

3 4

1.

jurisdiction pursuant to 31 U.S.c. §3729 et seq.

Venue

5 6

Jurisdiction of the claim asserted herein is based upon Federal subject matter

2.

Venue in the United States District Court for the Central District of California is

7

based upon the fact that Defendant as charged here with violations of 31 U.S.c. §3729 et seq.

8

(the "False Claims Act") is found in and has its principal place of business in this district, and

9

the violations alleged here occurred in this district. Parties

10

11

3.

Realtor MICHAEL QUINT is a resident and citizen of the United States, the State

12

of Nevada, and between Ocotber, 1987 and AprilS, 1991, Plaintiff was employed by Defendants

13

as a Senior Inspector involved in inspections of various portions of the L.A. Metro Rail Project

14

("the Project"). During the course of rus employment, Plaintiff was responsible for inspecting

15

various aspects of ongoing construction work for the project, including Contract A-141 and the

16

construction of the Union Station portion of the Project. QUINT was allegedly laid off from his

17

employment with Defendants on or about AprilS, 1991. Defendants

18 19

4.

Defendants, RALPH M. PARSONS CO., THE PARSONS CORPORATlON,

20

DILUNGHAM CONSTRUCTION N.A., INC., DILLINGHAM CONSTRUCTION, INC., A!\lD

21

DE LEUW, CATHER & CO. (hereinafter collectively "POCO") are corporations organized and

22

existing in various states, and was a joint venture fonned in the State of California ""ith their

23

principal place of business in Los Angeles, California, which perfonns business in this district,

24

and is in good standing with the State of California. During the relevant periods of Realtor's

25

allegations in this Complaint, from 1986 through 1991, PDCD, and later PD, was the

26

Construction Manager ("CM") for the Project pursuant to a contract executed on June 29, 1984

27

(Contract No. 3369), in which PDCD contracted with the Southern California Rapid Transit

28

District ("SCRID") to provide construction management services for the Metro Red Line 2

59y

.'"

.

.­ 1

S~gment One,

2

stJtions with an at-grade yard and shop facility.

3

5.

consisting of 4.6 miles of subway-type railroad construction and fi .... e below-grade

Defendants,

TUTOR-SALIBA,

INC.,

V~nturers

S.1.

GROVES,

INC.,

PERINI

4

CORPORATION, Individually, and as Joint

5

SALIBA, TUDOR-SALIBNGROVES, and TUTOR-SALIBA-PERINI (hereinafter collectively

6

"TUTOR-SALIBA"), are corporations organized and existing in various states, and individually

7

formed joint ventures in the State of California with their principal place of business in Los

8

Angeles, California, which perfom1ed business in this district, and are in good standing with the

9

State of California. During the relevant periods of Realtor's allegations in this Complaint from

10

1986 through 199 I, TUTOR-SALIBA was a contractor performing various tunnel work for the

11

L.A. Metrorail Project, for which Defendant POCO was a construction manager.

12

SALIBA provided construction services for the Metro Redline Segment I, consisting of 4.6 miles

13

of subway-type railroad construction at five below-grade stations, with an at-grade yard and shop

14

facility. Specifically, TUDOR-SALIBA was the contractor on the A-141 Contract, as well as on

15

other contracts.

TUTOR­

Contractual History

16

17

in the Joint Ventures known as TUDOR­

6.

As stated above, on June 29, 1984, POCO executed Contract No. 3369 with the

18

SCRTO to provide construction management services for the Project. POCO was paid by the

19

SCRTO (now the Metropolitan Transit Agency or "MTA"), and received monies from the United

20

States as part of this public works project and for its construction management services. Since

21

June 29, 1984, POCO (now Parsons-Dillingham or "PO" has executed fourteen (14) Amendments

22

to Contract 3369, the last Amendment (which combines Amendments 13 and 14 to Contract No.

23

3369) dated July 16, 1991. The latter Amendment noted that POCO's original contract, including

24

Amendments 1 through 12, was superseded by this Amendment which constituted a conformed

25

contract for services performed subsequent to April 30, 1991.

26 27 28

7.

The original scope of work for POCO consisted of the following, taken from

POCO's "Construction Management Job Description Manual" of December 1985: "POCO has agreed to serve the RID as its Construction Manager

t _ ••

1

("CM") and to assemble the necessary personnel resources and

2

expertise to provide the specified services. The CM acting for the

3

RTD is responsible for constructability review of design, drawings,

4

specifications, schedules, cost estimates, and bid documents;

5

performance of special studies, etc.; assistance in procurement of

6

long-lead materials and

7

construction

8

inspection of construction; and scheduling and cost control of

9

construction.

12

procurement

contractors; supervision and

The CM is also responsible for system wide

elements, including testing and systems certification."

10

11

and

equipment; assistance in selecting

With respect to performing these functions, POCO's contract with the RTO provided under Article V, General Provisions, Section 5.2, Provision 5.2.2:

13

"Subject to the authority and direction of the District, the CM is

14

responsible for the overall management of construction activities on

IS

behalf of the District."

16

In tenns of the professional standards to be observed by POCO in carrying out its

17

obligations W1der its contract with RTO, the contract, under Section 5.3, Provision 5.3.1 provided:

18

"With respect to the perfonnance of its services, the CM will

19

exercise that degree of skill, care and diligence normally exercised

20

by recognized professional construction management finns with

21

respect to services of a comparable nature."

22

8.

Pursuant to its obligations under the contract, and under Article III, "Scope of

23

Services", Section 3.1, Provision 3.1. t (1), PDCO was required to develop all detailed v.Tinen

24

procedures necessary to facilitate the fulfillment of its contractual obligations, including

25

procedures manuals.

26

STATEMENT OF FACTS

27

Statement of Facts

28

9.

This action concerns fraud perpetrated by POCO in connection with their work as 4

Manag~r

1

Construction

2

management services contractually provided for on all Segment One construction contracts

3

between POCO and the RTO.

4

10.

for the L.A. Metro Rail Project, and, in particular, the construction

Contemporaneously \\ith the filing of this Complaint, Realtor has come forward

5

to the United States with allegations contained in this law suit. Supportive evidence has been

6

provided by the Realtor and his counsel to the Government. The allegations and evidence as

7

presented reveal fraud by POCD, the nature of which has jeopardized the integrity of the L.A.

8

Metro Rail Project, including its structural integrity and ability to withstand earthquakes. The

9

allegations concern deficiencies in POCD's failure to provide construction management services

10

as required under their contract. These deficiencies include, but are not limited to, the following: A.

11

Dailv Inspection Reports: (1)

12

PDCO was required under Section 6.1 of the Resident Engineer's

13

Procedures Manual to initial each Daily Inspection Report ("DIR") on the Project. Between

14

February 1986 and July 1989, the Resident Engineer, Leavitt Clowell, failed to sign DIR's, and

15

failed to acknowledge his review or address issues raised in at least fifty percent (50%) of the

16

reports issued during this time frame. (2)

17

Furthermore, as part of the DIR., POCO was required to explain and

18

resolve any defective or nonconforming construction noted on the DIR' s which, in many

19

instances, had deviations or nonconfonnances which were never explained. Moreover, POCO

20

was required under Section 13.2 of the Inspector Guidelines Manual to note any unusual or

21

unsatisfactory conditions in each succeeding report until or unsatisfactory or unsafe conditions

22

had been corrected.

23

other contracts on Segment One, and failed to notify the RTO or its predecessors of their failure

24

to do so.

Defendants failed to follow this requirement during the course of this and

(3)

25 ~

POCO's Construction Operations Procedures Manual, Section4.2.3,

26

required, inter

27

wri tten for any condition which "deviates from construction specifications, approved procedures

28

and instructions, codes, or other special requirements, ...". In this regard, POCO failed to comply

that Noncompliance Reports ("NCR's") and corrective action be noted and

1

with this requirement, failed to write NCR's in many, if not all, instances where required, and

2

failed to infonu the client of their failure to do so, including their failure to initial OIR's and note

3

nonconforming work therein.

4

B.

Concrete Placement Check Off and Clearance Fonus: (1)

5

POCO was required to complete concrete placement check off and

6

clearance fonus for Segment One tunnel work. These fonus included areas for signature by

7

POCO inspectors, and a POCO inspector was required to sign off the form as "okay to place"

8

before any concrete pouring could take place.

9

required to be filled out each time a concrete pour took place. (2)

10

Moreover, a concrete placement form was

Realtor is aware of in excess of twenty-five (25) instances where

11

concrete placement forms for Contract A-141 were not signed off as okay to place, but concrete

12

pours were allowed to go forward 'Without signature by a POCO Inspector. Moreover, in many

13

instances, the concrete placement fonus had deviations or noncompliances that were noted on the

14

fonus, which were not corrected prior to concrete placement. At no time was the RID or the

15

ov.ner apprised of these failures, and PDCO failed to comply v.ith their duties and responsibilities

16

under the contract by stopping work on the Project until these deviations and nonconfomlances

17

were corrected. In each of these instances, the Resident Engineer and Chief Inspector did not

18

take the necessary corrective actions or notify the contractor or owner of the nonconformances

19

as required by contract documents and procedures.

20

procedures in place at the time.

21

c.

22

Said failure violated POCO's '",Tinen

Site Deficiency NoticesINonconformance Reports: (1)

Contrary to contract specifications and procedures, POCO failed to

23

prepare Site Deficiency Notices and/or NCR's after noting a deficiency or Nonconformance in

24

DIR's or concrete pour tickets.

25

specifically criticized the first four nonconfonnances issued on Contract A-141 as inappropriate,

26

thus preventing follow-up work and/or correction of these deficiencies. In fact, it appears that

27

the Resident Engineer effectively suppressed the preparation of this information and, thereafter.

28

disregarded the Nonconfonnance procedure.

Moreover, POCO's Resident Engineer on Contract A-141

6

."

.

'.

(2)

1

2

"disposition section" of the form was not completed, which was also a deviation from POCO's

3

written procedures and policies in existence at the time. The case of site deficiency notices, the

4

"corrective action taken" section of the form was not typically completed. O.

5

Suspension of Work Notices: (1)

6

Only seven (7) suspension of work notices were issued during

In only one of these cases was the fonn complete, which would include

7

Contract A-141.

8

completion of the "commencement of work approved" section of the fonn.

9

contractor was not allowed to resume work until correction of the problem and completion of the

10

form, POCO allowed this work to go forward, which is also contrary to the specifications and

11

procedures in existence at the time.

E.

12

Although the

Change Orders: (1)

13

Although generally POCO followed its \Hitten change order

14

guidelines with regard to evaluating direct costs with respect to change orders, and in many cases

15

the final change order values did not match the sum of force account charges related to the

16

change. This is contrary to industry practice. (2)

17

Pursuant to POCO's 'Nritten procedures in existence at the time,

18

(Project Control Procedures Manual Section 58, Change Order Control), POCO was required to

19

perform a Schedule Impact Analysis for each change order.

20

analyses in the vast majority of cases, in direct contravention of \!onnen procedures in Contract

21

A-141 Network Analysis requirements. F.

22

POCO failed to perfonn such

Schedules and Submissions: (1)

23



In those few instances where NCR's were actually issued, the

11lroughout the duration of Contract A-141, POCO operated 'Without

24

an approved project schedule, which could be impacted by changes or delays, which was required

25

in order to pro-actively manage the Project and to determine actual progress versus progress

~.,

projected. POCO's failure to ensure that an approved project schedule existed represented a



,

..

'<"~Iure

of the Defendants to manage and administer the construction of A-141. .....

"

.~:;!~~~~;:~~~~':~o:_~~~i~

_'!II

4



G.

1

ContrJcts A-DO, A-146 and A·171: (I)

2

Similar to the

probl~ms

experienced in Contract A-141, POCO

3

similarly failed to implement policies and procedures with respect to DIR's, concrete placement

4

tickets, Noncompliance Reports, Suspension of Work Notices, Change Orders and Scheduling

5

Submissions.

6

State Tnvestigation: Widespread failures, Quality Assurance and Scheduling Problems.

7

11.

Beginning approximately June of 1991, and continuing thereafter, Realtor advised

8

various State and Federal Agencies of widespread fraud and corruption involving the Metro Rail

9

Project, including failure on the part of POCO to implement or enforce contract policies and

10

procedures, as well as various falsified reports involving the Project. In fact, on January 18,

11

1991, Mr. Quint informed is Resident Engineer on Contract A-141, Roger Vitti, through a

12

memorandum, of at least three areas of problems associated with the contract. No follow up to

13

these problems was done by Mr. Vitti, or any other representatives of POCO, and Realtor

14

believes that his layoff in April of 1991 was as a direct and proximate result of his raising these

15

issues internally with his superiors.

16

12.

Beginning in June of 1991, Plaintiff relayed these problems to various State and

17

Federal Agencies, and, ultimately, his presentation to a meeting of the L.A. County

18

Transportation Commission led directly to the beginning of various investigations, including

19

ultimately an investigation by Barba Arkhon International, Inc., which was concluded on February

20

23, 1994. This investigation was the culmination of a number of other investigations, including

21

investigations by Fluor Daniels, Inc. and the Edward J. Cording Tunnel Review Panel, all of

22

which confirmed Mr. Quint's original observations of problems associated \¥ith the Project, which

23

were originally ignored.

24

13.

As a direct and proximate result of Realtor's previous allegations, Barba Arkhon

25

International, Inc. confirmed that POCO had failed to meet industry standards in each of the areas

26

outlined hereinabove with respect to Contracts A-l30, A-141, A-146 and A-171.

27 28

14.

Realtor contends that the aforementioned fmdings of these panels illustrate the

damages to the United States, which is a direct result of the perpetration of the frauds JlIeged 8

..

.' .-

. 1

herein by PDCD upon the United States in the course of its work in overseeing the L.A. Melfo

2

Rail Project.

3

Intentional Circumvention of Project Procedures and Submission of False Reports

4

15.

From the beginning of Segment One of the Mdro Rail Project, and continuing

5

through approximately January I, 1992, PDCD knowingly submitted falsified weekly and

6

monthly status reports to the RTD, and later the RCC and MTA, and specifically failed to advise

7

the RTO or MTA of the problems and deficiencies that have now been uncovered on the Metro

8

Rail Project, and their failure to enforce contract specifications and procedures for which they

9

were being paid to enforce. 16.

10

In approximately May of 1991, Plaintiff 'WTote to the Los Angeles Oistrict

11

Attorney's office outlining a number of observations and deficiencies which he had noted during

12

his work on the project. In response to these allegations, a fonnal response was prepared by

13

POCO, although it was signed by RCC Vice-President John Adams. Here, again, Oefendant

14

POCO knowingly submitted falsified infonnation in response to Plaintiffs allegations, or

15

kno'Wingly covered up an omitted information directly responsive to these allegations which

16

would have uncovered the failures on the part of POCO which have now been acknowledged by

17

independent investigation. 17.

18

POCO's own internal audits and memorandum reflect that division management

19

was aware of a complete lack of established procedures and compliance with policies and

20

procedures in place at the time, and yet failed to advise the RIO (and later MTA) of these

21

problems, and allowed nonconfonning work to be perfonned with their knowledge. Moreover,

22

PDCD continued to issue weekly and monthly reports which failed to acknowledge the problems

23

of which they were aware.

24

18.

Realtor therefore alleges that each DIR, NCR, Suspension of Work Notice, as well

25

as the Weekly and Monthly Status Reports, constitute false statements made to the RTO and

26

MTA.

27 28

19.

During the course of their work on Contract A-141, and other contracts,

Defendants, and each of them, continuously bypassed the contract policies and procedures in

9

1

favor of continuing work toward completion. Moreover, in many instances, the Defendants'

2

~mployces

3

deficiencies noted in DIR's or concrete placement forms, and rather than notify the MIA or

4

RID, or document these defective conditions in NCR's or Stop Work Notices, Defendants'

5

Inspectors, Chief Inspectors and Resident Engineers ignored the problems and informed the

6

contractor and their represent.1tives that they were proceeding with work at their own risk. Not

7

only did the Defendants fail to advise the o\\ner of this procedure, but said procedure was in

8

direct violation of Defendants' contractual responsibilities to insure the contract specifications and

9

procedures were being followed.

10

20.

WL're aware of failures on the part of the contractors to take corrective action for

POCO's work on the project was completely schedule-driven, and both the

11

Resident Engineer and Chief Inspector, as well as other inspectors, were under pressure in

12

directives from senior management to move construction along by doing whatever it took.

13

Quality assurance and safety controls which did exist on testing and inspections were deliberately

14

ignored by POCO management. This resulted in widespread falsified documentation which

15

reflected that properly inspected and tested construction was proceeding on this contract and

16

others, including inspection of the HDPE membrane, which was a critical part of the tunnel work,

17

because this prevented gas and water intrusion into the tunnels. Complaints by Realtor and others

18

were ignored, and project procedures and specifications were scrapped in favor of construction

19

progress. Thus, the weekly and monthly status reports being submined by POCD did not reflect

20

the true performance of the vast majori ty of the construction on Contract A-14l and other

21

contracts on Segment One of the Project.

22

21.

Because POCO's traceability documentation system, including NCR's, DIR's, or

23

Stop Work Notices was a subject of widespread falsification and error, POCO did not and could

24

not take effective corrective action once defidencies in the field were noted.

25

22.

The MTA hired the firm of Barba Arkhon International, Inc. to conduct a

26

"Construction Management Performance Review" on October 26, 1993.

27

consultant issued a report on February 23, 1994, after an extensive review of documentation and

28

interviews with many project and POCO employees. 10

This independent

This review found a total lack of

compliance with POCO's procedures, and complete ignoring of contract specifications, and a lack of an approved project schedule for Contract A-141, among other things. 23.

Among the findings of the Barba Arkhon report were failures on the part of POCO

in the areas of (A) Daily Inspection Reports (B) Concrete placement check off and clearance forms (3) Site deficiency noticesINonconformance reports (D) Suspension of Work Notices (E) Change Orders (F) Scheduling submissions (G) Project procedures updating. 24.

The failures on the part of POCO with respect to Contract A~ 141 were also found

to exist with respect to Segment One Contracts A-130, A-146 and A-17l. 25.

The MTA's own independent consultant found that POCO failed to meet industry

practices and standards in their work as a construction manager on the Project. Failures on the part of POCO was not authorized by the RTD or MTA, and POCO knew that by allo-wing contract specifications and procedures to be ignored, that they were not providing quality assurance and traceability systems for which the RTO, the MTA and the Department of Transportation were paying. 26.

In addition to the Barba Arkhon independent report, two other reports were

commissioned by the MTA, those being an independent review by Fluor Daniels, Inc., and the 17

Edward J. Cording Tunnel Review Panel.

18

confirmed many of the Realtor's allegations concerning failures on the part of POCO to properly

19

enforce contract specifications and procedures, and also confirmed many instances where thin

20

tunnel liner sections existed, or where reinforcing steel was not added to portions of the tunnel

21

as noted by the Realtor.

22

27.

Each of these independent investigations also

As an example of an attempt to suppress contract procedures with respect to the

23

writing of NCR's, then Resident Engineer A.L. Crowell wrote a memo to Quality Assurance

24

Inspector R. Frias on December IS, 1988, indicating that NCR's should only be issued for those

25

items which "materially affect the quality of the final product and are of such severity that

26

extensive remedial measures must be taken to alleviate the situation." This memo, as well as this

27

policy, was in direct contradiction to PDCO's own requirements, procedures and specifications;

28

yet, Mr. Crowell and others failed to infonn the owner of their failure to follow contract

1

2

prucedures in this and other areas. 28.

Other memos were issued from the Quality Assurance Department on January 25,

3

1989, and August 28, 1989 to Mr. Crowell and/or Roger Vitti, indicating that Noncompliance

4

Reports were issued, but no "'Titlen disposition of corrective action was taken. Again, the RTO

5

or MTA were not notified of POCO's failure to follow specifications in these areas.

6

29.

Senior Management of POCO directed their Audit Department, and specifically,

7

Senior Quality Assurance Auditor Ray Frias, to conduct audits of POCO's procedures. Individual

8

auditors also included Randall Paton.

9

30.

The corporate internal audit confinned the regular, and unauthorized, practice of

10

POCO of failing to document their activities, failing to follow contract procedures and

11

specifications, failure to prepare inspection reports, as well as failures to develop and implement

12

inspection and test plans. As of April 5, 1988, the teams working under Frias determined that

13

failures in each of these areas continued to exist, despite repeated memorandum on particular

14

items to the Resident Engineers and Chief Inspectors on this and other projects.

15

31.

POCO directed and conducted this fraud on a comprehensive scale. Subsequent

16

investigations reflect evidence of falsehood throughout POCO's records,

17

noncompliances with POCO's inspection procedures and contract requirements, and years of

18

failure to take corrective actions.

19 20

32.

\l,;despread

Realtor, therefore, alleges that each of the following records, including Quality

Assurance records, contains and constitutes false statements:

21

A.

Daily Inspection Reports;

22

B.

Concrete Check OfT and Clearance Forms;

23

C.

Nonconformance Reports;

24

O.

Suspension of Work Notices;

25

E.

Change Orders;

26

F.

Weekly and Monthly Progress Schedule and Status Reports;

27

G.

POCO's preparation of a response to Realtor's allegations and observed

28

items, which occurred on or about August 31, 1991, although signed by RCC Vice-President,

1

2

John Adams. 33.

As a further result, POCO knowingly made, used and caused to be used, and used, ~n

3

false records and statemenls to get false and fraudulent claims paid. The Government has

4

damaged in an amount

5

with compliant operation of a Quality Assurance system, and compliance with traceability

6

requirements as described above. In addition, said damages include the amounts paid to POCO

7

for inspection and oversight procedures which were not follo\.. .ed, as well as the costs associated

8

with remedial measures which subsequently had to be taken, which were not charged to the

9

contractor.

to Realtor, but which includes the cost of all efforts associated

COMMON DAMAGE CLAIMS

10 11

unknO~l1

34.

While Realtor does not have access to all information at present, there is e\"ery

12

reason to believe that the delivery to the Government of the Metro Rail Project, including those

13

portions covered by Contracts A-lJO, A-141, A-146 and A-I?I, continue to contain defective

14

parts, as hereinafter alleged. and may, in addition to those set forth specifically in each count,

15

include the cost to the Government of subsequent remedial measures such as leaks, damages

16

resulting from failure to confonn the project to earthquake and seismic specifications, plus any

17

damage awards and litigation costs it may have incurred, or may ultimately incur, in defending

18

itself against civil litigation, if any, which may result from these defects. FIRST CAUSE OF ACTION

19 20 21

22

Violation of Title 31, §3729 et seq. of the United States Code (The "False

DILLINGHAM CONSTRUCTION N.A., INC., DILLINGHAM CONSTRUCfION, AND DE LEUW, CATHER & CO.)

24

COUNT I

25

Contract A-141

27 28

Act")

(Against Defendants RALPH M. PARSONS CO., THE PARSONS CORPORATIO:'i,

23

26

Clajm~

35.

~c.,

Realtor hereby realleges and reincorporates by reference all paragraphs in the

Complaint as though fully set forth herein. 36.

In June 1984, POCO and the RID entered into a contract which provided. inter 13

alia, that POCO would serve as ConS1ruction Manager for the RTO, and would be responsible for the o\erall n1an:lgement of construction activities on behalf of the RTO, whereby POCO would protect the district from construction problems by establishing and assuring compliance with contract procedures and specifications, in exchange for which POCO was to be paid a fee, part of ',),nich was paid for utilizing federal funding. 37.

From 1984 through approximately May of 1991, POCO charged the RTO and/or

MTA, and was paid utilizing federal funds, substantial sums to oJXrate as Construction Manager for Contract A·141 and other contracts. Realtor is informed and believes that POCO knowingly billed for work it did not perfonn, as required by its contract, and failed to infonn the RID, and its predecessor agencies, of its failure to follow other procedures or policies required by the contractor, although billing the Government for perfonning such work, as outlined hereinabove. 38.

In submitting these claims for non-existent work, or in submitting claims for work

which was not being properly performed under its contractual obligations, PDCO knowingly made, used, and caused to be made and used, false records and statements to get false and fraudulent claims paid by the Government in violation of the False Claims Act. As a result, the Government was damaged in the amounts paid for such non-existent work, and/or work that was not properly performed, and/or the result and failure(s) of various portions of the Project, which were a direct and proximate result of PDCD's failure to properly inspect those areas and/or to inform the

O~l1er

of these deficiencies, and of failing to utilize their enforcement powers to stop

work until deficiencies were

correct~.

COUNT II

Contract A-l30 39.

Realtor hereby realleges and reincorporates by reference all paragraphs in the

Complaint as though fully set forth herein. 40.

In June 1984, PDCO and the RTD entered into a contract which provided, inter

alia, that POCD would serve as Construction Manager for the RTD, and would be responsible for the overall management of construction activities on behalf of the RID, whereby POCD would protect the district from construction problems by establishing and assuring compliance 14

7/~

."

1

with contract procedures and specifications, in exchange for which POCO was to be paid a fee,

2

part of which was paid for utilizing federal funding.

3

41.

From 1984 through approximately May of 1991, POCO charged the RID and/or

4

MTA, and was paid utilizing federal funds, substantial sums to operate as Construction Manager

5

for Contract A-141 and other contracts. Realtor is informed and believes that POCO knowingly

6

billed for work it did not perform, as required by its contract, and failed to inform the RTO, and

7

its predecessor agencies, of its failure to follow other procedures or policies required by the

8

contractor, although billing the Government for performing such work, as outlined hereinabove.

9

42.

In submitting these claims for non-existent work, or in submitting claims for work

10

which was not being properly perfonned under its contractual obligations, POCO knowingly

11

made, used, and caused to be made and used, false records and statements to get false and

12

fraudulent claims paid by the Government in violation of the False Claims Act. As a result, the

13

Government was damaged in the amounts paid for such non-existent work, and/or work that was

14

not properly perfonned, and/or the result and failure(s) of various portions of the Project, which

IS

were a direct and proximate result of POCO's failure to properly inspect those areas and/or to

16

inform the o\llTler of these deficiencies, and of failing to utilize their enforcement powers to stop

17

work until deficiencies were corrected.

18

COUNT ill

19

Contract A-146

20 21

22

43.

Realtor hereby real leges and reincorporates by reference all paragraphs in the

Complaint as though fully set forth herein. 44.

In June 1984, POCO and the RTO entered into a contract which provided. inter

23

alia. that POCO would serve as Construction Manager for the RID, and would be responsible

24

for the overall management of construction activities on behalf of the RTO, whereby POCO

25

would protect the district from construction problems by establishing and assuring compliance

26

with contract procedures and specifications, in exchange for which POCO was to be paid a fee,

27

part of which was paid for utilizing federal funding.

28

45.

From 1984 through approximately May of 1991, PDCD charged the RTO and/or IS

. . . ,

1

MTA, and was paid utilizing federal funds, substantial sums to operate as Construction Manager

2

for Contract A·141 and other contracts. Realtor is informed and believes that POCO knowingly

3

billed for work it did not perform, as required by its contract, and failed to inform the RTO, and

4

its predecessor agencies, of its failure to follow other procedures or policies required by the

5

contractor, although billing the Government for perfonning such work, as outlined hereinabove. 46.

6

In submitting these claims for non-existent work, or in submitting claims for work

7

which was not being properly performed under its contractual obligations, POCO knowingly

8

made, used, and caused to be made and used, false records and statements to get false and

9

fraudulent claims paid by the Government in violation of the False Claims Act. As a result, the

10

Government was damaged in the amounts paid for such non-existent work, and/or work that was

11

not properly perfonned, and/or the result and failure(s) of various portions of the Project, which

12

were a direct and proximate result of POCO's failure to properly inspect those areas and/or to

13

inform the o\\ner of these deficiencies, and of failing to utilize their enforcement powers to stop

14

work until deficiencies were corrected.

15

COUNT IV

16

Contract A-171 47,

17 18

Realtor hereby realleges and reincorporates by reference all paragraphs in the

Complaint as though fully set forth herein. 48.

19

In June 1984, POCO and the RTO entered into a contract which provided, inter

20

~

21

for the overall management of construction activities on behalf of the RTO, whereby POCD

22

would protect the district from construction problems by establishing and assuring compliance

23

with contract procedures and specifications, in exchange for which POCO was to be paid a fee,

24

part of which was paid for utilizing federal funding.

25

that POCO would serve as Construction Manager for the RTO, and would be responsible

49.

From 1984 through approximately May of 1991, POCO charged the RTO and/or

26

MTA, and was paid utilizing federal funds, substantial sums to operate as Construction Manager

27

for Contract A-141 and other contracts. Reallor is informed and believes that POCO knowingly

28

billed for work it did not perform, as required by its contract, and failed to inform the RTO, and 16

73~

its predecessor agencies, of its failure to follow othcr procedures or policies required by the contractor, although billing the Government for performing such work, as outlined hereinabove. 50.

In submitting these claims for non-existent work, or in submitting claims for work

which was not being properly performed under its contractual obligations, POCO kno .....ingly made, used, and caused to be made and used, false records and statements to get false and fraudulent claims paid by the Government in violation of the False Claims Act. As a result, the Government was damaged in the amounts paid for such non-existent work, and/or work that was not properly performed, and/or the result and failure(s) of various portions of the Project, which were a direct and proximate result of POCO's failure to properly inspect those areas and/or to infonn the 11

O.....l1er

of these deficiencies, and of failing to utilize their enforcement powers to stop

work until deficiencies were corrected.

12

SECOND CAUSE OF ACTION

13

Violation of Title 31, §3729 et seq. of the United States Code (The "False Claims Act")

14

(Against Defendants TUTOR-SALIDA, INC., S.J. GROVES, INC.,

15

PERL--"I CORPORATION, Individually, and as Joint Venturers in the

16

Joint Ventures known as TUDOR-SALIBA, TUDOR-SALIDA/GROVES,

17

and TUTOR-SALlBA.PERINI)

18 19 20

51.

Realtor hereby realleges and reincorporates by reference all paragraphs in the

Complaint as though fully set forth herein. 52.

Defendant TUTOR-SALIBA was charged with the principal performance of the

21

construction work for Contract A-141 on Segment One of the L.A. Metrorail Project pursuant

22

to contracts between TUTOR-SALIBA and the Southern California Rapid Transit District, also

23

known as the Rail Construction Corporation, L.A. COWlty Transportation Commission, and the

24

L.A. Metropolitan Transit Authority.

25

53.

Plaintiff is informed and believes and thereon alleges that at all times herein

26

mentioned, Defendant TUTOR-SALIBA had knowledge of, acquiesced income, authorized,

27

directed and/or ratified the conduct of its management and employees in the performance or non­

28

performance of the acts as herein alleged, and that such acts took place during the course and 17

r

1 2

cJ

·

'.

scope of such managements and employees employment with TUTOR-SALIBA. 54.

Some time in 1984 or 1985, TUTOR·SALIBA entered_ their first contract to

3

perform construction work on the L.A. Metrorail Project, Contract A-141, which was an

4

agreement between Defendants TUTOR-SALIBA and The Southern California Rapid Transit

5

District, whereby TUTOR-SALIBA agreed to perform construction work on various contracts,

6

including Contract A-141. Plaintiff is informed and believes and thereon alleges that TUTOR­

7

SALIBA was entitled to receive progress payments during the course of their construction work

8

on these contracts.

9

55.

During the course of construction work, TUTOR-SALIBA failed to perfonn the

10

work required of them, failed to follow contract documents, drawings, specifications and

11

procedures, including, but not limited to, the following:

12 13

A.

the construction manager, allowing the pour to go forward;

14 15

Failing to properly install structural steel and rehar as called for in contract

Failing to take proper corrective action once deviations from the contract

specifications and procedures were provided to them; E.

Installing and pouring tunnel walls of improper thickness, and failing to

correct such problems once they were brought to their attention.

F.

22 23

c. D.

20 21

Pouring concrete without proper submittal drawings or lift drawings in

drawings and specifications;

18 19

B. existence;

16 17

Continuing to perform concrete pours without signed authorization from

56.

Using improper concrete which was contrary to project specifications.

Plaintiff is infonned and believes that other deviations from the contract

24

specifications and procedures, as well as the contractual obligations of TUTOR-SALIBA, exist

25

and are presently unknown to Plaintiff, who will seek leave to amend this Complaint to include

26

additional deviations once same have become known to Plaintiff.

27 28

57.

In order to obtain their progress payments, Plaintiff is infonned and believes that

TUTOR-SALIBA submitted progress reports and other reports to the construction manager and/or 18

75"

, '

·. ..

..

1

the public entltlcs, which failed to apprise thcm of their

2

specificnions and procedures, in order to continue to obtain their "css payments. These

3

documents constitute a submission of false statements to the government, and knowingly

0\'wTI

deviations from the contract

misrepresented the status of the construction work, and failed to inform the construction manager 5 6

and/or publ ic entities of their deviations.

58.

Throughout the time frame specified in this lawsuit, TUTOR·SALIBA submitted

7

charges to the local public entities which were paid for by government funds, in the fonn of

8

request for progress payments, as well as invoices, Certificates of Confonnance, and regular

9

Status Reports which contained records and statements that were knowingly false, due to the

10 11

regular ongoing fraudulent acts perpetrated by TUTOR-SALIBA as alleged herein.

59.

Upon submitting requests for progress payments to the government throughout the

12

time frame specified herein, wherein TUTOR-SALIBA represented that the labor and material

13

charges were incurred in accordance with contractual requirements, and other documents

14

submitted at the time of payment, TUTOR-SALIBA knowingly submitted false and fraudulent

15

claims to the public entities and to the United States for payment and approval, or which were

16

paid for utilizing federal funds.

17

60.

11lrough the specific acts and methods alleged in this lawsuit, TUDOR-SALIBA

18

made, used and caused to be made and used, false records and statements to get false or

19

fraudulent claims paid by the government, or utilizing government funds, in violation of the False

20

Claims Act.

21

PRAYER

22 23

WHEREFORE REALTOR PRAYS:

24

I.

For the First Cause of Action and for each and every count stated therein,

25

judgment against Defendants, and each of them, for treble the United States' damages, maximum

26

civil penalties and forfeitures allowed under law, pre-j udgment and post judgment interest, all

27

expenses which the Court finds to have been reasonably incurred. plus reasonable expenses,

28

attorneys' fees and costs; and.,

19

.,

,

....

-, ..

2.

2

judgment against

3

~ivil

Def~ndants,

and each of them, for treble the Unltid

_Da~age~, maximum

'- .---

.,

.'

penalties and forfeitures allowed under law, pre-judgment and post-judgment interest, all

~xpcnses



For the Second Cause of Action and for each a.n,d .c~~~t,;~ated ,therein.

1

which the Court finds to have been reasonably incurred, plus reasonable attorney's fees

5

and costs;

6

3.

For such other relief as this court deems proper.

7 ....

8 9

10

.,'

/'

!~ AttorneyM.BROWN for Qui Tam Realtor MICHAEL QUINT

11 12 13

14

15

DEMAND FOR ruRY TRJAL Plaintiff and Qui Tam Realtor, MlCHAEL QUINT, hereby demands a Jury _Tlial as provided by Rule 38(a) of the Federal Rules of Civil Procedure:

20

77y

~taIS"~-,-----

.... _

~-

..

":"'.:"'

- _

"

~

~

reQUESTer(tj.

- ..

Document 9 of 18.

Copyright 1995 McGraw-Hill, Inc. .

Engineering News-Record

October 30, 1995 SECTION: NEWS~ Vol. 235, No. 18~ Pg. 20

LENGTH: 286 words

HEADLINE: Parsons paid settlement BODY:

A subsidiary of Pars ODS Corp.::has agreed to pay the U.S. Dept. of Justice $ 3.22 million to settle a

civlllawsuit by a fonner employee charging the company with fraud.

The contracts involved an environmental clean-up at Brooks Air Force Base in Texas in 1992 and 1993. lR. Tucker, a former employee of Parsons Engineering Science Inc., filed suit against the company in U.S. district court in Raleigh, N.C., on behalf of the U.S. goverrunent. Tucker alleged that the Pasadena-based company infl~ed actual labor costs and misclassified employees. Under federal law, a private party can file a suit~:m behalf of the government and receive part of the recovered funds. As a resuh, Tucker co\lected $ 354,750 of the settlement. According to a statement by the Justice Dept., the overbilling "may have been unintentional at the start but continued even after the comp'any discovered the discrepancies." Parsons Engineering Science notified the government but co~ued excessive invoices and offered to correct the error for an amount that "grossly underestimated the mischarged amount:' U.S. officials claim.

The amount of the overbilling is unclear. Neither officials of the Justice Dept. nor Parsons Engineering Sciences could be reached for claCifications. In a statement released several days after the settlement became known, a spokesman for Parsons Corp. emphasizes that Parsons, "not Mr. Tucker," first notified the Air Force of the error. The problem arose from an invoicing error and»arsons Engineering Science never received payment "in excess of which was properly due." The statement noted that Parsons Engineering Science was recently awarded a new contract on the same proj~t.

LANGUAGE: ENGLISH LOAD-DATE: November 02, 1995

.. .Idocumerrt?_ansset--GeHauKO-MsSDUARURUUBRZU-ZBY-CAV-ORAYREUUZZZYBZR 7/17/98

7?'t

IN THE UNITED STATES DISTRICT COURT FOR EAS~RN DI~ST ICT OF NORTH CAROLINA DIVISION ,t{Ct !P-I _

.

C;3-C6S/ . . CILl~S-F

Case No. J.R. TUCKER, Bringing this Action on Behalf of the United States Government, Plaintiff,

j

(~" "'-4

­

..

"'"'V'-'

COMPLAINT TRIAL DEMANDED) (COMPLAINT ORIGINALLY SEALED UNDER 31 U.S.C. § 3730(b)(2)) (JUR~

v. ENGINEERING-SCIENCE, INC., and RALPH M. PARSONS CORPORATION Defendants.

Plaintiff Tucker, bringing this qui tam action in the name of the

United

States

Engineering-Science,

complaining

Government, Inc.,

and

Ralph

M.

of

Parsons

Defendants Corporation,

alleges as follows: PARTIES 1.

Plaintiff Tucker is an individual citizen of the State of

North Carolina and resides

in Cary,

Plaintiff

North Carolina.

Tucker is bringing this civil action for violations of 31 U.S.C.

§

3729 for himself and for the United States Government, pursuant to the provisions of 31 U.S.C. 2.

The

Defendant,

Carolina

corporation

business

in

Pasadena,

§

3730(b)(1).

Engineering-Science,

with

its

principal

California

business in Cary, North Carolina.

and

an

Plaintiff

Inc.,

is

a

North

office

and

place

of

office

and

place

of

Tuc~e~

is

e~ployed

at

the Cary, North Carolina, office of Defendant Engineering-Science, Inc.

Defendant, Engineering-Science, Inc. 's, registered agent is 1

7'1>'

CT Corporation located at 225 Hillsborough Street, Raleigh, North Carolina

27603.

3.

The Defendant, Ralph M. Parsons Corporation, is a Nevada

corporation with its principal office and place of business

in

Pasadena, California and is, upon information and belief, the sole owner and parent corporation of the Defendant, Engineering-Science, Inc.

Defendant, Ralph M. Parsons Corporation's, registered agent

is CT Corporation located at 225 Hillsborough Street, Raleigh, NC 27603.

JURISDICTION AND VENUE This action arises under 31 U.S.C. § 3729 et seq., known

4.

as the "False Claims ll.ct. 5.

II

Jurisdiction over this action is conferred on this Court

by 31 U.S.C.

3732(a)

§

and 28 U.S.C.

§

1331 because this civil

action arises under the laws of the United States. 6.

Venue is proper in the Eastern District of North Carolina

under 28 U.S.C.

§

1391(c) and 31 U.S.C.

Engineering-Science,

Inc.

is

doing

§

3732(a) because Defendant

business

in

this

district;

because some of the claims alleged arose in this district, in Wake County,

North Carolina;

Science,

Inc.

charged

and because the Defendant with

the

violation

is

Engineering-

located

in

this

district. PRELIMINARY STATEMENT 7. Science,

Plaintiff Tucker is an employee of Defendant, EngineeringInc. s, I

Cary,

North Carolina,

facility.

Plaintiff has

been employed by Defendant, Engineering-Science, Inc., since 1991. 8.

Defendant

Engineering-Science,

Inc.

is

a

contractor

supplying services to the United States Government, including, but not limited to, United

States

services to the United States Coast Guard, Air

Force,

and

the

United

States

the

Environmental

Protection Agency (USEPA). THE CLAIMS 9.

Defendant

Engineering-Science,

contracts and agreements, agreements

with

the

Inc.,

pursuant

to

its

entered into one or more contracts or

United

States

Government

to

perform

environmental surveys for the Coast Guard, Air Force, and USEPA as a

prime

contractor and/or as

a

subcontractor to

another prime

contractor. 10.

Under the terms of the contracts entered into by the

United States Government with the Defendant, Engineering-Science, Ir.c.,

Defenc.ant was

responsible

for

keeping

detailed,

accurate

records, inc:uding but not limited to, records of billable hours of ti~e

expended by Ensineering-Science, Inc.

out

the

work

per=ormed

pursuant

to

IS

employees in carrying

the

completion

of

such

contracts. 11.

In

order

Government

for

described

above,

to

receive

supplying Defendant

payme:1t

services

from

the

pursuant

to

Engineering-Science,

United the Inc.

States

contracts prepared

claims for payment or approval, based upon the records described above and presented or caused them to be presented to an officer or employee of the United States Government or a member of the United 3

'&'/~

States Government's Armed Forces or to a prime contractor to the United States Government. 12. Defendant Engineering-Science,

Inc., by and through its

officers, agents, or employees caused vouchers to be made, presented, directly

or delivered to the United States Government, or

indirectly

by

means

of

summaries

of

them,

used, either which

vouchers or summaries were false or fraudulent because the records of billable rates per hour and/or the number of hours expended had been inflated.

The records of billable hours had been improperly

adjusted to bill one or more of Defendant's employees at higher rates than those for which they were qualified, or the number of hours expended was very inflated, resulting in the United States Government De:endant,

being

overbilled

for

Engineering-Science,

the

Inc.,

services

performed

by

pursuant to the contracts

described above. 13. Upon information and belief Defendant Enginee::::-ing-Science, Inc. 's officers, agents and/or employees were aware of the proper billing rates to be applied to its billings but higher rates were billed than were allowed by the contract. 14.

Upon

information

and

belief,

Defendant

Engineering-

Science, Inc. 's employees' billable rates/hour and billable hours expended were knowingly falsified by one of more of Defendant's employees for the purpose of wrongfully obtaining funds belonging to the United States Government. 15. The information described above has been brought to the attention of several of Defendant Engineering-Science, Inc. 's high

level management officials on at least one occasion, an April 6,

1993 dinner at which Plaintiff Tucker was present. these officials Science, •

discussed ways

At the dinner,

in which Defendant Engineering­

Inc. could conceal, avoid or decrease its obligation to

repay the United States Government the appropriate amounts due and to continue to bill at rates above those justified by the contract. No

discussion

was

conducted

at

the

dinner

to

suggest

that

Defendant, Engineering-Science, Inc., should come forward and tell the United States Government that its billing under

~he

contracts

described above was erroneous. COUNT I 16. Paragraphs 1-15 are

incorpora~ed

by reference as if set

out in full below. 17. Science, employees,

Upon

information

Inc.,

by

and

and

belief,

through

its

Defendant

officers,

Engineering-

agents,

and/or

knowing2.y presented or caused to be presented to an

officer or employee of the governwent or a me;nber of

~he

arwed

forces false or fraudulent claims for payment or approval during the last year or more of Defendant, Engineering-Science,

Inc. 's,

contract(s) referenced in paragraph (9) herein. 18.

Upon

information

and

belief,

Defendan~,

E~gineering-

Science, Inc., by and through its officers, agents, and employees, knowingly made, used, or caused to be made or used, false records or

s~a~ements

19.

UDon

to get false or fraudulent claims paid or approved. information

and

belief,

Defendant,

Engineering-

Science, Inc., by and through its officers, agents, and employees, 5

has authorized the actions of its various officers,

agents,

and

employees to take the actions set forth above. 20. Upon information and belief, the United States Government has sustained damages because of the acts of Defendant Engineering­ Science,

Inc.

as a result of its violations of the False Claims



Act, 31 U.S.C. § 3729. 21. Upon information and belief, the actions described above have

occurred

during

the

time

period

in

which

Defendant,

Engineering-Science, Inc., was a contractor with the United States Government

pursuant

to

various

contracts,

including,

but

not

limited to, the time period during which Plaintiff Tucker has been employed by Defendant. 22. Upon information and belief, as set forth in the preceding paragraphs,

Defendant,

violated 31 U.S.C.

Engineering-Science,

Inc.,

has

knowingly

3729 and has thereby damaged the United States

§

Government by its actions in an amount to be determined at trial.

*

* Further,

*

*

*

*

*

*

*

*

*

*

Jurisdiction of the Court having been invoked and

es~ablished

under

jurisdic~ion

of the Court is invoked under the doctrine of pendent

Plaintiff's

first

claim

for

relief,

the

jurisdiction for the purpose of Claim Two in that Claim Two alleges different grounds in support of a single claim for relief arising out of the same transaction.

6

COUNT II (Conversion)

23. Paragraphs 1-22 are incorporated by reference as if set out in full below. 24. Defendant, Engineering-Science, Inc., by and through the acts

and/or

omissions

to

act

of

its

officers,

agents

and/or

employees has wrongfully converted to its own use and benefit funds belonging to the United States Government. 25.

The United States Government has been deprived of the

legitimate use and

be~efit

of said funds by the detention of said

funds. 26.

By

engaging

In

the

acts

pleaded

herein,

Defendant,

Engineer ing-Science, Inc., should be charged with puni ti ve damages.

WHERSFORE,

PLAINTIFF,

on

behalf

of

the

United

States

Government, prays: (a)

That

Science,

this Inc.

Court

Order

that

Defendant

Engineering-

cease and desist from violating 31 U.S.C.

3729;

(b)

That this Court enter

Parsons Corporation,

judgment against

Defe~dant,

in an amount equal to three times

the amount of damages the United States Government has sustained because of its actions, plus a civil penalty of

§

$5,000 U.S.C.

to $10,000 for each action in violation of 31 3729,

§

interest,

and

including

the

costs

the

costs

of

this

of

the

action United

with

States

Government for its expenses related to this action; (c) That Plaintiff be awarded all costs incurred, including reasonable attorneys fees; (d)

That

in

the

event

that

the

United

States

Government

continues to proceed with this action, Plaintiff be awarded an amount for bringing this action in the amount of at least 15 percent and as much as 25

pe~cent

of the proceeds of the

action or settlement of the claim; (e) That in the event that the United States Government does not proceed with that

the

Court

action, Plaintiff be awarded an amount decides

is

reasonable

for

collecting

the

civil penalty and damages,

which shall be not less than 25

percent

oercent

nor more

than

30

of

the

proceeds

of

the

action or settlement;

(f) That punitive damages if! an amount to be determined be awarded pursuant to the second claim for relief; (g) That a trial by jury be held on all issues; (h) That the any

othe~

U~ited

relie~,

States Government and Plaintiff receive

both at law and at equity, to which they

may reasonably appear entitled.

8

This the 21 day of April, 1993.

~i/td~

Reag

H. Weaver

01 D~str~ct Law Offices

11 South Blount Street

P.O. Box 25096

Raleigh, North Carolina 27611

Telephone: (919) 828-0363

State Bar No. 12585

Cap~

9

NORTH CAROLINA WAKE COUNTY Plaintiff, J.R. Tucker, being first duly sworn deposes and says that he is the plaintiff in the foregoing action; that he has read the foregoing Complaint and knows its contents and that the same is true of his own knowledge except as to those matters and things set forth therein upon information and belief, and as to those matters he believes them to be t e.

My CommisslOO Expires 7/8/96

CERTIFICATE OF SERVICE It is hereby certified that on this date the foregoing Complaint fSealed Under 31 U.S.C. §3730(b)(2)] and substantially all material evidence in the possession of the Plaintiff was served upon the Office of the United States Attorney for the Eastern District Of North Carolina by hand delivery of such copies in accordance with the provisions of Rule 4(d)(4) of the Federal Rules of Civil Procedure.

This the

c2;2...

day of

H. Weaver Capi 1 District Law Offices 11 South Blount Street P.O. Box 25096 Raleigh, NC 27611 Telephone: (919) 828-0363 State Bar No.: 12585

~taIS"~.:::..:..-

---,----

----: IHQUESTer

.........- ..

":"'

_

(fl.

.

Document 9 of 18. Copyright 1995 McGraw-Hill, Inc. . Engineering News-Record October 30, 1995 SECTION: NEWS; Vol. 235, No. 18; Pg. 20

LENGTH: 286 words HEADLINE: Parsons paid settlement

BODY:

A subsidiary of Pars ODS Corp.::has agreed to pay the U.S. Dept. of Justice $ 3.22 million to settle a

civil lawsuit by a fonner employee charging the company with fraud.

The contracts involved an environmental clean-up at Brooks Air Force Base in Texas in 1992 and 1993. lR. Tucker, a fonner empl9Yec of Parsons Engineering Science Inc., filed suit against the company in U.S. district court in Raleigh, N.C., on behalf of the U.S. government. Tucker alleged that the Pasadena-based company infl~ed actual laboT costs and misclassified employees. Under federal law, a private party can file a suitpn behalf of the government and receive part of the recovered funds. As a result, Tucker collected $ 354,750 of the settlement. According to a statement by the Justice Dept., the overbilling "may have been unintentional at the start but continued even after the comp'any discovered the discrepancies." Parsons Engineering Science notified the government but co~ued excessive invoices and offered to correct the error for an amount that "grossly underestimated the mischarged amount," U.S. officials claim. The amount of the overbilling is unclear. 'Neither officials of the Justice Dept. nor Parsons Engineering Sciences could be reached for cla.tifications.

In a statement released several days after the settlement became known, a spokesman fOT Parsons Corp. emphasizes that Parsons, "not Mr. Tucker," first notified the Air Force of the error. The problem arose from an invoicing error and:Yarsons Engineering Science never received payment "in excess of which was properly due." The statement noted that Parsons Engineering Science was recently awarded a new contract on the same project.

LANGUAGE: ENGLISH LOAD-DATE: November 02, 1995 .. ./document?_ansscr--GeHauKO-MsSDUARURUUBRZU-ZBY-CAV-ORAYREUUZZZVBZR 7/17/98

IN THE UNITED STATES DISTRICT COURT

FOR EAS~RN DI~ICT OF NORTH CAROLINA

t{q 1",_( ~ DIVISION

.(\

q3-a5/~C/L(~S-F

Case NO: J.R. TUCKER, Bringing this Action on Behalf of the United States Government, Plaintiff,

) ) ) ) ) ) ) )

v. ENGINEERING-SCIENCE, INC., and RALPH M. PARSONS CORPORATION Defencants.

('­

j~j,~

COMPLAINT

(JURY TRIAL DEMANDED)

(COMPLAINT ORIGINALLY

SEALED UNDER 31 U.S.C.

§ 3730(b) (2))

) )

)

Plaintiff Tucker, bringing this qui tam action in the name of the

United

States

Engineering-Science,

Government, Inc.,

and

of

complaining

Ralph

M.

Parsons

Defendants Corporation,

alleges as follows: PARTIES 1.

Plaintiff Tucker is an

Nor': h Ca::-olina ar:.d res ides

individua~

in Cary,

citizen of the State of Plaintiff

North Carolina.

Tucker is bringing this civil action for violations of 31 U.S.C.

§

3729 for himself and for the United States Government, pursuant to the provisions of 31 U.S.C. 2.

The

Defendant,

Carolina

corporat~on

business

in

Pasadena,

§

3730(b)(1).

Engineering-Science,

with

its

principal

California

business in Cary, North Carolina.

and

an

Inc.,

is

a

North

office

and

place

of

office

and

place

of

Plaintiff Tucker is employed at

the Cary, North Carolina, office of Defendant Engineering-Science, Inc.

Defendant, Engineering-Science, Inc. 's, registered agent is 1

9/>i

CT Corporation located at 225 Hillsborough Street, Raleigh, North Carolina

27603.

3.

The Defendant, Ralph M. Parsons Corporation, is a Nevada

corporation with its principal office and place of business

in

Pasadena, California and is, upon information and belief, .the sole owner and parent corporation of the Defendant, Engineering-Science, Inc.

Defendant, Ralph M. Parsons Corporation's, registered agent

is CT Corporation located at 225 Hillsborough Street, Raleigh, NC 27603.

JURISDICTION AND VENUE 4.

This action

under 31 U.S.C. § 3729 et seq., known

a~ises

as the "False Claims Act." 5.

Jurisdiction

ove~

and 28 U.S.C.

confe~~ed

by 31 U.S.C.

§

2c~ion a~ises

under the laws of the United States.

6.

3732(a)

this action is

Venue is proper in the Eastern

on this Court

1331 because this civil

§

Dist~ict

of North Carolina

under 28 U.S.C. § 1391(c) and 31 U.S.C. § 3732(a) because Defendant Engineering-Science, because some of County,

North

Science,

Inc.

t~e

Inc.

is

doing

business

in

claims alleged arose in this

Ca~olina;

charged

and because the with

this

dis~rict,

Defendant

the. violation

is

district; in Wake

Engineering-

located

in

this

district. PRELIMINARY STATEMENT 7. Science,

Plaintiff Tucker is an employee of Defendant, EngineeringInc.'s,

Cary,

North Carolina,

facility.

Plaintiff has

been employed by Defendant, Engineering-Science, Inc., since 1991.

8.

Defendant

Engineering-Science,

Inc.

is

a

contractor

supplying services to the united States Government, including, but not

limited to,

United

States

services to the United States Coast Guard, Air

Force,

and

the

United

States

the

Environmental

Protection Agency (USEPA). THE CLAIMS Defendant

9.

Engineering-Science,

contracts and agreements, agreements

the

with

prime

pursuant

to

its

entered into one or more contracts or States

United

environmental surveys for the a

Inc.,

contractor and/or

Coas~

as

a

Government

to

perform

Guard, Air Force, and USEPA as

subcontractor to

another

prime

contractor. 10.

Under the terms of the cont::-acts entered into by the

United States Government with the Defendant, Engineering-Science, Ir:c.,

was

Defendan~

responsible

for

keeping detailed,

accurate

records, including but not limited to, records of billable hours of time expended by Engineering-Science, Inc. 's employees in carrying out

~he

work

performed

pu::-suant

to

~he

completion

of

such

contracts. 11.

In

order

Government

for

described

above,

to

receive

supplying Defendant

payment

services

from

the

pursuant

to

Engineering-Science,

United the Inc.

States

contracts prepared

claims for payment or approval, based upon the records described above and presented or caused them to be presented to an officer or

employee of the United States Government or a member of the United

States Government's Armed Forces or to a prime contractor to the United States Government. 12. Defendant Engineering-Science,

Inc., by and through its

officers, agents, or employees caused vouchers to be made, used, presented, or delivered to the United States Government, directly

or

indirectly

by

means

of

summaries

of

them,

either which

vouchers or summaries were false or fraudulent because the records of billable rates per hour and/or the number of hours expended had been inflated.

The records of billable hours had been improperly

adjusted to bill one or more of Defendant's employees at higher rates than those for which they were qualified: or the number of hours expended was very inflated, resulting in the United States Government Defendant,

being

overbilled

for

Engineering-Science,

the

Inc.,

services

performed

by

pursuant to the contracts

described above. 13. Upon information and belief Defendant Enginee:-ing-Science, Inc. 's officers, agents and/or employees werE aware of the proper billing rates to be applied to its billings but higher rates were billed than were allowed by the contract. 14.

Upon

information

and

belief,

Defendant

Engineering-

Science, Inc. 's employees' billable rates/hour and billable hours expendec were knowingly falsified by one of more of Defendant's employees for the purpose of wrongfully obtaining funds belonging to the United States Government. 15. The information described above has been brought to the attention of several of Defendant Engineering-Science, Inc. 's high 4

level management officials on at least one occasion, an April 6, 1993 dinner at which Plaintiff Tucker was present.

these officials

discussed ways

At the dinner,

in which Defendant Engineering-

Science, Inc. could conceal, avoid or decrease its obligation to repay the United States Government the appropriate amounts due and to continue to bill at rates above those justified by the contract. No

discussion

was

conducted

at

the

dinne=

to

suggest

that

Defendant, Engineering-Science, Inc., should come forward and tell the United States Government that its billing under the contracts described above was erroneous. COUNT I 16. Paragraphs 1-15 are incorporated by reference as if set out in full below. 17. Science, employees,

Upon Inc.,

information by

and

and

belief,

through

its

Defendant

officers,

Engineering-

agents,

and/or

k:1Owingly presented or caused to be presented to an

officer or employee of the government or a member of the armed forces false or fraudulent claims for payment or approval during the last year or more of Defendant, Engineering-Science,

Inc. 's,

contract(s) referenced in paragraph (9) herein. 18.

Upon

information

and

belief,

Defendant,

E~gineering-

Science, Inc., by and through its officers, agents, and employees,



knowingly made, used, or caused to be made or used, false records or statements to get false or fraudulent claims paid or approved. 19.

Upon

information

and

belief,

Defendant,

Engineering-

Science, Inc., by and through its officers, agents, and employees, 5

CfSx

has authorized the actions of its various officers,

agents,

and

employees to take the actions set forth above. 20. Upon information and belief, the United States Government has sustained damages because of the acts of Defendant Engineering­ Science,

Inc.

as a result of its violations of the False Claims

Act, 31 U. S . C. § 3729. 21. Upon information and belief, the actions described above have

occurred

during

the

time

period

in

which

Defendant,

Engineering-Science, Inc., was a contractor with the United States Government

pursuant

to

various

contracts,

including,

but

not

limited to, the time period during which Plaintiff Tucker has been employed by Defendant. 22. Upon information and belief, as set forth in the preceding paragraphs,

Defendant,

violated 31 U.S.C.

Engineering-Science,

Inc.,

has

knowingly

3729 and has thereby damaged the United States

§

Government by its actions in an amount to be determined at trial.

*

* Further,

established

*

*

*

*

*

*

*

*

*

*

Jurisdiction of the Court having been invoked and under

Plaintiff's

first

claim

for

relief,

the

jurisdiction of the Court is invoked under the doctrine of pendent jurisdiction for the purpose of Claim TwO in that Claim Two alleges different grounds in support of a single claim for relief arising out of the same transaction.

COUNT II (Conversion)

23. Paragraphs 1-22 are incorporated by reference as if set out in full below. 24. Defendant, Engineering-Science, Inc., by and through the acts

and/or

omissions

to

act

of

its

officers,

agents

and/or

employees has wrongfully converted to its own use and benefit funds belonging to the United States Government. 25.

The United States Government has been deprived of the

legitimate use and benefit of said funds by the detention of said funds. 26.

By

engagi~g

in

the

acts

pleaded

herein,

Defendant,

Engineering-Science, Inc., should be charged with punitive damages.

P~AINTIFF,

WHEREFORE,

on

behalf

of

the

United

States

Government, prays: (a)

That

Science,

this Inc.

Court

Order

that

Defendant

Engineering-

cease and desist from violating 31 U.S.C.

3729;

(b)



That this Court enter

judgment against Defendant,

Engineering-Science,

Inc.

and/or

Defendant,

Ralph

M.

Parsons Corporation,

in an amount equal to three times

the amount of damages the United States Government has sustained because of its actions, plus a civil penalty of 7

§

$5,000 to

$10,000 for each action in violation of 31

U.S.C.

3729,

§

interest,

and

including

the

costs

the

costs

of of

this the

action United

with

States

Government for its expenses related to this action;

(c) That Plaintiff be awarded all costs incurred, including reasonable attorneys fees; (d)

That

in

the

event

that

the

United

States

Government

continues to proceed with this action, Plaintiff be awarded an amount for bringing this action in the amount of at least 15 percent and as much as 25 percent of the proceeds of the action or settlement of the claim; (e) That in the event that the United States Government does not proceed with this action, Plaintiff be awarded an amount that

the

Court

decides

is

reasonable

for

collecting

the

civil penalty and damages, which shall be not less than 25 percent

nor more

than

30

percent

of

the proceeds

of

the

action or settlement;

(f) That punitive damages in an amount to be determined be awarded pursuant to the second claim for relief; (g) That a trial by jury be held on all issues; ( h)

Tna~

~ne

Uniced States

Guver~ffi2~t

........ .-J 0. ...... 1.....01.

T"'\' ... .: _.... ~_(.;,."""-

any other relief, both at law and at equity, may reasonably appear entitled.

8

J...

.:

;;:.c _

--=--_0 .. "'TO

-'----_.­

to which they



This the 21 day of April, 1993.

~!ltd~

Reag H. Weaver

Capi 01 D~str~ct Law Offices

11 South Blount Street

P.O. Box 25096

Raleigh, North Carolina 27611

Telephone: (919) 828-0363

State Bar No. 12585

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NORTH CAROLINA WAKE COUNTY Plaintiff, J.R. Tucker, being first duly sworn deposes and says that he is the plaintiff in the foregoing action; that he has read the foregoing Complaint and knows its contents and that the same is true of his own knowledge except as to those matters and things set forth therein upon information and belief, and as to those matters he believes them to be t e.

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Sworn and subs c!" ibed to me this the .2./ day of

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CERTIFICATE OF SERVICE It is hereby certified that on this date the foregoing Complaint [Sealed Under 31 U.S.C. §3730(b)(2)] and substantially all material evidence in the possession of the Plaintiff was served upon the Office of the United States Attorney for the Eastern District Of North Carolina by hand delivery of such copies in accordance with the provisions of Rule 4(d)(4) of the Federal Rules of Civil Procedure.

This the ;2.,;;L day of

H. Weaver Capi 1 District Law Offices 11 South Blount Street P.O. Box 25096 Raleigh, NC 27611 Telephone: (919) 828-0363 State Bar No.: 12585



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IN THE COURT OF COMMON PLEAS OF NORTHAMPTON COUNTY, PENNSYLVANlA . CIVIL DIVISION PONDEROSA FIBRES OF PENNSYLVANIA, INC., and APPLETON RECYCLED FIBRES, INC., tJdfb/a PONDEROSA FIBRES OF PENNSYLVANIA PARTNERSHIP, 7 Penn Plaza, Suite 618 New York, NY 10001

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No. 97-C-4861

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and THE PARSONS CORPORATION, 100 West Walnut Street Pasadena, CA 91124 Defendants.

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PARSONS MAIN, INC. Prudential Center Boston, MA 02199



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lUR Y TRIAL DEMANDED

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NOTICE TO DEFEND

YOU HAVE BEEN SUED IN COURT. IF YOU WISH TO DEFEND

AGAINST THE CLAIMS SET FORTH IN THE FOLLOWING PAGES, YOU MUST TAKE

ACTION WITHIN TWENTY-c;(20) DAYS AFTER THlS COMPLAINT AND NOTICE ARE

SERVED, BY ENTERING A WRITTEN APPEARANCE PERSONALLY OR BY

ATTORNEY AND F~ING IN WRITING WITH THE COURT YOUR DEFENSES OR

OBJECTIONS TO THE CLAIMS SET FORTH AGAINST YOU. YOU ARE WARNED

THAT IF YOU FAIL TO DO SO, TIiE CASE MAY PROCEED WITHOUT YOU AND A

JUDGMENT MAY BE ENTERED AGAINST YOU BY THE COURT WITHOUT FURTHER

NOTICE FOR ANY MONEY CLAIMED IN THE COrv1PLAINT OR FOR ANY OTHER

CLAIM OR RELIEF REQUESTED BY THE PLAINTIFF. YOU MAY LOSE MONEY OR

PROPERTY OR OTHER RIGHTS IMPORTANT TO YOU.

YOU SHOULD TAKE TIllS PAPER TO YOUR LAWYER AT ONCE.' if

YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE

THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP.

NORTIIAMPTON LAWYER REFERRAL SERVICE

155 SOUll{ 9TH STREET

EASTON. PENNSYLVANIA 18042

TELEPHONE: (610) 258-6333 o

PI-89884.03



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John R. Dingess (Pa. I.D. No. 28861) Richard F. Paciaroni (Pa. I.D. No. 46690) KIRKPATRICK & LOCKHART LLP 1500 Oliver Building Pittsburgh, Pennsylvania 15222 Telephone: (412) 355-6500 Douglas J. Smillie (Pa. J.D. No. 36687) FITZPATRICK LENTZ & BUBBA, P.C. Saucon Valley Road at Route 309 Post Office Box 219 Center Valley, Pennsylvania 18034-0219 Telephone: (610) 797-9000 Attorneys for Plaintiffs Ponderosa Fibres of Pennsylvania, Inc. and Ap'pleton Recycled Fibres, Inc., t/dJb/a Ponderosa Fibres of Pennsylvania Partnership IN THE COURT OF COtv1MON PLEAS OF NORTHA!YfPTON COUNTY, PENNSYLVANIA CIVIL DIVISION

PONDEROSA FIBRES OF PENNSYLVANlA, INC., and APPLETON RECYCLED FiBRES, INC., t/dIb/a PONDEROSA FIBRES OF PENNSYLVANlA PARTNERSHIP, 7 Penn Plaza, Suite 618 New York, NY 10001 Plaintiffs, v.

PARSONSMAIN, INC.

Prudential Center Boston, MA 02199 and THE PARSONS CORPORATION, 100 West Walnut Street Pasadena, CA 91124 Defendants.

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COMPLAINT

No. 97-C-4861

JURY TRIAL DEMANDED

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COMPLAINT Plaintiffs, Ponderosa Fibres of Pennsylvania, inc.

and Appleton Recycled Fibres,

Inc. tJd/b/a Ponderosa Fibres of Pennsylvania Partnership, by and through their counsel, Kirkpatrick & Lockhart LLP and Fitzpatrick, Lentz and Bubba, P.C., file this Complaint against Defendants Parsons Main, Inc. aIid The Parsons Corporation, and in support thereof, aver as follows:

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PARTIES 1.

Ponderosa Fibres of Pennsylvania Partnership ("Ponderosa") is a general .

partnership formed under the laws of the Commonwealth of Pennsylvania.

Its two general

partners are Ponderosa Fibres of Pennsylvania, Inc. ("PFP") and Appleton Recycled Fibres, Inc. ("ARF"). Both PFP and ARF are Delaware corporations and each has a place of business in Pennsylvarna. 2.

Ponderosa conducts business through its majority general partner, PFP.

3.

At all times relevant hereto, Ponderosa was the owner of a 415 ADSTID

(Air Dry Short Tons Per Day) Mixed Office Waste Chemical Fiber Deinking Mill located in Northampton, Northampton County, Pennsylvania (the "Facility"). 4.

Defendant, Parsons Main, Inc. ("PMI"), is a corporatten organized and

existing under the laws of the Commonwealth of Massachusetts. Its principal place of business is located in Boston, Massachusetts. 5.

At all times relevant hereto, PM! was the contractor for the engineering,

procurement, construction, commissioning, testing and start-up of the Facility.

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Defendant. The Parsons Corporation r'Parsons

and existing under the laws of the State of Delaware.

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is a corporation organized

Its principal place of business is in

Pasadena, California. 7.

At all times relevant hereto, Parsons was the ultimate parent of PM! and the

guarantor of all of PMI's obligations with respect to the Facility.

JURISDICTION AND VENUE



8.

This Court has personal jurisdiction over P?vfl because PM!: (a) is licensed,

authorized, or registered to do business in Pennsylvania; (b) has, within the relevant time period, conducted business in Pennsylvania; and/or (c) has done business with Ponderosa in Northampton County, Pennsylvania in connection with the transactions at issue in this Complaint. 9.

This Court has personal jurisdiction over Parsons because the claims at issue

in this Complaint against Parsons relate to Parsons' unconditional guaranty of the perfonnance and payment of all of PMI's obligations with respect to the Facility. In its guaranty, Parsons consented to the jurisdiction of all state and federal courts in the Commonwealth of Pennsylvania. 10.

This Court has subject matter jurisdiction over this action pursuant to 42 Pa.

11.

Venue is proper in this Court because Ponderosa's causes of action against

C.S.A. § 931.

PMl and Parsons have arisen in, or the transactions from which its causes of action have arisen took place in, Northampton County, Pennsylvania.

FACTUAL BACKGROUND

A.

Introduction 12.



The claims at issue in this Complaint relate to a $190+ million project to

develop, finance, engineer, procure, construct, commission, test and start-up the Facility (the "Project").

The object of the Project was to produce a plant which wouid be capable of

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processing mixed office waste (waste paper) through various mechanical and chemical processes so as to produce 41 S tons per day of recycled paper pulp, meeting specified guarantees as to quality and quantity, for resale to paper manufacturers. 13.

The Project was financed through the sale of Pennsylvania economic

development bonds and equity contributions from Ponderosa's general partners. The Trustee for the bondholders is Mellon Bank, N.A. Brown & Root, Inc. ("Brown & Root") is the Independent Engineer who reports to the Trustee for the bondholders.

B.

The EPC Contract and Parsons' Guaranty 14.

On or about March 23, 1995, Ponderosa and PrvtI entered into a contract for

the engineering, procurement, construction., commissioning, testing and start-up of the Facility (the "EPC Contract").

A true and correct copy of the EPC Contract (wiLhout Exhibits and

Attachments, which are voluminous) is attached hereto as Exhibit "A". IS.

On or about March 23, 1995, Parsons executed a Construction Contract

Guaranty (the "Guaranty") whereby Parsons unconditionally and irrevocably guaranteed to both Ponderosa and the Trustee the punctual payment of all amounts due and the performance of each and every obligation of PrvtI under the EPC Contract.

Parsons further agreed that the

performance of its obligations under the Guaranty was not conditioned or contingent upon any attempt to collect amounts due-.from PrvtI or to enforce performance by PMl under the EPC Contract, or on any other condition or contingency. A true and correct copy of the Guaranty is attached hereto as Exhibit "B". 16.

In connection with the negotiation of and entry into the EPC,Contraet, PrvtI

represented itself as a leading contractor with the capability and expertise to

~ngineer, ~rocure

all

necessary equipment for and ~nstruct the Facility (an "EPC contractor") in accordance with the EPC Contract.

Ponderosa relied upon such representations by PM! in connection with its

decision to enter into the EPC Conl.!&ct with·PM!, its decision to partially fund the Project with

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equity contributions of its general partners, and its decision to obtain primary financing for th~ Project from the bondholders. 17.

In connection with the negotiation of and entry into the EPC Contract,

. Parsons represented itself as a leading international EPC contractor with experience handling the engineering, procurement, construction, commissioning, testing and start-up of complex process plants like the Facility. Parsons further gave assurances to Ponderosa that its wholly-owned "

subsidiary, PN1l, had the necessary expertise and experience to successfully engineer, procure, construct, commission, test and 18.

start~up

the Facility in accordance with the EPC Contract.

To further assure Ponderosa of the full and faithful discharge of all of PN1l's

obligations under the EPC Contract, Parsons represented and agreed to provide to Ponderosa and the Trustee an unconditional and irrevocable guaranty of: (I) PN1l's performance of the EPC Contract, and (2) payment of all of PN1l's obligations under the EPC Contract. Ponderosa relied upon such representations and assurances by Parsons in connection with its decision to enter into the EPC Contract \ltith PMI, its decision to partially fund the Project with equity contributions of its general partners, and its decision to obtain primary financing for the Project from the bondholders. 19.

The EPC Contract required PtvO. to provide all professional- services, labor,

supervision, materials, equipment, tools, supplies, and all other items (with the exception of certain materials which Ponderosa agreed to provide pursuant to Article 36 of the EPC Contract) necessary to engineer, procure, construct, commission, test and start-up the Facility. 20.

As part of its duties and obligations under the EPC Contract, PM!

guaranteed that the Facility would achieve eei-tai.n performance and quality standards including, but not limited to: (1) quality and quantity of pulp production; (2) yield. defined as a ratio of the tonnage of pulp produced to the tonnage of waste paper utilized; (3) consumption of chemicals;

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0_ (4) consumption or electricity and Iteam; and (S) ernuent discharge quality (heretnancr

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collectively the "Performance Guarantees"). 21.

The EPC Contract required that the Facility achieve Mechanical Completion,

which is defined in the EPC Contract as follows: "Mechanical Completion" shall occur on the last to occur of the (I) Contractor has completed the following requirements: installation of all necessary components of the Facility and all Project Systems shall have achieved Acceptance, except that to pennit the earliest possible commissioning of the Facility, the completion of the Punch List Items may be deferred by Owner solely for the purposes of Mechanical Completion; (2) the Facility is mechanically and electrically sound (i.e., interruption of use for further normal recommissioning activities is not expected); (3) Facility equipment may be operated within manufacturers' recommended limits and together with all other Facility equipment in compliance with all applicable laws as an integrated Facility without hazard or damage to the Facility or any other property and without injury to any person; (4) completion of all items on Part A of the Deficiency List; (5) all Pre-Operational Tests and testing and Commissioning of the auxiliary boiler shall have been successfully completed; (6) Owner has received all drawings, specifications and instruction books necessary to start up, operate and maintain the Facility in a safe and reliable manner; and (7) the certificate called for by Paragraph 3.D has been signed by all parties.

22.

The EPC Contract, at Paragraph 2.G., defines "Deficiency List" items as

follows: In accordance with Paragraph 2.1, Owner shall prepare a list of items of the Work construction which have not been completed, together with any defects and deficiencies in the Work (collectively, the "Deficiency List"). Part A of the Deficiency List must be completed prior to Mechanical Completion, and Part B of the Deficiency List (such Part, the "Punch List") must be completed prior to Fmal Completion (the items thereon, the "Punch List_ Items"). Punch List Items shall consist only of such items of tht Work which are minor in nature and can be successfully completed without interfering with the commercial operation of the Facility and do not affect the performance of the Facility, including the operability, maintainability, reliability, safety or mechanical or electrical or thermal integrity of the Facility.

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23. The EPC Contract also requires that the Facility achieve Commercial

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Operation, which is defined j,n the EPC Contract as follows: "Commercial Operation" shall occur upon the last to occur of the following requirements: (I) Mechanical Completion has been achieved; (2) Contractor has completed the Work (lOc1uding stocking of spare parts and Special Tools in accordance with Paragraph 2.H), except Punch List Items and items number (3), (4), (5) and (8) in the definition of Final Completion; (3) the Facility is able to operate in accordance with its design requirements and in accordance with applicable laws; (4) the Effluent Discharge Guaranty has been met; (5) Contractor has paid all liquidated damages, if any. required pursuant to Paragraph 8.C.I and 8.C.2; (6) Contractor has successfully completed all Operational Testing; (7) Contractor has demonstrated that Guaranteed Plant Performance has been achieved or Contractor has given the notice and paid all liquidated damages required pursuant to Paragraph 13.F; (8) the Facility is ready to begin uninterrupted operation under the control of Owner or its agents; (9) all permits necessary to conduct Commercial Operation on an uninterrupted basis which are to be obtained by Contractor have been issued to Owner other than those listed on Exhibit D attached hereto; and (10) the Certificate called for by Paragraph 3.D has been signed by all parties.



24.

The EPC Contract also requires that the Facility achieve Final Completion,

which is defined in the EPC Contract as follows: "Final Completion" shall occur upon the last to occur of the following requirements: (1) Commercial Operation has been achieved; (2) comple~n of all Punch List Items; (3) Contractor has provided to Owner all As-Built Drawings, system descriptions and engineering data called for by this Contract;· (4) all Contractor supplies, equipment, waste material, rubbish and temporary facilities have been removed from the Facility Site; (5) Contractor has delivered all releases and lien waivers required pursuant to Paragraph 3.E; (6) Owner bas received all amounts, if any, to be paid by Contractor; (7) Contractor shall have completed all obligations required under this Agreement other than those items which require future performance ~ warranties, indemnities); and (8) the certificate called for by Paragraph 3.D has been signed by all parties. •

25.

The EPC Contract, at Paragraph 2.D., explicitly requires that "Commercial

Operation shall be achieved on or before the Guaranteed Commercial Operation Date," which was -7-

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22, 1997. The fPC Contract provides that if PM! fail. to

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the Facility to achi~;--'

Commercia.! Operation on or before May 22, 1997, or if the Facility does not meet or exceed the Performance Guarantees, then PM! shall pay liquidated damages to Ponderosa ("Liquidated Damages"). 26.

The EPC Contract, at Paragraph 19.0., requires PMI to maintain care,

custody and control of the Facility until the Facility achieves Commercial Operation, and to be "responsible for and obligated to replace, repair or reconstruct any portion or all of the Work which is lost, damaged or destroyed" prior to achieving Commercial Operation. 27.

The EPC Contract, at Paragraph 3.G., provides that U[PMI's] obligation to

perform the Work and complete the Facility in accordance with the Contract Documents shall be absolute. " 28.

The EPC Contract also provides, at Paragraph 14.C., that PMI is required to

continue to carry out the Work and maintain progress during the course of any dispute with Ponderosa. 29.

In return for the full and faithful discharge by PMI of all of its duties and

obligations under the EPC Contract, Ponderosa agreed to pay PMI SI22,800,000, plus up to

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Engineering, Design and Construction of the Facility; Failed Attempts to Start-Up the Facility and Abandonment of the Facility by PMI.

30.

. On or about March 23, 1995, and pursuant to the terms 'of the EPC

Contract, Ponderosa issued a Notice to Proceed to PM!. 31.

PM! commenced engineering and design of the Facility in or about January

1995. Such engineering and design proceeded continuously through at least June 1996. -8-

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32.

PMl's engineering and design work and project management for the Facility

were conducted primarily by individuals located in Massachusetts. 33.

Unknown to Ponderosa, PMI's engineering and design of the Facility were

defective and deficient in that a plant built in accordance with PMI's design drawings and specifications could never achieve the requirements of the EPC Contract. 34.

Construction of the Facility conunenced in or about May 1995. Construction

proceeded through the remainder of 1995 and into November 1996. 35.

In the period May-July 1996, PMI and Parsons became aware that the

Project was far behind schedule.

At that time, Parsons placed one of its own senior level

executives over PMI's Project management team. Upon information and belief, it was in that time period that Parsons, through its Parsons Power Group, took over control of the Project. 36.

In the period July 1996 through January 1997, PMI and Parsons became

aware of delays to the Project schedule which were caused by PMl or its subcontractors and also became aware of serious problems with PMl's project management staff.

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In that same time

period, Ptvfi and Parsons replaced PMI's project manager, PMI's construction manager and Ptvfi's operations manager for the Project. 37.

On or about October 29, 1996, PMI introduced waste paper into the pulping

and forming systems for the first time, bypassing the deinking portion of the plant. Over the course of the next two months, Parsons began to run pulp through the deink equipment and systems as they came on line. 38.

Between November 1996 and February 1997 or earlier, Parsons and PM!

became aware of; or recklessly or negligently failed to become aware ot: numerous, major defects and deficiencies in the engineering. design, equipment selection, equipment operation and construction of the Facility (collectively, the "Defects"). At that time, Parsons and PM! also

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knew and understood or should have known and understood that the Defects were so major and so fundamental to the overall operation and performance of the Facility that major reengineering, redesign and retrofitting of the Facility would be required in order for the Facility to achieve the requirements of the EPC Contract. including Mechanical Completion, Commercial Operation, Final Completion, and the Performance Guarantees. 39.

By mid-January 1997, Parsons was attempting to run the Facility on a

continuous basis 24 hours per day.

At that time, major deficiencies in the operation and

performance of the Facility were noted by Ponderosa and Brown & Root. 40.

During the period from November 1996 to May 1997, Parsons and PM!

continued to work on the Facility in accordance with its defective design (with only minor design adjustments) and continued periodic efforts to start-up and run the Facility without attempting to address and correct many of the Defects. During this period, the Facility continued to exhibit major deficiencies in engineering, design, equipment and construction which precluded it from achieving Mechanical Completion. 41.

On information and belief, in or about May 1997 or earlier, the senior level

management of Parsons, including the President and the Chajrman of the Board of Parsons, became directly involved in the management of the PIoject and were involved in major decisions and positions taken by Parsons and PM! from that point forward. 42.

In meetings between January 1997 and May 1997, PMI and Parsons made

representations to Ponderosa's management and to the bondholders that PMI ang Parsons were I

committed to completing the Project and that PM! would fulfill its obligations under the EPC Contract, including the payment of Liquidated Damages to Ponderosa. 43.

In June 1997, after the Guaranteed Commercial Operation Date of May 22,

1997 had passed with the Facility having failed to achieve the EPC Contract requirements for this

milestone, Parsons and PMI unilaterally ran an unsanctioned "performance test" of the Facility. -10-

The results of that test showed that the Facility was incapable of p~oducing pulp which met the Performance Guarantees specified in the EPC Contract and that many Defects still existed in the Facility.

In fact, imbalances in the water system and major equipment malfunctions caused

massive water and pulp overllows inside the Facility and significant loss of operating time, and excessive heat inside the Facility endangered the health and safety of Ponderosa's employees..

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44.

On June 27, 1997, Ponderosa gave written notice to PM! that:

(1) the

Facility had failed to achieve Mechanical Completion; (2) the Facility had not met any of the Performance Guarantees; and (3) Ponderosa wanted a realistic plan of action from PM! to address the deficiencies and reasonable assurances that the Facility would achieve Mechanical Completion and Commercial Operation as defined in the EPC Contract.

A true and correct copy of

Ponderosa's June 27, 1997 letter is attached hereto as Exhibit "C", 45.

By letters dated June 5, 1997 and July 2, 1997, Ponderosa demanded that

PM! pay Ponderosa the amounts due Ponderosa for Liquidated Damages for delay in achieving Commercial Operation and demanded payment for the cost of waste paper, chemicals, labor and other consumable items which Ponderosa had provided to PMl prior to Mechanical Completion amounts which were then due and owing to Pqnderosa under the terms of the EPC Contract. True and correct copies of P~nderosa's June 5, 1997 8l1d July 2, 1997 letters are attached hereto

as Exhibits "0" and "E", respectively. 46.

Upon information and

belie~

PM! and Parsons decided prior to June 30,

1997 that they would abandon the Project after the completion of the unsanctioned performance .

I

test. In fact, at sometime prior to June 30, 1997, PMl and Parsons advised their subcontractors and employees that their services in Northampton would no longer be needed after June 30, 1997. 47.

At 4:30 p.m., on July 2, 1997, despite the fact that Parsons' and PMI's

unsanctioned "performance test" had demonstrated that the Facility was incapable of achieving the Performance Guarantees (a prexequisite to Commercial Operation), and despite the fact that

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Parsons and PMl had wholly failed to demonstrate that any of the other prerequisites to Commercial Operation had been achieved, Parsons and PMI unilaterally, abruptly and without forewarning declared that the Facility had achieved Commercial Opera~on and notified Ponderosa that PMl was turning over to Ponderosa care, custody, and control of the Facility as of 6:00 p.m. that same day. 48.

Parsons' and PMI'sabrupt abandonment of the Facility without notice, just

before the long Fourth of July holiday weekend. jeopardized the safety and integrity of the Facility and placed critical systems and processes in the Facility at risk of damage. Indeed, shortly after PMI abandoned the Project, part of the effluent treatment plant was damaged, apparently by sabotage. The damage to the effluent treatment plant put the Facility's operation at risk and put Ponderosa at risk of losing environmental permits necessary to run the Facility. 49.

In order to protect and safeguard the Facility, Ponderosa had no choice but

to accept care, custody, and control of the Facility. That was done, under protest, on July 3, 1997. 50.

Since July 2, 1997, PM! has refused to complete the work required under the

EPe Contract, has refused to provide a plan of action as requested by Ponderosa, and has, as of that

date,~abandoned

51.

the Project. As of the date Parsons and PM! abandoned the Project. and despite the fact

that Ponderosa has paid PM! in excess of $103,000,000 for the design and construction of the Facility, the Facility had not produced one pound of pulp which met the requirements of the EPC I

Contract.

D.

Parsons' Bruch of the Guaranty 52.

By letter dated July 11, 1997, which was sent pursuant to the ootice

requirements of the EPe Contract and the Guaranty, Ponderosa gave -12-

Written notice to Parsons

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that PMI had breached the EPC Contract and that PM! had failed to .pay Ponderosa amounts due under the EPC Contract for Liquidated Damages and other costs incurred by Ponderosa for the benefit of PM!. In its July II, 1997 letter, Ponderosa made a demand on Parsons to: (l) remedy PMl's breaches of the EPC Contract; and (2) to pay the amounts due and owing by PMl to Ponderosa. A true and correct copy of Ponderosa's July II, 1997 letter is attached hereto as Exhibit UF."

• 53.

Parsons has failed and refused to remedy PMl's breaches of the EPC

Contract, and has failed and refused to pay Ponderosa the amounts due from PMl under the EPC Contract.

In fact, Parsons has, to date, failed and refused to provide any response - oral or

written - to Ponderosa's July 11, 1997 demand letter.

E.

PJ\H's and Parsons' Misrepresentations and Failures To Disclose the Defects to Ponderosa 54.

In or about May 1996, PM! and Parson became aware that the Project was

significantly and irretrievably behind schedule.

At that time, PM! and Parsons also knew or

should have known that the Facility would not achieve the EPC Contract milestone of Commercial Operation on or before the Guaranteed Commercial Operation Date. 55 .. Despite the fact that, as of May 1996,

PM!

and Parsons knew that the

Project was significantly behind schedule, PM! and Parsons failed to disclose the status of the Project, and affirmatively misrepresented to Ponderosa that the design, engineering and construction. of the Project was proceeding on schedule in accordance with the EPC Contract requirements. 56.

Through it.!! own engineering analysis and/or notice from its own

subcontractors and equipment suppliers. PM! and Parsons becam~ aware of the Defects sometime between November 1996 and February 1997 or earlier: At that

time. PM! and Parsons also knew

that the Defects were so major and fundamental to the overall performance. and operation of the -13-

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Facility that (I) the Facility would never be able to achieve Mechanical Completion, Commercial Operation, Final Completion, or the Performance Guarantees without significant reengineering, redesign and/or retrofitting; (2) the Facility would not achieve Co~ercia1 Operation on or before the Guaranteed Commercial Operation Date; and (3) continued attempts to start-up and run the Facility, without first addressing and correcting the Defects, were futile, and would merely

result in the useless consumption of millions of dollars of Ponderosa's money which was being spent on consumables and waste paper to support PMI's attempts to start-up the Facility. 57.

Despite the fact that, as of February 1997 or earlier, PMI and Parsons knew

of the Defects and that, due to the Defects, PMI would not fulfill its obligations under the EPC Contract, PMI and Parsons failed to disclose to Ponderosa the existence of many of the Defects. After becoming aware of the Defects and PMI's inability to fulfill its obligations under the EPC Contract, PMI and Parsons not only failed to disclose such material facts to Ponderosa, but also affirmatively and repeatedly misrepresented to Ponderosa that the Facility's engineering, design and construction work were proceeding on or ahead of schedule in accordance with the EPC Contract. 58.

Despite the fact that, as of May 1996, PMI and Parsons knew that the

Project was significantly behind schedule and that, as of February 1997 or earlier, PMI and Parsons knew that the Facility's engineering, design, equipment selection, and construction work were defective and that PMI would Dot be able to meet its obligations under the EPC Contract,

PM! continued to submit monthly invoices, through and including Invoice Number 31 for June 1997, seeking additional payments of millions of doUars from Ponderosa. In connection with each I

invoice, PM! falsely represented and falsely warranted as follows:

(1)

"The Work included in each milestone for which payment is requested has been performed."

(2)

"The Facility is being built in

accordance with the Construction Contract and the quality oCthe Work completed to date is in accordan<:e with the Construction Contract."

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(3)

"To the best of [PMI's] knowledge, no event, including an Uncontrollable Circumstance, has occurred which would prevent Commercial Operation from occurring on or before the Guaranteed Commercial Operation Date."

(4)

H[PMI] has not failed to perform in a timely manner any material obligation of [PMI] under the Construction Contract as of the date hereof."

(5)

"All Subcontractors. suppliers and materialmen have been paid all amounts due for work performed and materials furnished through the date of the proceeding invoice for payment and to the best of [PM!'s] knowledge, there are no liens outstanding for labor, materials and services furnished by subcontractors, suppliers and materialmen."

59.

Between the time PM! and Parsons became aware that the Project was



significantly and irretrievably behind schedule (mid-1996) and the time PM! and Parsons first became aware of the Defects (February 1997 or earlier), and the time PM! abandoned the Project (July 1997), Ponderosa: (l) paid miUions of dollars in progress payments to PM!; and (2) spent additional millions of dollars of its own money buying consumables and waste paper in an effort to support what Ponderosa unknowingly

believ~

were good faith efforts by PM! to

st~-up

and run

the Facility - efforts which were in fact futile and which PMl and Parsons knew were futile. Ponderosa made such progress payments and supplied such consumables to PM! in reliance on PMl's and Parsons' false representations that the Project was proceeding on schedule and in accordance with the EPC Contract. 60.

Upon information and belief, as of February 1997 or earlier, when PM! and

Parsons learned of the Defects, PM! and Parsons intentionally, knowingly and maliciously discontinued any good faith efforts to fulfill PMl's obligations under the EPC Contract, and intentionally, knowingly and maliciously undertook a course of action to misinform Pondero~ conceal the true state of affairs on the Project and, ultimately, extract themselves from the Project while shirking their respective duties and obligations under the EPC Contract and the Guaranty. 61.

Upon information and be1ie~ Parsons' and PMI's efforts to start-up and run

the Facility between January 1997 and the time they abandon~ the Project in July 1997 wen DOt

-IS-

1/7 )(

--_._-_

...

'-"

aimed at fulfilling PM1's obligations under the EPC Contract or I~dressing and correcting the Defects, but instead were nothing but a sham and were &imed solely at better positioning Parsons and PM! for the dispute which they knew would inevitably result from PMl's failure to design and build the Facility in accordance with the EPC Contract. 62.

Upon information and belief, PMl's management in Boston, Massachusetts

and Parsons' upper management in Pasadena, California knew about the Defects as of February

1997 or earlier. 63.

Upon information and belief, PMl's management and Parsons' upper

management intentionally, knowingly and maliciously conspired with and/or directed PMl's personnel connected with the Project to: (1) conceal information regarding the Defects from Ponderosa; (2) affinnatively misrepresent to Ponderosa the status and progress of the engineering, design and construction of the Facility; and (3) orchestrate sham efforts to start-up and run the Facility between November 1996 and June 1997 for the sole purpose of better positioning PM! and Parsons for the dispute that they knew would inevitably result from PMI's failure to design and build the Facility in accordance with the EPC Contract and Parsons' failure to fulfill its obligations under the Guaranty. COUNT I (Breach or Contract Against PMI)

Ponderosa hereby incorporates by reference Paragraphs 1 through 63 as if

64. fully set forth herein. 65.

PM! has materially breached the EPC Contract.

Its material breaches

include, but are not limited to:

a) wrongfully and prematurely abandoning the Project despite having failed to complete the Work in accordance with the EPC Contract;

-16-

....

'ill ..

a_.

b) failing and refusing to design and build the Facilit~ so that it could· ~chi~ve' tit. requisite Performance Guarantees~ c) failing and refusing to achieve Mechanical Completion; d) failing and refusing to achieve the Performance Guarantees; e) failing and refusing to achieve the Effiuent Discharge Guarantee; f)

failing and refusing to achieve Commercial Operation on or before the Guaranteed Commercial Operation Date;

g) failing and refusing to achieve Final Completion; h) failing and refusing to pay Liquidated Damages due and owing to Ponderosa under the EPC Contract; i) failing and refusing to pay other amounts due and owing to Ponderosa under the terms of the EPC Contract~ j) failing and refusing to continue with the Work during disputes;

k) wrongfully and prematurely relWquishing care, custody, and control of the Facility prior to achieving Commercial Operation;. I) failing to exercise reasonable skill and expertise in the design of the Facility;. m) improperly and/or deficiently staffing the Project;

.

n) performing the Work deficiently, negligently, and/or improperly; 0) failing and refusing to supply equipment and materials in a proper and timely

fashion;

-11-

1/9)(

. . ...'t...,. .

i ..J <;;:::t1ili:$\I4Jt2j:

...

h.,,\" . . . "",.

.

'.,~

.... Si4r.

,.",,::&:1'

t......-c. :

....

p) failing and refusing to properly and reaso~ plan. monitor, and/or

..

coordinate the Work;

•~ ,i,

q) failing and refusing to adhere to plans and specifications;

r) improperly deviating from plans and specifications; s) delaying the Project's schedule and critical path; t) delaying, hindering and/or interfering with the work. cf its subcontractors; u) failing and refusing to prosecute the Work aggressively, vigorously and/or in a timely manner; v) failing and refusing to properly repaJr and/or correct its deficiencies and improper workmanship. w) failing and refusing to tum over to Ponderosa all information and documents as is required by the EPC Contract; x) failing and refusing to repair or replace deficient and/or improper equipment; y) failing and -refusing to administer the Project work with reasonable diligence· and care; z) failing and refusing to work with Ponderosa to make a saleable product; and ~

aa) failing to comply with applicable laws and regulations

iD

the design,

construction and operation of the Facility. 66.

.

Despite repeated demands by Pondecosa, PMI has failed and refused to

remedy its material breaches of the EPC Contract and has failed and refused to provide adequate assurances of its intent to remedy or cure its material breaches of the EPC Contract. -18-

I~O)t

.. :::::::Ji

-AW

aNt ieu:ii:!lt. '(,iM!:

II."'. ---Pt..-G·.. •'· ... r ·ie

.

67.

i< .

.c.

" t,~" " """"

_

r

("

.

.. _

......

"'_"

A3 a result ofPMl'. material breaches of the EP.C Contract, and its der«tive

design, engineering, supply and installation of the Facility, Ponderosa was forced to incur additional costs, including, but not limited to, costs to procure waste paper, chemicals and other consumables, excessive sludge disposal costs, engineering costs, labor costs, maintenance costs, costs lo repair and replace defective equipment and other costs. 68.

In addition to the above costs, PMl's breaches of the EPC Contract have

caused Ponderosa to suffer lost profits and other damages. 69.

As the direct result of PMI's material breaches of the EPC Contract,

Ponderosa has suffered damages in an amount to be proven at trial. but which exceeds the compulsory arbitration limit of $50,000. 70.

All conditions precedent under the EPC Contract to the relief requested by

Ponderosa against PMI have been fulfilled, excused or otherwise satisfied. WHEREFORE, Ponderosa prays for judgment in its favor against PMl for all . damages, costs, and payments and any and all other sums incurred or whieb may be incurred as a result of PMl's breaches of the EPC Contract, pre- and post-judgment interest, for reasonable costs

~f

prosecuting this litigation, including reasonable attorneys' fees, and such other reliefas

this Court deems just and proper. COUNTn (Negligence and Misfeasance Against PMI) 71.



Ponderosa hereby incorporates by reference Paragraphs I through 70' as if

fully set forth herein. 72.

PM! owed a duty to Ponderosa to act reasonably in carrying out its

obligations on the Project.

-19-

I~y

-.

73.

.. ~.~~.. SI;~ ... '-.Ct

".. "',:;·36 .t

if....

""tZIt. ';".'rll'E'QtlR44

.'

J



:

PMl breached iu duty to act reasonably by the.foUoWUlg actions, failures to

act, negligence and/or misfe.ua.nce of its duties:

a) failing to exercise reasonable skill and expertise in the design of the Facility. b) failing to exercise reasonable skill and expertise in the engineering of the Facility; c) failing and refusing to achieve Me<:hanical Completion; d) failing and refusing to achieve Commercial Operation; e) failing and refusing to achieve Final Completion; f)

improperly and/or deficiently staffing the Project;

g) performing the Work deficiently, negligently, and/or improperly; h) failing to supply equipment and materials in a proper and timely fashion; i) failing to properly plan, monitor, and/or coordinate its work with the work of other contractors and subcontractors; j)

failing to properly schedule the Work of the Project;

k) failing and refusing to adhere to plans and specifications;

. 1) improperly deviating from plans and specifications; m) failing to comply with OSHA standards in the design, construction and operation of the Facility; n) delaying the Project's schedule and aiticaJ path;

-20-

c

D•

hi1tRi&:;~:a;:s. hinde=L:~~; ;;;;;:ri~;~th ili't:ork'"~f' oth~r co-;Uictor.- --_.' and/or subcontractors; p) failing to comply with Pennsylvania state environmental regulations in the design and operation of the Facility; q) failing and refusing to prosecute the Work aggressively, vigorously and/or in a

timely manner; r) failing and refusing to properly repalf and/or correct its deficiencies and improper workmanship; s) failing and refusing to repair or replace deficient and/or improper equipment; t) failing and refusing to administer the Project work with reasonable diligence and care; u) failing and refusing to achieve the Performance Guarantees; v) failing and refusing to achieve the Effiuent Discharge Guaranty; w) failing to work with Ponderosa.. ·'to make a saleable product; and x) failing to share proper and realistic time schedules with Ponderosa. 74.

As a result of PMI's negligence and misfeasance, and its defective design,

engineering, supply and installation of the Facility, Ponderosa was forced to incur additional costs, including, but not limited to, costs to procure waste paper, chemicals and other consumables, excessive sludge disposal costs, engineering costs, labor

co~. ~enance

costs, costs to repair

and replace defective equipment and other costs.

75. In addition

to the above costs, PMI's negligence and/or misfeasance, have

caused Ponderosa to suffer lost profitS and other damages.

·21·

llS4

a

a UK .c:, . 76. AJ a direct and proximate result of the abo~e-described negligent' ;"ct-;:

•• Qa. cae

;

failures to act, neglect and defaults. Ponderosa has suffered damages in an amount to be proven at trial, but whkh exceeds the compulsory arbitration limit of $50,000.

WHEREFORE, Ponderosa prays for judgment in its favor against PMl for all damages, costs, and payments and any and all other sums incurred or which may be incurred because of PMl's negligence and/or misfeasance, pre- and post-judgment interest, reasonable costs of prosecuting this litigation, including reasonable attorneys' fees, and such other relief as this Court deems just and proper. COUNT III

(Rescission Against PM!) 77.

Ponderosa hereby incorporales by reference Paragraphs 1 through 76 as if

fully set forth herein. 78.

PMl breached its fundamental obligations under the EPC Contract by failing

to achieve Mechanical Completion, failing to achieve Commercial Operation, failing to achieve Final Completion, failing to achieve any of the Performance Guarantees and failing to remedy the Defects. 79.

As a result of PMl's breach of its fundamental obligations under the EPC

Contract, and its defective design, engineering, supply and installation of the Facility, Ponderosa was forced to incur additional costs, including. but not limited to, costs to procure waste paper,

chemicals and other consumables, ex.cessive sludge disposal costs, engineering costs} labor com, maintenance costs, costs to repair and replace defective equipment and other costs. 80.

In addition to the above costs, PMI's breaches of the EPC Contract have

caused Ponderosa to suffer lost profits and other damages.

-22-

82.

As a result of the aforementioned problems,' deficiencies and material

breaches of the EPC Contract, Ponderosa has received no consideration for the S103,687,921.80 which it has paid to date to PMl. 83.

Accordingly, because there was a total failure of consideration on the part of

PMl, the EPC Contract is null and void. 84.

The EPC Contract is additionally Dull and void because Ponderosa was

induced to enter into the EPC Contract by material misrepresentations made by PMl and Parsons. 85.

In connection with the negotiation and execution of the EPC Contract, PMI

and Parsons represented that PMI and PMI's major subcontractor, Alfa Laval Celleco, Inc. ("CeUeco") had the. expertise and experience necessary to successfully engineer, procure, construct, commission, test and start-up the Facility in accordance with the EPC Contract. These representations were material and were false when made. 86.

Ponderosa reasonably relied upon the material misrepresentations made by

PMI and Parsons in connection with its decision to enter into the EPC Contract with PM!. . 87.

88.

.

Accordingly, Ponderosa is entitled to an order rescinding the EPC Contract

As the direct result of PMI's breach and abandonment of its fundamental

obligations under the EPC Contract and the material misrepresentationS made by PM! and Parsons, Ponderosa has suffered damages in an amount to be proven at

the compulsory arbitration limit ofSSO,OOO.

-23-

triaJ. but which exceeds

S50,ooo, together with costs, pre- and post-judgment interest, reasonable costs of prosecuting this litigation, including reasonable attorneys' fees, and such other relief as the Court deems just and proper.

COUNT IV (Breach of Contract Against Parsons) 89.

.

Ponderosa hereby incorporates by reference Paragraphs 1 through 88 as if

fully set forth herein. 90.

Pursuant to the Guaranty, Parsons unconditionally guaranteed to Ponderosa

the full and punctual performance of each and every obligation of PMI under the EPC Contract and further guaranteed full payment of all amounts due and owing by PMI under the EPC Contract. 91.

Ponderosa has made a demand on Parsons to: (1) remedy PMI's breaches of

the EPC Contract; (2) perform all ofPMI's obligations which PMI failed to perform; and (3) pay all sums due Ponderosa from PMI in accordance with Parsons' obligations under the Guaranty. 92.

Parsons has failed and refused, despite Ponderosa's demands, to remedy

PMl's various material breaches of the EPe Contract, and bas failed and refused to pay the amounts due and owing by PMI under the EPC Contract. I

93.

Parsons' failure and refusal to perform PMI's obligations under the EPC'

Contract and its failure and refusal to pay all amounts due Ponderosa from PMI constitute material breaches of the Guaranty.

-24-

~

,.

,

RauIt 0 Panons mat .

.~. ." hu'luff~daiUaes':lD:ail "&mo~t to be

-~~.~ ..... ; .':"~~ 'f,:'.

.

"

~.:.



a

proven at trial. but

. ~ ....>•.

_.rr



~ ..

which;' exceeds the compulsory

arbitration limit ofS50.ooo. 95.

All conditions

pr~ent

under the Guaranty to the relief requested by

Ponderosa have been fulfilled, excused or otherwise satisfied. WHEREFORE. Ponderosa prays for judgment in its favor against Parsons for all



damages, costs, and payments and any and all other sums incurred or which may be incurred because of the breach by Parsons of its obligations under the Guaranty, pre- and post-judgment interest, all costs of prosecuting this litigation, including reasonable attorneys' fees, and such other relief as this Court deems just and proper.

COUNT V (Declaratory Judgment Against Parsons) Ponderosa hereby incorporates by reference Paragraphs 1 thorough 9S as if

96. fully set forth herein. 97.

Pursuant to the Guaranty, Parsons unconditionally guaranteed the full and

prompt performance of each and every obligation ofPMl under the EPC Contract. Parsons fuftber agreed that the performance of its obligations under the

98. Guaranty were: (1)

ab~lute,

(2) unconditional, and (3) nQ1 conditioned or contingent upon any

attempt to collect amounts due from PMl., or to enforce performance by PMl., or on any other condition or contingency. 99.

PM! has materially breached its obligations unde:t' the EPC Contract as more

fully set forth above.

·25--

has any obligation to Ponderosa under the Guaranty. 102. An actual controversy currently exists between Ponderosa and Parsons with

respect to Parsons' obligations under the Guaranty and whether Parsons bas materially breached those obligations. 103. Declaratory relief from this Court will terminate all of the disputes and

controversies between Ponderosa and Parsons regarding the Guaranty. Pursuant to the provisions of the Pennsylvania Declaratory Judgments Act, 42 Pa. C.S.A § 7531, et. seq., Ponderosa is entitled to a declaration by this Court of the obligations of Parsons under the Guaranty. WHEREFORE, Ponderosa prays for judgment inits favor against Parsons: (a)

declaring and adjudging that Parsons' obligations under the Guaranty are

absofote and unconditional; (b)

declaring and adjudging that Ponderosa's rights to enforce performance by

Parsons ofits obligations under the Guaranty are !lQ1 conditioned or contingent upon any attempt by Ponderosa to enforce performance by PM! of its obligations under the EPC

~ntract,

through

arbitration or otherwise; (c)

declaring and adjudging that Parsons is in material breach of its obligations

under the Guaranty; (d) suffered

83

declaring and adjudging that Parsons is liable to Ponderosa for all damages

a result ofPMI's. breaches of the FPC Contract, including. but not limited to: (i) all

-26-

I~¥~

~:~~,~"'~~~J~.''~I~~amoun··tI"p·~~~·. .to·,P~~Ml;~.I•..I~an')Ii'Ill~.fflil. amou·lln"'u·~ ... ~'=1~ .~"

.:{ftt "'!;'..

.:<,~. \~:'.~~jl${~·~-"O .

.~1:'f1:(i.~tyIn '
", "~"r#Owins

~l!'!\;d~o~r ~re-co~~nstNct~~~..",·.- .-.--.-. ... l

widl,. ~ifrequirements of the fPC Contract; (ill) all amount. due and

under the £PC Contract, including unpaid Liquidated Damages and/or consequential In

.~.

J

Il!:Igt"ol'Jr"-c-e"'ltns-n""eer-.-

nS&l)''l1.

."

~ges;

I

,to

(iv) pre- and post-judgment interest on sums due and oWing; and (v) costs of

prosecuting this action including reasonable attorneys' fees; and (e)

for such other and further relief as the Court may deem just and proper. COUNT VI

(Fraud Against PMI and Parsons)

104. Ponderosa hereby incorporates by reference Paragraphs 1 thorough 103 as if fully set forth herein. 105. In connection with the negotiation of the EPC Contract, PM! and Parsons represented to Ponderosa that PM! and its major subcontractor, Celleco, had the capability, experience and expertise to engineer, procure, construct, commission, test and start-up the Facility in accordance with the requirements of the EPC Contract. These representations were material and were false when made. 106. Parsons further represented to Ponderosa that it would stand behind PMl and honor its guaranty unconditionally if PM! failed. These representations were material and, upon' information and belie£: were false when made. 107. In addition to the initial misrepresentations described above in Paragraphs 105 and 106, starting in February 1997 or earlier, PM! and Parsons knowingly, intentionally or , recklessly concealed the Defects from Ponderosa. Additionally, as early as May 1996, PMl and Parsons knowingly, intentionally or recklessly misrepresented to Ponderosa that the engineering, procurement and construction of the Facility was proceeding on schedule in accordance with the EPC Contract. -27-

......::.:

'~.~

..

-'~~

·~~.r

'.

.

.

-

. '

_





.~.



I

1997, Parsons' senior level executives represented to Ponderosa that Parsons was committed to completing the Project and seeing to it that PMl would fulfill its obligations under the EPC Contract, including the payment of Liquidated Damages to Ponderosa. These representations were material and, upon information and belief, were false when made. 110. PMI and Parsons made the material misrepresentations and omissions described above intentionally, maliciously and with the intent to injure Ponderosa by inducing it to enter into the EPC Contract and by inducing Ponderosa to pay PMl tens of millions of dollars in progress payments which would not have been made had the true status of the Project been disclosed by PMI and/or Parsons to Ponderosa. Ill. When PM! and Parsons made the material misrepresentations and omissions

described above, PM! and Parsons knew the representations were false or made them recklessly knowing there was substantial probability that they were false. 112. Ponderosa, in reasonable reliance on PMI's and Parsons'

material

misrepresentations and omissions and in ignorance of their falsity: (1) entered into the EPC Contract; (2) funded a portion of the Project costs through equity contributions of its general partners; (3) obtained primary financing for the Project from the bondholders; and (4) made progress payments to PMI in excess of S103,000,000. 113. As a result ofPMl's and Parsons' fraudulent conduct, Ponderosa was forced

to incur additional costs, including, but not limited to, costs to procure waste paper, chemicals and other consumables, excessive sludge disposal costs, engineering costs. labor. costs, maintenance costS, costs to repair and replace defective equipment and other costs. -28-

~.

,'.

,

41>.

.. ; ..

,.

Parsons' material misrepresentations and omissions, Ponderosa has suffered damages in an amount to be proven at that, but which exceeds the compulsory arbitration limit of,$50,Ooo. 116. PMl's and Parsons' fraudulent conduct was intentional, willful and malicious. Punitive damages should thus be imposed to punish PMl and Parsons, and to deter others from engaging in such wrongful conduct. WHEREFORE, Ponderosa prays for judgment in its favor against PMl and

Parsons for all damages, costs and payments and any and all other sums incurred or which may be incurred as a result of PMl's and Parsons' tortious conduct, for punitive damages, for pre- and post-judgment interest. for reasonable costs of prosecuting this action, including attorneys' fees, and for such other relief as this Court deems just and proper. COUNTVll (Negligent Misrepresentation Against PMI and Parsons)

117. Ponderosa heUby incorporates by reference Paragraphs I tluough 116 as if fully set forth herein. 118. In the alternative, PM! and Parsons made the material misrepresentations to Ponderosa described in Count VI above negligently and without exercising a reasonable degree of care and competence. 119. Each of the material misrePresentations made by PM! and Parsons to Ponderosa were made in the course of a transaction in which PMI and Parsons respectively had a

pecuniary interest.

-29-

13/1-

I,

121. As a result ofPMJ's and Parsons' tortious conduct, Ponderosa was forced to incur additional costs, including, but not limited to, costs to procure waste paper, chemicals and other consumables, excessive sludge disposaJ costs, engineering costs, labor costs, maintenance costs, costs to repair and replace defective equipment and other costs. 122. In addition to the above costs, PMl's and Parsons' tortious conduct has

caused Ponderosa to suffer lost profits and other damages. 123. As a direct result of its reasonable reliance on PMl's and Parsons' material

misrepresentations, Ponderosa has suffered damages in an amount to be proven at trial., but which exceeds the compulsory arbitration limit of S50,OOO. WHEREFORE, Ponderosa prays for judgment in its favor against PM! and Parsons for all atunages, costs and payments and any and all other sums incurred or which may be incurred as a result of PMl's and Parsons' tortious conduct, for pre- and post-judgment mterest. for reasonable costs of prosecuting this action, including attorneys' fees. and such other relief as this Court deems just and proper.

COUNTvm

(CoDosive Tort - .Concert of Action - Against PM! and Panons) 124. Ponderosa hereby incorporates by reference Paragraphs 1 through 123 as if

fully set forth herein.

-30-

in concert and/or pursuant to I common design to deceive and dcrraud Ponderosa by fraudulently inducing Ponderosa to enter into the EPC Contract and, thereafter, to fraudulently induce Ponderosa to pay PMl tens of millions of dollars in progress payments. '126. PMl and Parsons each engaged in various tortious acts in furtherance of the common design or scheme to defraud Ponderosa as set forth in this Complaint. The tortious acts



of PMl and Parsons include, but are not limited to: (a) In connection with the negotiation of and entry into the EPC Contract, PMl and Parsons, in concert with one another, misrepresented to Ponderosa that PMl and Celleco had the expertise and ability to engineer, procure, construct, conunission, test, and start-up the Facility in accordance with the requirements of the EPC Contract.

Upon information and belief, p.M! and

Parsons made such material misrepresentations to Ponderosa with the intent to fraudulently induce Ponderosa to enter into the EPC Contract and, thereafter, to fraudulently induce Ponderosa to pay PMl tens of millions of dollars in progress payments.

(b)

In connection with the negotiation and entry

into the EPC Contract, Parsons represented to Ponderosa that it would stand behind PM] and honor its Guaranty PMl failed to fulfill its obligations.

unconditi~nally if

These representations wer,e"

material and, upon infonnation and belief: were false when made. (c) Between the time PM] and Parsons first became aware of the Defects (February 1997 or earlier) and first became aware that the Project was significantlY and irretrievably behind

-31-

.

~,~ .. ·LJ.·~!JtQe4't\i .\;C.WDiMilR:.W:WWW."*".

schedule

- _ _ .____

.

(mid 1996) and the time PM1 abandoned the7"iOject QUlylt".. •• : c."

," ."'

1997), PMI and Parsons, pursuant to the common design to defraud Ponderosa., concealed the Defects from Ponderosa and misrepresented to Ponderosa that the engineering, procurement and construction of the Facility was proceeding on or ahead of schedule in accotdance with the EPC Contract. PMl and Parsons, in concert with one another, concealed and misrepresented the true status of the Project with the intent to fraudulently induce Ponderosa to continue making progress payments, which amounted to tens of millions of dollars. (d)

When PMl and Parsons first learned of the

Defects (February 1997 or earlier), they conspired together to undertake a course of action to misrepresent to Ponderosa and to conceal from Ponderosa the true status of the Project and, ultimately, to extract themselves from the Project while shirking their respective duties and obligations under the EPC Contract and the Guaranty.

Specifica1Iy, they conspired and agreed that PMI

would undertake fraudulent and deceptive efforts to start-up, run, and continue to run the Facility - efforts which both PMI and Parsons knew were a sham due to the Defects - for the sole purpose of better positioning PMI and Parsons for litigation which they knew would inevitably restilt from PMI's failure to fulfill

lts

obligations under the EPC Contract and Parsons' failure to perform its obligations under the GuarantY. 127. The conduct of PM! and Parsons constitutes a coUusive tort as set forth in Restatement (Second) of Torts § 87~a).

-32-

129. By reason of their collusive conduct

In

defrauding Ponderosa which was

undertaken in concert with one another and/or pursuant to a common design, PM! and Parsons c

are jointly and severally liable to Ponderosa for all damages incurred by Ponderosa as a result of the collusive conduct of PM! and Parsons. 130. Because PMI's and Parsons' collusive conduct to defraud Ponderosa was intentional, malicious, and done with the intent to injure Ponderosa, Ponderosa is entitled to recover punitive damages. WHEREFORE, Ponderosa prays for judgment in its favor against PMI and Parsons for all damages, costs and payments and any and all other sums incurred or which may be incurred as a result of the collusive conduct of PMl and Parsons, for punitive damages, for preand post-judgment interest, for reasonable costs of prosecuting this action, including attorneys' fees, and such other relief as this Court deems just and proper.

COUNT IX (Collusive Tort - Aiding and Abetting - Against PMI and Parsons) 131. Ponderosa hereby incorporates by reference Paragraphs 1 through 130 as if fully set forth herein. 132. PM! was aware of and knew that Parsons' conduct, as detailed in this Complaint, was tortious and constituted breaches of the duties which Parsons owed to Ponderosa. 133. As detailed in this Complaint, PM! gave Parsons substantial assistance and/or encouraged Parsons in

its tortious

conduct and breaches of duties which Parsons owed to

Ponderosa.

-33-

1:1,'

,I'i

"134.' PIlIODl wu aware ~. ~

of and knew that

. \!' ~~:4' .:.,..('.I ... ~:.,,, • ,~ • . !'l!f.~·"

'.

Complaint, wu tortious and constituted breaches of duties which PM!. owed to foDderosa. ~: .

'" •'. il ... .......-: ..'" I.. "';J. •• " • . ' .-, ~"... . :.:::.~~~;:- f~".

.

.

.•

135. As detailed in this Complaint, Parsons gave PM] substantial assistance and/or encouraged PMI in its tortious conduct and breaches of duties which PM! owed to Ponderosa. 136. The conduct of PM! and Parsons constitutes a collusive tort as set forth in Restatement (Second) of Torts § 876(b & c). 137. Ponderosa suffered damages as a direct and proximate result of the collusive conduct of

P~

and Parsons in an amount to be proven at trial, but which exceeds the

compulsory arbitration limit ofS50,OOO. 138. Because of the collusive conduct of

P~

and Parsons was intentional,

malicious, and done with the intent to injure Ponderosa, Ponderosa is entitled to recover punitive damages. WHEREFORE, Ponderosa prays for judgment in its favor against PMl and Parsons for all damages., costs and payments and any and all other sums incurred or which may be incurred as a result of the collusive conduct of PMI arid Parsons, for punitive damages, for preand post-judgment interest, for reasonable costs of prosecuting this action, including attdtneys' . fees, and such other relief as this Court deems just and proper. COUNTX

(Civil Conspiracy Against PMI and Parsom) 139. Ponderosa hereby incorporates by reference paragraphs 1 through 138 as if fully set forth herein. 140. As detailed in this Complaint, PMI and ParsOns conspired and agreed to act

in concert and/or pursuant to a common design to deceive and de~d Ponderosa by fraudulently -34-

142. As a result of acting together to defraud Ponderosa, PMl and Parsons had additional and pecultar power of coercion over Ponderosa that neither PMl nor Parsons would have had acting alone. 143. As a direct and proximate result of the conspiracy and agreement of PMI and Parsons to defraud Ponderosa, Ponderosa has suffered damages in an amount to be proven at

trial, but which exceeds the compulsory arbitration limit of S50,000. 144. Because PMl's and Parsons' conduct in entering into and furthering the conspiracy to defraud Ponderosa was intentional, malicious, and done with the intent to injure Ponderosa, Ponderosa is entitled to recover punitive damages.

WHEREFORE, Ponderosa prays for judgment in its favor against PMI and Parsons for all damages, costs and payments and any and all other sums incurred or which may be incurred as a result of the wrongful civil conspiracy of PMl and ParsoDs, for punitive damages, for pre- and post-judgment interest, for reasonable costs of prosecuting this action, including attorneys' fees, and such other relief as this Court deems just and proper.

-35-

2M!

.

,

hC,• •

.•..-1'" siti.?,", ;aCQiiN"i)U"'ts,~.... ,:"""I!I!~~.~4t'!"':~!.4_'

__.._(...._

(Druch or tbe Implied Covenant of Good Faith and Fair Dea11al AlaUu~ PMI aad _ ((f . Parsons) r:);~ ;,:.~~:{> . i' 145. Ponderosa hereby incorporates by reference paragraphs 1 through 144 as if fully set forth herein. 146. As a matter of law, the EPC Contract contained an implied covenant of good faith and fair dealing..This implied covenant required, among other things, that PM! not deny, destroy or injure Ponderosa's rights or benefits under the EPC Contract. 147. As a matter oflaw, the Guaranty contained an implied covenant of good faith and fair dealing.

The implied covenant required, among other things, that Parsons not deny,

destroy or injure Ponderosa's rights or benefits under the EPC Contract or the Guaranty. 148. PMl and Parsons breached the implied covenant of good faith and fair dealing contained in the EPC Contract and the Guaranty, respectively. Their breaches include, but are not limited to: (a)

Beginning as early as May 1996, PMl, in conspiracy

with andlor at tbe direction of Parsons, knowingly, intentionally and in bad faith misrepresented to-"onderosa that the engineering, design and construction of the Facility was proceeding on schedule in accordance with the EPC Contract, when, in truth and in fact, PM! and Parsons knew that the Project was significantly behind schedule.

.

(b)

Beginning in February 1997 .or earlier, PM! and

Parsons, pursuant to their conspiracy to defraud Ponderosa, knowingly, intentionally and in bad faith concealed the Defects from Ponderosa, and affirmatively and repeatedly misrepresented to

-36-

?

.; '

.•

~:'

;

. result of the Derects PMI would not fulfill its obligations under the EPC Contract. (c) Beginning in February 1997 or earlier and continuing through June 1997, PM! and Parsons, pursuant to their conspiracy to defraud Ponderosa, knowingly, intentionally and in bad faith submitted monthly invoices to Ponderosa which contained false representations and warranties. PMl and Parsons submitted such invoices in order to defraud Ponderosa of additional millions of dollars. (d)

Between the time PMI and Parsons learned of the

Defects (February 1997 or earlier) and the time PMl abandoned the Project (July 1997), PM! and Parsons, pursuant to their conspiracy to

defrau~Ponderosa,

knowingly and intentionally undertook a bad

faith course of action to conceal and misrepresent the

We state of

affairs on the Project and, ultimately, to extract themselves from the Project while shirking their respective obligations under the EPC Contract and the Guaranty.

PMl's and Parsons' efforts on the I

Project during this time period were not aimed at fulfilling PMI's obligations under the EPC Contract, but, instead, were a sham aimed solely at better positioning PMI and Parsons for disputes which they knew would inevitably result from their failure to fulfill their respective obligations under the EPC Contract and the

Guaranty. -37-

139)<

support what Ponderosa unknowingly believed were good faith .:' • ,'.\:1: :

~1,.,1t

\.

.

~,,,,

efforts by PMI, Ponderosa paid for and supplied all waste paper and other consumables necessary for PMl's start-up efforts, PMl and Parsons accepted and utilized such consumables. all the while: (1). knowing that the start-up efforts were futile due to the Defects, (2) knowing that the start-up efforts would result in the needless consumption of millions of dollars of Ponderosa's money, (3) intending never to reimburse Ponderosa for such consumables, despite their clear contractual obligation to do so. and (4) intending to use the start-up efforts to better position themselves for the disputes which they knew would inevitably result. (f)

Upon information and belief, in or about June 1997,

PMI, in conspiracy with and/or at the direction of Parsons, destroyed or

d~leted

data from the Facility's comput"er control

systems - data which PMI was contractually obligated to make available to Ponderosa - in a bad faith effort to conceal information which demonstrated that the Facility had failed to achieve and could never achieve the required Performance Guarantees.

PMI and.'

ParsonS, in bad faith.. refused to tum over other infonnation and documents which it was obligated to make available to Ponderosa pursuant to the terms the EPC Contract. 149. Parsons also breached its implied covenant of good faith and fair dealing by: (1) arbitrarily and in bad faith refusing to make any efforts to remedy PMrs. breaches of the EPC -38-.

ILl-by.



the bad faith conduct described above in order to permanently deny or deprive Ponderosa of the benefIts of the EPe Contract by, among other things, orchestrating a sham aimed at better positioning PMI and Parsons for disputes with Ponderosa that PMl and Parsons knew were inevitable. 151. Parsons engaged in the bad faith conduct described above in order to: (I) conceal from Ponderosa PMl's material breaches of the EPC Contract and, thereby, prevent Ponderosa from rightfully calling on the Parsons Guaranty; and (2) permanently deny or deprive Ponderosa of the benefits of the EPC Contract and the Guaranty by, among other things, orchestrating a sham aimed at better positioning PMl and Parsons for disputes with Ponderosa that PrvtI and Parsons knew were inevitable. 152. As a direct and proximate result of PMl's and Parsons' breaches of their respective duties of good faith and fair dealing, Ponderosa has suffered damages in an amount to be proven at trial, but which exceeds the compulsory arbitration Ii mit of S50,ooo. WHEREFORE, Ponderosa prays for judgment in its favor against PMl and Parsons for all damages, costs, and payments and !lIlY and all other sums incurred or which may be incurred as a result ofPrvtI's and Parsons' breaches of their duties of good faith and fair dealing, pre- and postjudgment interest, reasonable costs of prosecuting this litigation, including reasonaqle attorneys' fees, and such other relief as this Court deems just and proper.

·39-

I If/ )!

;

.

i"~~:~" ~Cooua~ (2) reIUJ1ns and fa.iUoa to make I guod fnith clT'ort to investIgate PMl s reaches of the . :.

,'-.,*"





EPe Contract; and (3) fa.iling and refusing to respond to Ponderosa's July II, 1997 demand

Jeller. 150. PM! engaged

In

the bad faith conduct described above in order to

permanently deny or deprive Ponderosa of the benefits of the EPC Contract by, among other things, orchestrating a sham aimed at better positioning PM! and Parsons for disputes with Ponderosa that PMI and Parsons knew were inevitable. lSI. Parsons engaged in the bad faith conduct described above in order to: (I) conceal from Ponderosa PMl's material breaches of the EPC Contract and, thereby, prevent Ponderosa from rightfully calling on the Parsons Guaranty; and (2) permanently deny or deprive Ponderosa of the benefits of the EPC Contract and the Guaranty by, among other things, orchestrating a sham aimed at better positioning PM! and Parsons for disputes with Ponderosa that PM! and Parsons knew were inevitable. 152. As a direct and proximate result of PMI's and Parsons' breaches of their respective duties of good faith and fair dealing, Ponderosa has suffered damages in an amount to be proven at trial, but which exceeds the compulsory arbitration limit of S50,000. WHEREFORE, Ponderosa prays for judgment in its favor against PMI and Parsons for all damages, costs, and payments and any and all other sums incurred or which may be incurred as a result of PMI's and Parsons' breaches of their duties of good faith and fair dealing. pre- and postjudgment interest, reasonable costs of prosecuting this litigation, including reasonable attorneys' fees, and such other relief as this Court deems just and proper.

-39-

.~ . .,,:'.. t~· -..'.' '\7,' ~l' oa"'orSt~te UlW DeclAdn; U'n,.~&d

.:. '. . .rooll :" :.~l .. :.,~, ", ~ '- ." ,- Unralr Methods of Competition ftnd

';r. ~.\

.

. r 't}~!

I

Unfair and Deceptive TrAde PrActictS Against PI\II and P"nons) I53. Ponderosa hereby incorporates by reference Paragraphs 1 through 152 as if fully set forth herein. 154. Ponderosa is a person engaged in trade or commerce within the meaning of Mass. Gen. Laws, ch. 93A, § l. 155, PMI is a person engaged in trade or commerce within the meaning of Mass. Gen. Laws, ch. 93A, § I. 156. The goods, services and other promises and performance made and provided by PM] under the EPC Contract constitute trade or commerce within the within the meaning of Mass. Gen, Laws, ch. 93A, § I. 157. Parsons is a person engaged in trade or commerce within the meaning of Mass. Gen. Laws, ch. 93A, § l. 158. The promises of perfonnance and payment made by Parsons in the Guarant}: constitute trade or commerce within the meaning of Mass. Gen. Laws, ch. 93A, § I. 159. By their acts and conduct as set forth above, PMI and Parsons have engaged in unfajr methods of competition or unfajr and deceptive acts or practices in the conduct of trade or commerce in violation of Mass. Gen. Laws, ch. 93A, § 2. 160. Ponderosa has suffered the loss of money or property as a direct and proximate result of the use or employment by PMI and Parsons of unfair methods of competition and unfair and deceptive acts or practices prohibited by Mass. Gen. Laws, ch. 93A, § 2.

-40-

i'

;. :

·i'cc:over ~ea it bU lU1fered as the result of the acU and conduct of PMl and Parsons set ........ the ... ,. forth above. 162. The acts and conduct of PMI and Parsons, as set forth above, constitute willful and knowing violations of Mass. Gen. Laws, ch. 93A, § 2. 163. As a result of PMl's and Parsons' use or employment of unfair methods of competition and unfair and deceptive acts or practices, Ponderosa was forced to incur additional costs, including, but not limited to, costs to procure waste paper, chemicals and other consumables, excessive sludge disposal costs, engineering costs, labor costs, maintenance costs, costs to repair and replace defective equipment and other costs. 164. In addition to the above costs, PMl's and Parsons' use or employment of unfair methods of competition and unfair and deceptive acts or practices, have caused Ponderosa to suffer lost profits and other damages. WHEREFORE, Ponderosa prays that the Court: (1) award judgment in its favor against Ptv11 and Parsons for all damages it as suffered as the result of PMI's and Parsons' respective violations of Mass'. Gen. Laws, ch. 93A, § 11; (2) treble suCh damages; (3) award

-41- .

'I~g!

!

reuooabre

...

.((o~~~~~s;

nlcresl logether with II ctlsll

and (4) award Ponderosa such other relief as the Court

deems just and proper.

Date: September L

1997

By: R. Din ess, sq. . LD. No. 28861 chard F. Paciaron~ Esq. a. LD. No. 46690 Kirkpatrick & Lockhart LLP 1500 Oliver Building Pittsburgh, PA 15222 (412) 355-6500

Fitzpatrick Lentz & Bubba. P.C. Saucon Valley Road at Route 309 P O. Box 219 Center Valley, PA 18034-0219 (610) 797-9000 Attom~ for Plaintiffs Ponderosa Fibres of Pennsylvania. Inc. and Appleton Recycled Fibres-... Inc, tldlb/a Ponderosa Fibres of Pennsylvania Partnership

-42-

1'+57-

VERIFICATION

) ) )

COMMONWEALTH OF PENNSYLVANIA COUNTY OF NORTHHAMPTON

SS.

Before me, the undersigned Notary Public, personally appeared Thomas Meersman, Project Manager, for Ponderosa Fibres of Pennsylvania Partnership after being duly sWorn and deposed and says that as such he is authorized to make this Affidavit on behalf of Ponderosa Fibres of Pennsylvania Partnership and that the facts contained in the foregoing Complaint are true and correct, according to the best of his knowledge, information and belief.

BYSlb-~/ ri~~

Thomas Meersman

Sworn to a~~ sUbscri~}~;/AI' '1 . me this c2t!:./day of ~ 1991..

.1~/1

~·r~ary~~J

My Commission Expires:

Notarial Seal Marflyn M. Minder·Dolzani. Notary Public Upper Saueon Twp.• LehIQh County My Commission EXpires April 27, 1998

Merrber. PerrasyMria AssodalIon 01 NotMDI

..

_'.

/li/P

._ - (I

~

~-

-------

1 2 3 4 5 6 7 "

8 9 10

COUNTY OF LOS ANGELES DeWitt W. Clinton, County Counsel, SBN 32095 David Kelsey, Assistant County Counsel, SBN 66400 Charles Safer, Deputy County Counsel, SBN 82771 One Gateway Plaza, Twenty-Fifth Floor 'los Angeles, California 90012 Telephone: (213) 922-2511

WORKING COpy

NOSSAMAN, GUTHNER, KNOX & ELUOn, LLP Alvin S. Kaufer, State Bar No. 30694 Thomas D. Long, State Bar No. 1.05987 Scott N. Yamaguchi, State Bar No. 157472 445 South Figueroa Street, Thirty-First Floor Los Angeles, California 90071 Telephone: (213) 612-7800 Facsimile: (213) 612-7801

.

Attorneys for Plaintiff Los Angeles County Metropolitan Transportation Authority

11

SUPERIOR COURT OF THE STATE OF CALIFORNIA

12

FOR THE COUNTY OF LOS ANGELES

13 14

LOS ANGELES COUNlY METROPOLITAN TRANSPORTATION AUTHORllY, a public corporation,

16

v.

17

PARSONS-DILLINGHAM METRO RAIL CONSTRUCTION JOINT VENTURE aka PARSONS - DILLINGHAM; THE RALPH. M. PARSONS COMPANY aka PARSONS INERASTRUCTURE AND TECHNOLOGY CORP.; PARSONS DE LEUW, iNC. aka DE LEUW, CATHER, INC.; and DILLINGHAM CONSTRUCTION INC. aka DILLINGHAM CONSTRUCTION, NA., INC.,

18 19 20 21

Defendants.

BREACH OF CONTRACT, SPECIFIC PERFORMANCE, AN ACCOUNTING, DECLARATORY RELIEF, AND· FRAUD

) ) ) ) ) ) ) ) ) )

)

Plaintiff, for causes of action against defendants and each of them, alleges:

25

INTRODUCTORY ALLEGATIONS

26

28

(1) (2) (3) (4) (5)

----------------)

24

27

) FIRST AMENDED COMPLAINT FOR:

)

22 23

)

) ) ) ) )

Plaintiff,

15

) Case No. BC 179 027

1.

Plaintiff, Los Angeles County Metropolitan Transportation Agency,

rMTA'} is a public corporation duly organized and existing under the laws of the State of CaUfornia. l.N980690031

I 477-

1

2.

Defendant Parsons-Dillingham Metro Rail Construction Manager Joint

2

Venture also known as Parsons-Dillingham (·P-D·) is a joint venture consisting of the

3

defendants identified in paragraph 3, 4 and 5. poD was formed in order to enter into and

4

execute the contract with the MTA hereafter described. The joint venture and each of the

5

joint venturers are liable for the matters herein alleged and will be referred to jointly as

6

defendants.

7

3.

Defendant the Ralph M. Parsons Company is a corporation with its

8

head-quarters in Pasadena, California and one of the joint venturers of P-O. Plaintiff is

9

informed and believes and on said information and belief alleges that the Ralph M Parsons

10

Company changed its name to Parson's Infrastructure and Technology Corp. (hereafter

11

wParsons").

12

4

Defendant Parsons De DeLeuw, Inc. is a wholly owned subsidiary of

13

the Parsons Corporation and one of the joint venturers of P-D. Plaintiff is informed and

14

believes and on said information and belief alleges that Parson DeLeuw Inc. changes its

15

name to DeLeuw Cather Inc. (hereafter wDeLeuw-).

16

5

Defendant Dillingham Construction Inc. is a corporation with its

17

headquarters in Pleasanton, California and is one of the joint venturers of P-O. Plaintiff is

18

informed and believes and on said information and belief alleges that Dillingham

-19

Construction Inc. changed its name to Dillingham Construction N.A., Inc. ("Dillingham-).

20

6.

In 1984, plaintiff and defendants entered into an agreement pursuant

21

to which defendants were going to be the ·consultant- and ·construction manager" for the

22

Los Angeles Metro Red line Rail Project. The agreement is commonly known as Contract

23

3369.

24

7.

In 1991, plaintiff and defendants entered into an amendment to

25

Contract 3369 by an agreement entitled ·Amendment 13/14- which added Segment 2 to the

26

Metro Rail Red Line project.

27

8.

28

In 1993. plaintiff and defendants entered into an amendment to

Contract 3369 by an agreement entitled -Amendment 1r which added Segment 3 to the

l.AI980690031

2.

I'-I-~y

1

Metro Rail Red Line project. (The contract and all of the amendments thereto will hereafter

2

be referred to collectively as the MAgreemenr or MContract 3369:)

9.

3

Said Agreement consists of hundreds of pages and is too bulky to

4

attach.

5

consultanVconstruction manager for the Metro Rail Red Line and that plaintiff would pay

6

P·D its "Recoverable Costs· plus a fixed fee, all in accordance with the terms of the

7

Agreement. Individual portions of said Agreement that are pertinent to this case will be set

8

forth in the respective causes of action.

In substance or effect, said Agreement provided that defendants would be the

10.

9

On May 20, 1996, Martin Gerlinger, a former finance manager of P-D

.

10

and a former employee of Parsons, as a qui tam plaintiff, filed a false claims action against

11

defendants aUeging that defendants filed false claims with the MTA under Contract 3369.

12

The action was filed on behalf of the United States of America, the State of California, the

13

County and City of Los Angeles and the plaintiff.

14

California as well as the City of Los Angeles elected not to be the prosecuting office. The

15

County of Los Angeles and the plaintiff elected to join and prosecute the false claim action.

16

11

The United States and the State of

Defendants in this case are the same defendants as in the false claim

17

action. For about one year defendants refused to allow discovery in the false claims action

18

which prevented the MTA from ascertaining the truth or falsity of the qui tam plaintiffs

19

allegations, however based on information obtained from other sources, plaintiff believes

20

that significant parts of the qui tam allegations are meritorious.

21

refused to submit statements regarding actual overhead rates as required by the contract,

22

or to allow plaintiff its contractual rights to audit the books and records of defendants which

23

denial also prevented plaintiff from ascertaining the true facts. Because defendants have

24

possession of the essential evidence and refuse to disclose said evidence either voluntarily,

25

or pursuant to their contract obligations or pursuant to discovery requests in the false cla1im

26

action, plaintiff has been forced to file this complaint

27

'" I

28

'"

i

l..AJ98069OO31

3.

Defendants have also

1

FIRST CAUSE OF ACTION FOR RECOVERY OF ALL AMOUNTS

2

PAID TO DEFENDANTS AS PROVISIONAL OVERHEAD RATES.

3

12.

4

Plaintiff rea lieges and incorporates herein by reference each and every

allegation contained in paragraphs 1 through 11 hereof.

5

13.

Contract 3369 provides and requires that each defendant, on an annual

6

basis, submit its actual overhead rates on an annual basis together with a statement of the

7

methodology used to determine actual overhead rates and the identity of the person who

8

computed the rates. Specifically paragraph CP-3E provides in part that:

9

·After the close of each Joint Venturer's fiscal year, that

10

Joint Venturer shall submit to the AUTHORITY [now MTAj a

11

statement setting forth its interim determination of its Actual

12

Overhead Rates for Home Office, Field Offices, and Project

13

offices for that fiscal year, together with a statement of the

14

method by which those rates were determined and by

15

whom,·

16

14.

Since the inception of the contract, no defendant ever submitted a

17

computation of its "actual overhead rates· in compliance with Contract 3369 nor did any

18

defendant submit a statement of methodology by which said actual overhead rates could be

19

computed or the name of any person who computed such rates.

20 .

15,

Contract 3369 provides and requires each defendant to allow plaintiff

21

to audit its books and records at reasonable times. Specifically, the pertinent paragraphs

22

provide:

23

·CONSULTANT and each Joint Venturer may be

24

audited, if the AUTHORITY in its sole discretion deems it

25 ,:

necessary or desirable, and Home Office, Project Office, and

26

Field Office "Actual Overhead Rates- for each Joint Venturer

27

shall be established and determined, as provided in Article

28 <:

CP-6 below.r (Contract 336911 CP-3C.)

l.AI980690031

4.

/56y.



1

·CONSULTANT and each Joint Venturer shall permit

2

authorized representatives of the AUTHORITY, and any

3

other agency as directed by the AUTHORITY, in its sole

4

discretion and at its sole cost. to inspect and audit all of

5

CONSULTANT'S and each Joint Venturer's records relating

6

to

7

Subcontractors' performance under this Contract from the

8

date of this Contract through and until expiration of three

9

years after acceptance of the Services by the AUTHORITY

10

under this Contract. Any such audit may be required by the

11

AUTHORITY at reasonable times upon reasonable notice to

12

CONSULTANT and each Joint Venturer during the Contract

13

term and within the three year period thereafter, and audits

14

held no more frequently than once per year shall be per se

15

reasonable." (Contract

16

16.

its

performance

under

3369:~

this

its

Plaintiff demanded of defendants that plaintiff have the right to

unconditionally audit defendant's books and records.

18

allow such an audit. 17.

and

CP-6.)

17

19

Contract

Defendants failed and refused to

Plaintiff is informed and believes and on such inforrilation and belief

20

alleges that defendants' actual overhead rates are substantially below the provisional

21

overhead rates paid by MTA to defendants.

22 23

18.

charges. defendants:

24

(a)

25

refused to allow plaintiff its contractual right to audit defendants'

books and records in order to determine their actual overhead rates;

26

(b)

27

28

In order to prevent plaintiff from discovering the true amount of over-

refused to submit actual

by the contract; and

/I /I

lAI'980690031

5.

15/~

ove~d

rate stateme.nts as required

1 2

(c)

refused to respond to discovery requests regarding overhead

rates in the related false claims action. 19.

3

Because of defendants refusal to honor its contractual obligations.

4

plaintiff has no ability to determine defendants' actual overhead rates and therefore seeks to

5

recover all overhead previously paid by MTA to defendants in the approximate amount of

6

$65,000,000, except to the extent that defendants can prove to this Court then actual

7

overhead rate.

8

SECOND CAUSE OF ACTION TO RECOVER UNAUTHORIZED CHARGES.

9

20.

10

Plaintiff realleges and incorporates herein by reference each and every

allegation contained in paragraphs 1 through 19 hereof. 21.

11

Contract 3369 provides that plaintiff would pay to defendants only their

12

wRecoverable Costs· as defined in the Agreement.

In addition, the Agreement does not

13

allow recovery of certain specific costs or costs in excess of a certain amounts all as

14

specified therein.

15

22.

Plaintiff is informed and believes and on such information and belief

16

alleges that defendants charged and received unauthorized costs in many ways including,

17

but not limited to, the following, each of which is alleged on information and belief:

18

Improper Overbilling to MTA by Failing to Adjust Provisional Overhead

19

Rates to Actual Overhead Rates.

20

(a)

-

P-D and each joint venturer was required, by both the

21

contract and by FAR 16.307-A which incorporates FAR 52.216-7 into all contracts

22

which involve federal funds, to determine their respective actual overhead rates each

23

year and to adjust the provisional rates to the actual rates at that time. Defendants

24

failed and refused to adjust their provisional overhead rates to their actual overhead

25

rates. Improper Overbilling Because of Failure to Properly Credit Refunds.

26 27 28

(b)

P-D was required by law and by the contract to credit or

pay to MTA any and all credits and/or reimbursements it received which previously

l.M60690031

6.

1

were charged to MTA and paid by MTA. P-O received a credit from a subcontractor

2

named CCSC because of overcharges by CCSC on segment 1, but failed and

3

refused to credit or pay to MTA in the time and manner required by the Agreement.

4

As a direct and proximate result of the foregoing, MTA is entitled to all refunds

5

received plus interest on said amounts at the rate of 10% per annum from and after

6

the date said sums were paid by MTA. Said credits should be applied to reduce the

7

authorized maximum allowed for Segment 1.

8

(c)

In addition to the foregoing, Parsons did not credit to MTA

the forfeitures in its ESOP plan while billing as fringe benefits the maximum allowed

9 ,!

10

to be put into the ESOP Plan.

11

realized profits by overcharging fringe benefits for its ESOP Plan in excess of its

12

actual costs, and MTA is entitled to a refund ,in the amount of said forfeitures.

13

As a result of the foregoing, defendant Parsons

Improper Overbilling by Including Reimbursed Costs in Overhead.

14

(d)

Defendants billed MTA for direct costs and were paid for

15

those direct costs. Defendants also billed certain identical functions as both direct

16

costs and as a part of overhead/G&A (general and administrative) thereby receiving

17

excess recovery of said costs.

18

estimators working on Contract 3369 as direct costs and also charged for estimators

~9

working on non-MTA contracts as a part of overhead.

20

For example defendant Dillingham charged for

Improper Overbilling In Excess of Maximum Contract Price.

21

(e)

P-D is limited in the amount of charges it may charge to

22

each segment of the Metro Rail Red Line as set forth in Contract 3369. P-D charged

23

costs to Segments 1 and 2 in excess of the amount anowed by Contract 3369. To

24

the extent that P-D charged costs in an amount in excess of that authorized by the

25

contract, MTA is entitled to recover those costs plus interest at the rate of 10% on

26

said sums from and after the date of payment of each excess sum.

27 . 1/1/ 28

II/I

LM80690031

7.

Improper Overbilling for Legal Fees.

1 2

(f)

P-D charged legal fees in the approximate amount of

3

$300,000 to Contract 3369 which were not allowed by the contract or the FARs. As a

4

result of the foregoing, MTA is entitled to recover said legal fees plus interest in the

5

amount of 10% from the date of payment of each such reimbursement for legal fees.

6

Improper Overbilling Because of Los Angeles City Business Tax.

7

(g)

Contract 3369 provides the Los Angeles City Business

8

Tax would not be charged as a direct expense but would be charged as overhead

9

which meant that said tax would be allocated to other contracts as well as Contract

10

3369.

11

Business Tax as a burden on labor thereby effectively charging said tax as a direct

12

expense rather than an overhead expense as provided and required by Contract

13

3369.

In breach of Contract 3369. defendants charged the Los .'Angeles City

14

Improper Overbilling Because of Insurance, Telephone, Labor Allocation

15

and Sub-Contractor Profits.

16

(h)

P-D charged MTA for workers compensation and other

insurance in excess of that which is allowed by Contract 3369.

17

(i)

18

P-D charged MTA for long distance telephone calls that

19

were made by employees for jobs unrelated to MTA, and which were reimbursed by

20

the employees to P-D. P-D did not reflect the credits for those reimbursements from

21

employees resulting in P-D getting paid twice for such phone expenses.

m

22

Defendant Parsons, through P-D, charged for profits on

23

subcontractors which were wholly owned subsidiaries.

24

authorized by the contract or the FARs. (k)

25

Such charges are not

Employees of P-D did not allocate their time correctly to

26

the various segments on which they worked and billed time to MTA that was

27

improper because not allocated or authorized by Contract 3369.

28

/1/1 8.

23.

1

Plaintiff is entitled to recover all costs charged by defendants and paid

2

by MTA which were not ·Reimbursable Costs· under Contract 3369.

3

THIRD CAUSE OF ACTION FOR AN ACCOUNTING.

4

24.

5

allegation contained in paragraphs 1 through 23 hereof.

6 7

Plaintiff realleges and incorporates herein by reference each and every

25.

By reason of Contract 3369, defendants undertook to be the MTA's

consulting manager on the Metro Rail Red Line and, among other things:

8

(a)

9

To bill the MTA only for Recoverable Costs as defined in

Contract 3369; and (b)

10

To submit a statement of Actual Overhead Rates 'as defined 'in

11

Contract 3369 and to readjust the provisional overhead rates and payroll burden

12

rates each year based upon their respective actual overhead rates.

13

26.

At no time did defendants submit the statement of Actual Overhead

14

Rates together with a statement of methodology and at no time did defendants adjust the

15

provisional overhead rates specified in Contract 3369 to their actual overhead rates.

16

27.

Plaintiff is informed and believes and on such information and belief

17

alleges that the actual overhead rates and actual payroll burden of defendants is

18

substantially lower than the provisional overhead rates (including payroll burden) paid by

-_19

MTA to defendants. Plaintiff is informed and believes that defendants billed the MTA for

20

costs that were not -Recoverable Costs· under Contract 3369.

21

28.

The amount of money due to plaintiff from defendants is unknown to

22

plaintiff and cannot be ascertained without an accounting of the actual overhead rates and

23

cost of defendants.

24

29.

Plaintiff has demanded that defendants 'provide plaintiff with the

25

required statement of overhead rates and methodology but defendants have failed and

26

refused to do so. Plaintiff demanded of defendants that they allow an audit as required by

27

Contract 3369, but defendants have failed and refused to anow such audits.

28 . 1/1/

9.

1 2

30.

Plaintiff has no remedy at law and is unable to determine exactly how

much is owed by defendants to plaintiff without an accounting.

3

FOURTH CAUSE OF ACTION TO RECOVER ON A

4

SPECIFIC CONTRACT FOR REFUND OF $1,461,857.

5

31.

6

allegation contained in paragraphs 1 through 8 hereof. 32.

7 8

an agreement

9

reference.

10 11

On or about March 22, 1994, plaintiff and defendants entered into

a copy of which is attached hereto as Exhibit A and incorporated herein by •

33.

Said agreement provides that defendants will pay to plaintiff the sum

of$1,461,857.

12 13

Plaintiff rea lieges and incorporates herein by reference each and every

34.

Plaintiff has duly performed all of the conditions contained in said

agreement on its part to be performed.

14

35.

Defendants have not performed the covenants contained in said

15

agreement on their part to be performed in that defendants have failed and refused to pay

16

the full amount owing pursuant to said agreement, all to plaintiffs damage in a sum subject

17

to proof at trial, plus interest at the rate of 10% per annum from April 1, 1994.

18

FIFTH CAUSE OF ACTION FOR DECLARATORY RELIEF.

19

36.

20 21

Plaintiff rea lieges and incorporates herein by reference each and every

allegation contained in paragraphs 1 through 28 hereof. 37.

Plaintiff claims and contends that it is not obligated to pay any overhead

22

payments under the Agreement to defendants and is entitled to recover all overhead costs

23

previously paid to Parsons-Dillingham until and unless defendants:

24

(a)

Submit their Actual Overhead Rates for each year of Contract

25

3369 together with a statement of methodology and the identity of the person making

26

such calculations as required by Contract 3369;

27 . 28 .

(b)

Allow plaintiff to perform the aud~ that Contract 3369 authorizes

plaintiff to perform; and

10.



(c)

1 2

Parsons-Dillingham to plaintiff as required by the contract.

3 4

38.

39.

Plaintiff prays for a declaratory judgment declaring the rights of the

6

parties under and pursuant to Contract 3369 with regard to the issues identified herein and,

7

if the court determines that plaintiff is entitled to an audit. for a judgment ordering

8

defendants to make all books and records available to plaintiff and its agents at reasonable

9

times as specified by the court.

10

SIXTH CAUSE OF ACTION FOR FRAUD AND DECEIT.

11

40.

12

Plaintiff realleges and incorporates herein by reference each and every

allegation contained' in paragraphs 1 through 23 hereof. 41.

13

Plaintiff is informed and believes and on such information and belief

14

alleges that defendants and each of them, conspired to do the acts herein alleged and each

15

knew that the other defendants were overcharging the MTA in one or more of the specific

16

ways herein alleged and acquiesced in such overcharges.

17

42.

Plaintiff is informed and believes and on such information and belief

18

alleges that defendants fraudulently and deceitfully overcharged their indirect expenses,

19

i.e., "overhead" in several, ways including the following:

20

(a)

Pursuant to Contract 3369, defendants agreed to act as the

21

Construction Manager for MTA and to do all things necessary (as specified in the

22

Agreement) to cause the Metro Rail Red Line to be constructed. Defendants thereby

23

assumed both a contractual and fiduciary dUty to MTA. (b)

24

.

Plaintiff is informed and believes and on such information and belief

alleges that defendants contend in all respects to the contrary.

5

..

Defendant rparsons-Oi'llingham certifies the invoices submitted by

Contract 3369 specifically provided that it was a ·cost-plus·

25

Agreement which meant that. among other things. defendants were not permitted to

26

reap profits from said Agreement greater than the amounts specified in the

27

Agreement Defendants were entitled to recover their Actual Recoverable Costs as

28

defined and certain designated amounts as profits.

l..AJ980690031

11.

1

(c)

2

was their "actual overhead."

3

determined by a formula pursuant to which each defendant was required to total all

4

overhead costs incurred in a given year and allocate those costs fairly to all contracts

5

on which the defendant was working in that year. After allocation of all overhead

6

costs among all contracts, each defendant should not receive more than 100% of all

7

of its overhead costs.

8 9

(d)

One of the "cost" items defendants were permitted to recover In general terms. the "actual overhead costs" are

The intent of Contract 3369 was that each defendant would

charge no more than their actual overhead costs to MTA. (e)

10

However, actual overhead costs would not be known until after

11

the bills for any given year had already been submitted. Therefore, Contract 3369

12

provided for "provisional" overhead rates which defendants were authorized to

13

charge.

14

would submit to MTA, after the first year and after the close of each fiscal year

15

thereafter, a statement setting forth its interim determination of its actual overhead

16

rates together with other information.

As alleged in paragraph 13, the contract also provided that defendants

(f)

17

By virtue of their contractual and fiduciary obligations to MTA,

18

defendants had a duty to disclose to MTA their actual overhead rates after the first

19

year and at the close of such fiscal year thereafter.

20

(g)

-

Although defendants had a duty to disclose their interim

21

determination of their actual overhead rates to MTA, defendants conspired with each

22

other to refuse to disclose their actual overhead rates to MTA.

23

(h)

After the first year of the contract, defendants were obligated to

24

charge no more than their interim determination of actual overhead rates unless,

25

after disclosing their interim determination of their actual overhead rates, the MTA

26

authorized a higher rate.

27

28

(i)

Instead of charging their actual overhead rates after the first

year, defendants conspired with each other to charge a rate that was in excess of

lAI980690031

12.

,. •

1

their actual overhead rates. Defendants charged their overhead rates as follows:

2

(i)

Each joint venturer would invoice P-O and said invoice

would show an overhead rate in excess of actual overhead rates:

3 4

(ii)

A representative of poD would compile one total bill,

5

usually for a period of one month, and submit the bill to MTA together with a

6

cover letter sig ned by a desig nated person from P-O. (iii)

7

There were over 1200 invoices submitted to MTA. Each

8

invoice usually consisted of several binders of papers.

9

burdensome and cumbersome to attach each invoice to this complaint :but

10

examples of cover letters are attached hereto marked as Exhibifs B-1, B-2, 'B-

11

3, B-4, 8-5 or B-6. Those cover letters are signed by the person who sent the

12

invoice to MTA.

13

U)

14

the terms of the agreement.

15

(k)

It would be too

Contract 3369 provides that employees of MTA could not change

In reliance on the belief that defendants were complying with the

16

terms to the contract, MTA employees and the Board of Directors authorized

17

payments of invoices from P-D and even authorized over 490 change orders.

18

(I)

Until recently, MTA paid said overhead charges in full.

19

(m)

As a result of the foregoing, 'MTA has been damaged in an

20

amount equal to the amount of overhead charged to and paid by MTA in excess of

21

defendants actual overhead rates. 43.

22 23

As a part of their scheme to defraud the MTA, MTA alleges on

information and belief, that defendants also did the following:

24

P-O. Joint venture:

25

(a)

The joint venturers used the joint venture entity as a vehicle to

26

charge indirect or overhead rates in excess of their actual rates. For example, one or

27

about June I, 1993, George Morschauser, in his capacity as construction manager of

28

the joint venture, wrote a letter to Charles Star1< of MfA with regard to an amendment

lAJ'9&069003 t

13.

1

to Contract 3369. In said letter he represented that "As an entity, the joint venture's

2

indirect costs approximate 115.6% ..." and attached a schedule which purported to

3

support that statement.

4

DeLeuw were based on "audited" rates thereby implying that the MTA performed an

5

audit and validated said overhead rates. In amendment 17, MTA in fact agreed to

6

pay actual overhead rates not to exceed110%.

7

(b)

The schedule states that the rates of Dillingham and

In truth and in fact, the indirect costs of each joint venturer and

8

therefore of the joint venture was less than 110% and the rates of Dillingham and

9

DeLeuw were not MTA audited rates.

10

(c)

On or about June 18, 1996, Richard S. Enriquez in his capacity

11

as Business/Administration Manager for the joint venture wrote to Joe Mathis of the

12

MTA, also represented that the joint venture overhead rate was 115.6% and

13

requested that the MTA pay 115% for overhead after December 1995. MTA paid

14

115%asrequested.

15 16

(d)

In truth and in fact, the overhead rates of the joint verturers and

therefore the joint venture was not 115%.

17

Parsons:

18

(e)

Defendant Parsons represented to MTA that its payroll burden

. 19

was in excess of 55%. Said representation was made by, among other ways, in the

20

schedule attached to the letter from Richard Enriquez to Joe Mathis dated June 18.

21

1996.. MTA relied on said representation and agreed to pay provisional rates based

22

on said representations. In fact, Parsons knew that its actual payroll burden rate was

23

approximately 45% and intended to deceive MTA.

24

(f)

By reason of the foregoing, MTA was overcharged at least 10%

25

and is entitled to recover said overcharges with interest at the rate of 10% per annum

26

from and after the date of overpayment Dillingham Construction N. A'I Inc.

27 28 .

(9)

lAI980690031

Defendant Dillingham submitted records to MTA and to MTA

14.

1

outside accountants which represented that the overhead rates of Dillingham were

2

higher than in fact they were. Among other records, Dillingham submitted through

3

Mr. Yaekel, its controller, a statement which purported to be a statement from Arthur

4

Anderson & Co. certifying that Dillingham's overhead rate was 156% for the year

5

ended October 31, 1985. Also, Dillingham submitted a statement which purported to

6

be a statement of KPMG Peat Marwick, representing that the total revenues, costs

7

and profits for the fiscal year ending 1987 was $269,171,451, $268,054,314 and

8

$1,117,137 respectively whereas for the same fiscal year it represented to

9

Washington Metropolitan Area Transit Authority that said revenues and expenses

"

10

were much lower resulting in a lower overhead rate of 8.05% for WAMA'TA. (h)

11

MTA relied

on

the

representations

made

by

Defendant'

12

DiUingham and paid provisional rates base on the rates represented by Dillingham,

13

all to MTA's damage in an amount to be determined.

14

OeLeuw Cather, Inc. (i)

15

Defendant DeLeuw Cather submitted records to MTA purporting

16

to be a report of Price Waterhouse LLP representing that the overhead rates for

17

OeLeuw Cather were over 140%.

18

OeLeuw Cather computed it actual Overhead Rates at approximately 88%.

Plaintiff is informed and believes that in fact,

MTA relied on the alleged rate of 140% in approving the

19

MTA paid the provisional rates and was

20

provisional rates under Contract 3369.

21

thereby damaged in an amount to be determined.

22

42.

In addition to the foregoing, plaintiff is informed and believes and on

23

such information and belief alleges that each defendant knew that it was making profrts

24

greatly in excess of the amount of profits anowed under Contract 3369 and that each

25

defendant intentionally refused to deliver its statement of actual overhead as required by

26

Contract 3369 with the intent and for the purpose of defrauding MTA into paying monies

27

greatly ih excess of that allowed under the contract. Defendants each had a duty to provide

28 . the statement required by Contract 3369 and breached said duty by intentionally refusing to

15.

1

provide said statements so that it could overbill MTA.

43

2 3

and is entitled to recover all overhead paid to defendants less such overhead as defendants

4

can prove was its actual overhead for the periods of time in question.

S

44.

Defendants' fraud and deceit was intentional and they were guilty of

6

oppression, fraud and malice entitling plaintiff to exemplary and punitive damages pursuant

7

to Civil Code section 3294 in an amount to be determined.

8

WHEREFORE. plaintiff prays for judgments as follows:

9

1.

On the First Cause of Action, for the sum of $65,000,000 representing

10

all payments of provisional overhead rates, unless, prior to judgment, (a) defe'ndants prove

11

their actual overhead rates and (b) allow plaintiff a full and unconditional audit to verify said

12

overhead rates, and then judgment should be against defendants for the amount paid in

13

excess of actual overhead rates plus interest thereon at the rate of 10% per annum from the

14

date of payment of each excess overhead rate.

2.

15

On the Second Cause of Action, for the total amount of overcharges

16

paid by MTA to defendants and the total amount of credits received by defendants and not

17

given to plaintiff, plus interest thereon at the rate of 10% per annum. 3.

18 ~

By reason of the foregoing, MTA was overcharged for overhead costs

On the Third Cause of Action, for an accounting and for judgment in

19

favor of plaintiff for all amounts owed by defendants to plaintiff for any reason as a result of

20

Contract 3369.

21

4.

On the Fourth Cause of Action, for the sum of at least $1,161,857,

22

subject to proof at trial, plus interest thereon at the rate of 10% per annum from April 1,

23

1994. 5.

24

On the Fifth Cause of Action, for a declaration by the Court that plaintiff

25

need not pay any overhead to defendants until they have complied with the terms of the

26

contract requiring that each defendant provide a statement of its actual overhead rates and

27

allow an audit and for a judgment of specific performance allowing plaintiff an audit.

6.

28 .

lAJ980690031

On the Sixth Cause of Action, for a joint and several judgment that

16.

1

defendants defrauded plaintiff in the amount to be proved at trial together with exemplary

2

and punitive damages from each defendant in an amount not less than 10% of their

3

respective net worth.

4

5

DATED: March 16, 1998

6

NOSSAMAN. GUTHNER, KNOX & ELLIOTT, LLP Alvin S. Kaufer Thomas D. Long

7 By:

8

U.J1~

Alvin S. Kaufer Attorneys for Plain Iff Los Angeles County . Metropolitan Trans~)rtation Authority

9 10

11

12 13 14

15 16

17 18 19

20 21

22 23

24 25 26 27 . 28 1.N980690031

17.

EXHIBIT A

,

I

~

March 21, 1994 Mr. Leonard J. Pieroni The Parsons Corporation 100 West Walnut Street Pasadena, California 91124

.. r3 nspOn:3 LIon

Dear Mr. Pierpr!:-

Authonry

XvC'nth SU't'el Suitt )00

r-1a CA 900ti

~:

This is to confirm our conversation of Thursday, March 10, 1994, wherein we agre~ to acc:pt your offer that Parsons-Dillingham (P-D) will: 1) supervise, at no cost to the Los Angeles County Metropolitan Tr.lnsportation Authority ~IT A), all remedial construction work re:ommended by the Cording q"unnel P;mel Report of February, 1994; and 2) Jeimburse the IvITA uo to a tocaLof 51.461,857 for the following: • •

costs of the Cording Tunnel Panel RepOrt; cOSts of the Barba-Arkhon audit.

In :lddition, P-D will reimburse the ~IT A tbe costs of the Wiss, J mney, Elstner Associ<es quality assurance work directly associated with the remedial construction work defined by the Co~ding Tunnel Panel Report.

areas

to b~ r~paired will be defined by the MTA based upon the The specific recommend:ltions for remedial construction work spedfied by the Cording Tunnel Panel Report. Repair design procedures will be prepared by the Engin~ring Man~geme.nt Consultant (EMC) and submitted to P-D. The Cording Tunnel Panel will review the EMC generat~ specifications.

In its construction management function, P-D will perform the work usually undertaken by a construction IIWlager including the prepar4tion of a work plan and a schedule for the repairs. P-D will also coordinate inspection, testing, documentation and staffing' plans in connection with the remedial construction work.

Exhibit. A,

pa~e

I {,Sy.

1 of 2

I

~!r. ~:l~rC

M::u-d.

~.

J.

;

Pic:c~~

1994

P.:lgc :\,.'0

:0 cor.;pl~ r:'e impl~::,.~ntJticnC~ ~r...~ R~port r~c"mrn~:".dztio.ns in a high ~un..lI~YI thorOl:=~J)' docume:u:d. ~;.d ege~hrlCJu.s mann~:. MTA ~PP:~:~i~ your

We hope

nrOT7::lt " .

.

~cio~ it. tr~ 'Dc::'[o~ac:.c:

of this work..

&J£-

Sinc:.:dy,

/~f ·b a~E.W?.rrE Chief ExeoJtive Offie.::

.Ac..t(NO~'!..EDG:.n

_T_

T~

cc:·

AND ACe=-? I -D

PERO!'.rr Parsons CorpOtction •

E. ~fcS~etklO (Re·:) G. MorSd·.ms~ (P·D) ~

--

,-

-"

".

.:

I .

Exhibit A. page 2 of 2

CA_GER. Yo Patsoas. et Il.

719197. 159

J _

.'

E«HIBIT B ;

,

poce 600 SOV'" S'il100Q "AUT SuIT( -lOO LOS .... ClLU. CAL"O."'" 90011

,l"'''''''UO

REF. Contract No. 3369 CM-MR-5627 June 25. 199o

Southern California Rapid Transit District 425 South Main Street Los Angeles, California 90013 Attention:

Mr. Samuel K. Louis Director, Construction Management

Subject:

Request for Payment No. 151

Gentlemen: Attached is our Request for Payment No. 151 for the period ending June 22. 1990. Upon your approval. please wire funds to: POCO c/o Bank of America, A/C No. 6003-01361 525 South Flower (l.A. Main Office) los Angeles, California 90071 ThanK. you. Very truly yours.

/~-e::~

~~~on Manager Attachment As noted above cc:

Calvin louie (Original) A. H. Perdon TSO-OCC (w/o attachment)

I

.. ~T ~ 01 TOC ~ ..

Exhibit B-1, page 1 of S ~ ~ 0lUJN0H,UI OOM&~ -.c: ,-.=:t LlIIWt CAT'Cfl l~

rtJIeTRO RAIL PROJECT INVOICE APPROVAL SHEET DATE INVOICE RECEIVED .ftL.Jd.:iI ..:lQ

I

I

CONTRACT • DESCRIPTION PAYMENT

--

~AL ACCOUNT DISTRIBUTION :>-rECHNI CAL REVIEW j " f '- ~ e-AUTHORIZATION" FOR PAYMENT I / ~/V__ C::::f0NTRACTUAL COMPLIANCE ~~r /

~:3{,9 ;:>OCD AJO. lSI

DATE

=!fft

COST ANALYST DIRECTOR ASSIST. GEN. MANAGER CONTRACT ADMIN. OCPX

~

.

.......

--

--J PAYMENT SCHEDULE

~

~

INVOICE mOUNT

/.kl I (

69i DoD,

bCer NO, 10m

TOTAL

6'lf,

$

LIm: ..! rt)

ntl,

:"'7

(1(7

COMMENTS:

0' PO

VDUFI~

[f

.

o

Line Report attached

Ell'lZF.w

i)

Retention Analysis attached

. I

)'9-.,

2t£.M1:-

P.:.LE;\~

J,t::.·JUlfT

TSD CLEARED

C·lt"'Z~IDE

t

,

SOUTHERN CALIFORNIA RAPID TRANSIT DISTRICT

SOUTHERN CALIFORNIA R, lPID TRANSIT DIITRICT

ACCOUNTS PAYABI,E- CONTRACTS ~

/J(-<\

Roult To: ') Dept. No.

Date Rtc'd.

..._~....::~:z::_ _ _

(
d J l.c fJ.: 1

2) OCPM - CMF Building

3) Accounts

pa~or payment

VENDOR

.

D

5T';;

'=:>/
VOUCHER NO.

T"lva C lAd CONTRACT NO. 3 3~ 9 15 7

INVOICE NO.

, it lC;q ceo'? PI.... provldt the following Information a d approvt tht Inyolct Yor'Plyment. A~ounf "9 OI,tr1butlon

s..5(; 1) Account No.

W,OJAFE No.

Dtpt. I ,.

Amount

Line No.

/. ..proveI Date Approved by: Project Manag r Department Hf ld Contract

7L,

\--

)

-:-~_~-

Cr/~;H(

Date Rec'd D ate M ai Iad U/'...

.....



/76 'I

_

~6l:.~~~~:::l-_ _

A~m, ~gr.

From Accounts paY8~1'-:'L~ , :' '-t............ Clerk N a m e _ Extension' ~'.

(j

_~~~~---:,....-

/.5'[/:-/

l".'

_.-----

(06/27/90)

""" --J ............ "w< 1

..

PO N£4R 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369 3369

LN 01 02 03 04 OS 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

25 26 27 28

PART NIIR/DESC CONTRACT AMENDMENT 1 AMENDMENT 2 AMENDMENT 3 AMENDMENT 4 AMENDMENT 4 AMENDMENT 4 ADJUSTMENT ORIG CONTRACT ORIG CONTRACT ORIG CONTRACT ADJUSTMENT AMENDMENT 02 ADJUSTMENT AMENDMENT 03 ADjUSTMENT AMENDMENT 04 ADJUSTMENT AMENDMENT 04 AMENDMENT 06 AMENDMENT 06 AMENDMENT 06 AMENDMENT 06 AHENDMENT 06 AMENDMENT 07 ADJUSTMENT AMENDMENT 08 CH~ ORDER 009

" " AFE " ACCOUNT 10503 10583 10583 10583 10583 10583 10583 10583 10503 10583 10503 10583 10583 10583 10583 10583 10503 10583 10583 10583 10583 10583 10503 10583 10SB3 10583 10503 10583

06611 06611 06611 06611 0211 1 98103 98003 06611 02111 02111 06611 06611 06611 06611 15111 02111 151 11 151 11 20911 151 11 20911 20711 21203 98111 15111 15111 15111 15111

MILLENNIUM ONLINE PRINT: INV AMOUNT TOT ,AMOUNT 1 .00 1.00 1.00 1 .00 1 .00 1 .215.40 37.000.00 68.394.63 350.000.00 1 .00 206.3.29.00 206.329.00 5.740.671.00 5.740.671.00 642.849.00 642.849.00 1 .00 4.357.151.00 4.357.151.00 1 .00 1.5£16.890.00 1.586.090.00 1 .00 12.122.392.00 12.122.392.00 1 .00 38.706.00 55.000.00 8.641.527.00 13.197.938.00 10.607.00 63.000.00 15.000.00 463.000.00 35.000.00 16.024.911.97 17.625.378.00 1 .00 16.872.967.00 14.773.295.00 1 .060. 175.00 75.230.759.00 64.215.107.00

-_._------_. __._-- --_._---------_.75.230.759.00

64.215.107.00

'.

jl

" "

.

PARSONS-DILLINGHAM t.AETAO

RAI~

CONSTRUCflON WANAQEA

REF. Contract No. 3369 R80-CM-RC-1976

April 30, 1993

Mr. Richard Bennett Project Accounting Los Angeles County Metropolitan Transportation Authority 818 West Seventh Street, Suite 1100 Los Angeles, California 90017-4606 Subject:

..

Transmittal of Segment 1 Invoice No. 110

Dear Mr. Bennett: Enclosed is one fully supported original and one unsupported copy of ParsonsDillingham's Invoice No. 110 for the period ending February 26, 1993. This invoice is for record purposes only. Do not pay from this document. The attachments to this invoice contain confidential payroll information. We will appreciate your discretion in handling these documents. If you have any questions on this invoice, please contact Douglas K Ho at (213) 3626033.

George B. orschauser Construction Manager GBM:sgz Enclosures As noted cc:

J. J. Adams - RCC (w/o enclosures) RCC - RMC (w/o enclosures)

• Exhibit B-2. page 1 of 3

.

TRANSPORTATION COMMISSION

_

•••

-

u

__

. . . . .., .... "

\l4.Ifl.O~"

FOR PAYMENTS THRU 02121/13 PARSONS·DlllINGHAM INVOICE NO. 110

TOTAL CURRENT

I DESCRIPTION

NO.

PREVlOUS

CUMULATIVE TO DATE

LABOR & RELATED COSTS: A1 A2 A3 A4 B1 Cl C2 01

LABOR·FIELD STAFF LABOR·HOME OFFICE FIELD LABOR·PREMIUM HOME OFFICE LABOR·PREMIUM PAYROLL BURDEN OVERHEAD·FIELD OVERHEAD·HOME OFFICE SUBCONTRACT COSTS

57.888.83 32.325.14 3.804.25 0.00 54,555.39 21,814.20 17,038.36 147.782.13

29.856.765.75 1.759,831.30 225,256.57 4,206.77 16,758,206.47 10.268.231.07 1,148,421.44 36.783.663.53

29.914.654.58 1.792. I 56.44 229.060.82 4.206.77 16.812.761.86 10.290,045.27 1, I 65.459.80 36.931.445.66

TOTAL LABOR & RELATED COSTS

335.208.30

96.804.582.90

9'7.139.791.20

.

OTHER DIRECT COSTS: 82 E1 E2A E2B E3A E3B E4 E5 E6 E7 E8 ESA E8B E8C ESD ESE E9 El0

F

INSURANCE REPRODUCTION TELEPHONE & TELEX FREIGHT & POSTAGE TRAVEL EXPENSES TRANSPORTA TION CAPtTAL & SPEC EQUIP FIELD OFFICE EXPENSES TEMPORARY HELP GROSS RECEIPTS TAX & PERMITS MOB & RaCCAnON EXPENSES GEN. CONDITIONS ITEMS..QTHER GCI • TESTING PROGRAM GUARD SERVICE CONSTRUCTION PHOTOGRAPHY WATER QUAUTY DESIGN & MISC. COMPUTER EXPENSES MARK UP

0.00 4.286.92 2.528.66 368.65 18.517.95 3.983.76 0.00 1.925.38 0.00 0.00 0.00 0.00 1774.001 '0.00 2.174.65 2.300.00 938.08 4.544.48

193.697.81 615.562.91 708,401.87 72.073.03 593.071.77 317,034.61 1.876.204.01 5,262.119.57 988.00 417,739.80 890,911.38 61,496.03 1,940,920.39 819.023.96 346.497.09 873.983.92 230,920.91 327.050.23

193,697.81 619.849.83 710.930.53 72,44 1.68 61 1.589.72 321,018.37 1.876.204.01 5.264.044.95 988.00 417,739.80 890.911.38 61,496.03 1.940, I 46.39 819.023.96 348.671.74 876.283.92 231,858.99 331.594.71

TOT AL OTHER DIRECT COSTS

40.794.53

15,547,697.29

15.588,491.82

0.00

5.070.837.59

5.070.837.59

376.002.83 0.00

117,423,117.78 87.526;409.95

117,799.120.61 87,526,409.95

376,002.83

29,896,707.83

30,272,710.66

376.002.83

117,423,117.78

117,799,120.61

FEE TOT AL INVOICED AMOUNT TOTAL OLD COi\lTRACT p~ 05101191 TOTAL NEW CONTRACT P~ 05101/9 1 • CURRENT TOTAt OLD & NEW CONTRACT

"

/73 1

\,vo) ANutLt~ COUNTY TRANSPO RTATION COMMISSION

FOR PERIOD ENDING 02126193 FOR PAYMENTS THRU 02126/93 INVOICE NO. 110 PARSONS· DllUNGHAM SCHEDULE A RECONCILIATION TOTAL CURRENT

INCEPTION TO DATE

DESCRIPTION

FUNDS RECEIVEOTHRU PAYMENT 214 AS OF 01/29/93

116,666.000.00

ADD: FUNDS RECEIVED FOR CURRENT PERIOD:

,

0.00 0.00 0.00 0.00 TOTAL FUNDS RECEIVED AS OF 01/29/93 LESS: FUNDS APPLIED THROUGH INVOICE NO.1 10

0.00

116.666.000.00

376.002.83

117.799,120.61

1376.002.83)

AMOUNT OVER/IUNDERI FUNDED:

0.00 0.00 0.00 0.00

11.133.120.611

RECAP OF INVOICES.

DESCRIPTION

FIRST ANNUAL WORK PLAN SECOND ANNUAL WORK PLAN THIRD ANNUAL WORK PLAN FOURTH ANNUAL WORK PLAN FIFTH ANNUAL WORK ,PlAN SIXTH ANNUAL WORK PLAN SEVENTH ANNUAL WORK PlAN EIGHTH ANNUAL WORK PlAN NINETH ANNUAL WORK PlAN

TOTAL AMOUNT INVOICED

CURRENT

PREVIOUS

$0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 376,002.83

4,982.353.16 5,581,693.80 7,444,327.84 12.646,784.83 17,313,752.35 17,661,741.22

$376,002.83

-

TOTAL

19,240,379.39 6,510,162.25

4,982,353.16 5,581,693.80 7.444,327.84 12,646,784.83 17,313,752.35 17,661,741.22 26,041,922.94 19,240,379.39 6,886,165.08

117,423,117.78

117,799.120.61

26,041,922.94

PARSONS-DILLINGHAM METRO RAIL CONSTRUCTION MANAGER

"-"'-.- .

REF. Contract No. 3369 R81-CM·RC·2804 Sa020.2-PA600 Mr. Richard Bennett Project Accounting Los Angeles County Metropolitan Transportation Authority 818 West Seventh Street, Suite 1100 Los Angeles, California 90017 -4606

.. :

'.

.---~. .:..._~

3 :r.""'4

. ._----

__A

_~

Subject: Transmittal of Segment NO.2 Invoice No. 39 and Funds Request No. 89 Dear Mr. Bennett:

..

Enclosed please find one fully supported original and one unsupported copy of Parsons-Dillingham's Invoice No. 39 for the period ending June 24, 1994.

~ ok *~/ ' ,£ .15 as per attached schedule.

Enclosed is a funds request totaling $40;5~ It.-

Upon your approval of funds request, please mail funds to our address shown below. Please note that this submission includes $1,658,427.15 previously requested. These funds are sorely needed to meet ongoing obligations. The attachments to this invoice contain confidential payroll information. We will appreciate your discretion in handling the documents. If you have any questions on this invoice contact Douglas K Ho (213) 362-6033.

~'"'Vf//7~

eorge B. Morschauser Construction Manager GBM:pws Enclosures As noted cc:

Joel Sandberg ( wlo enclosures) RCC·RMC ( wlo enclosures)

l ..... - . .

nw ~ II PJrww e-.., 01 1Mw. e- &e-.., ~e--.c.

1.A..1'"

W"'SWlShl!

s.... lM

~..,..

Exhibit B-3, page 1 of 4

IlU1Xl. . .

I

175x

PAA SOHS- OI\UN4lHAM 1Il.Cl.Ul Of f UPOe P,t 07/2i(M

.101 To DATt COSTI DilLen TllnOOI:U PIC ~

eoer ~'IC

~12~"'4

TOTAl. Jo. TO !IAn ~T~

~'1t4

lHVOlec NO. tt

~ltI ~n fl(Jt'(Jf;j4

Mi2W

lUi: fUIf)$ RECEIVED CUMULAnvm TlUlOl.:Qi P,{ CIllmM

1Al.JJa DUE

'Q,o::Jl,2liU4

;m,m.21 A' .A71un III

11.471.000.00

1,477.11

AOO.f'Jfa IIflJJEIT HO. 81 UTlMATW ttl,a KlR PIE 07flW14

TOTJoL AUOU h'T DUl

DlffflfNCE IETWH EJT1ACT1IAl fO« ME M

2,&00,000..00

t2,i3 427.1&

1,427.15

I

lNA 100S2 CONTRACT NO. 3369 R81·MC.oOl LOS ANGelES METROPOLITAN TRANSPORT AliON AUTHORITY

PERIOD ENDING 06124/94

INVOltE NO. 39 PARSONS·OILLINGHAM SCHEDULE A RECONCllIA liON TOTAL CURRENT DESCRIPTION

FUNDS RECEIVEO THROUGH PAYMENT 84 AS OF 05127/94

INCEPTION TO DATE

155,"21.000.00

I

ADD: FUNDS RECEIVEO FOR CURRENT PERIOD: PA YMENT NO 85 PIE 05/16194, REC'O 05/3 1~

1-520.000.00

1.520.000.00

$1-520.000.00

$56.941.000.00

2,«J,174.21

61.479.427.15

. ($923,174.211

($4,538,427.151

CURRENT

PREVlOUS

TOTAL

SIXTH ANNUAL WORK PLAN

0.00

96.742.73

96.742.73

SEVENTH ANNUAL WORK PUN

0.00

2.D8-4.438.15

2.08-4.438.15

EIGHTH ANNUAL WORK PUN

0.00

11.067.136.32

11.067.136.32

NINTH ANNUAL WORK PlAN

0.00

19..2".123.53

19~"'.123.53

TErml ANNUAL WOR)( PlAN

2.«3.174.21

2&.543,812.21

28,986,986.42

$2.«3.174.21

$SS,D38.25U4

$61.479.427.15

TOTAL FUNDS RECEIVED AS OF 06124194 lESS: FUNDS APPlIEO THROUGH INVOICE NO.39 AMOUNT OVERJIUNDER) FUNDED:

RECAP OF INVOICES

DESCRIPTION

TOTAL AMOUNT MOICm

'---

177~

lOS UGHES MnIlO'OllTU TUIlS'OUlTIOII AUTHOIIITY

fall '£11100 nD11IQ II/241M PU SOIlS-DlllIIlGHAM INVOICE .0. U

TOTAL

n

DE SCRIPTlOIl

CUMUlATIVl

CURRENT

paMOUS

50'.111.15

lOa

lJ.I"IIl.17 44(M3.21

TO DATt

lABOR .. RElATED COSTS: Al

lABOHIElD STAff

AZ

IABOR·HOME OfFICE

AJ

u

FiElD lA801l·PRfMIUM HOME OFFICE lABOR·PREMIUM

81

PAYROll BURDEll

'~i, ~~.

,j

I

CI

OVERHEAD·FlHD

CZ 01

OVUHEAD·HOME OFFlet SUBCONTRACT COSTS

02

SUBCONTRACT OO(;"S .. FEU

OJ

OTHER SUBCONTUCT COSTS

/0"11 ' ,

TOTAL lABOR .. RElATED COSTS

t

IUU.7'U2'" W.1U.21

1.01

'4,m..

lOO

.5U4

m.m. OJ

7,75l40UI

1IG,UU7 1.01

4.t5UJ7.1t 17UU.S7

m.zauz

lU~,,741"

102.57\.71 174,5014.-

liJl,IQl1

ZUC7••41.1. 7.1.2IUI

CI".ll5f

5tttlU.

toSS-17U2

47.5Zt.ut.44

eU75,SU.U

" 1ft.71 ZIUl1.11

tUIU.. ZIZ,lIUS

Jll,l.U.

401.UlS4

3I.M&.n

40.15"'7 ttU5l.H cst.... 7...

'4,UUI .5lS4

t- 1, slJ, i

'.055.110..71 5,lJU7U. 175.tu.57

.'

}

~(,7!z..,Cl'/.c;[

.

OTIIER DIRECT COSTS

uau.

BZ INSURAllCf EI REPROOUCT10. Ell TElEPHONE .. nux E2B FREIGHT .. POSTAGE

1.t44.... Zt,741I. 1."1.11 14,Z44. 7S

DA TRAVEl EXPEIlSES UB TRlIISPORTAno. Ee CAPITAL .. SPEC EQUIP f5

E7 EI

ElA Ell £10

ElE EI Ell

fIElD arRet EXPEIS£I GROSS RECEIPTS Tll ..

1'.f5l.S4 .7.1 ....17

lZt.ztt.u PE~I

M08" IIElOUno. EXPUSU GEIl. COllomou ITtMS-OTWR Gta· TEsn.G P.OGIIJJI COUTIIUCTlO. PIIOTOGUP1fY WAn. OUlllTY OUIGII .. MISt. COIl1Pun. UPUSU MUK· UP TOTll OT1lER D1UCT costl

F

FU

F

FU IllCUTM

TOTAl AMOUlllIVotCB TOTAL 0lA COITUCT

'IE 1$111111

I.H

12.7Ot..HJ

.....

(,441.11

IltXI.21 ~U11.12

UJUJU7 1. m.m.. 13 11.nUl 311,.J55,.1I l ..

zaua:z.n

1.171.131.14 1.35l15115 11.I11.n 217.155.11 l .. m.IlUI IM.71U1

I.H

IM.7IUI

Z7.71t.l1 ..7.D

nUll-a K.JI2.M

'U,tu.u

n,1U54

fU.IZ7.17

"U11.I1

2It,1tl15 " Uf7,15U1

,,3IlISU7

....... ....

z,ztlMLn

z,ZM.7N.M

lou-n

t.411.7X.l1

Z,4G,17U1 z,4G,nU1

17.11UZJ,11

M,1Il.m.a

H,. . 2P M

11.C7t,U7.1I /

7t,11U1

2G,11U1

z,C43.17Ul r-il.m.zu M

t7.7tt.t7

mill. II U.C7t,U7.11 ~

-

TOTAL lEW COITUCT

'1£ MUll· CUUOT TOTAl AIIOUIT lIYotCO

7~. C /

PARSONS-DILLINGHAM METRO RAil CONSTRUCTION MANAGER

REF. Contract No. 3369 R81-CM-RC·3003 SQ020.2-PA600

November 30. 1994

." I Ir

Subject:

(. •

r...~._.

Mr. Jon Sotero Project Accounting l.os Angeles County Metropolitan Transportation Authority f:18 West Seventh Stree~, Suite 1100 los Angeles, California 90017-4606

Transmittal of Segment NO.2 - Invoice No.43 and Fllnds Request ~o. 93

Dear Mr. Sotero. Enclosed please find one fully supported original and one unsupported copy of Parsons-Dillingham's Invoice No. 43 for the period ending October 28, 1994. We are requesting $2,311,795.97 (Request No. 93) for the month of November 1994. The cumulative outstanding balance owed to date totals $2,311,795.97. Upon your approval of funds request, please mail funds to our

addrf;~s

shown below.

The attachments to this invoice contain confidential payroll information. We will appreciate your discretion in handling these documents. If you have any questions on this invoice contact Douglas K Ho at (213) 362-6033. Sincerely,

R~

Business/Administration Manager RSE:pws Elclosures As noted cc:

Charles Stark (w/o enclosures) RCC-RMC (w/o enclosures)

Exhibit B-4, page 1 of 3

PARSONS-OILLINGHAM REQUEST FOR FUNDS NO. 93 SEGMENT-2 PIE 11/25/94

JOB TO DATE COSTS BILLED THROUGH P/E 09/30/94 1\DO:

COST FOR pIE

10/28/94

INVOICE

TOTAL JOB TO OATE COSTS BILLED THROUGH

NO. 43 10/28/94

LESS: FUNDS RECEIVED CUMULATIVELY AS OF 11/18/94

BALANCE DUE

ADO -

$70,525,349.94 2,411,795.97 72,937,145.91

73,125,34~L94

(l88, 204.03)

ESTIMATED COSTS FOR pIE 11/25/94

TOTAL A.'"10UNT DUE

2,500,000.00

$2,311,795.97

DETAIL OF OUTSTANDING AMOUNTS ESTIMATED COSTS FOR

PIE 11/25/94

DIFFERENCE BETWEEN EST/ACTUAL FOR OCTOBER 94

$2,500,000.00 (18e, 204.03) 2,311,795.97

P~OUS

REQUEST OUTSTANDING

TOTAL AMOUNT DOE

c:

DOCS/EXCEL

NEWFREQ

DATED 10/25/94

0.00

$2,311,795.97

LOI AllWI IUTROP«ITAI

TW., OIT AT1011AIIT1lOllT1 PMSOnOIWIIl:llAM

UI:¥UIT·2 I/IIVOIct • Q. 43 TOTAl CUllREn

OUClUmOil

110.

Plll'VlOOS

CUMUUTlvt TO DAn

lAlOll&REUT£O coni: Al

LAIOMlnO STAIf

At

lAlO~IIOME OFFICI

l.1

FInD LUOll·1RfMIUM

u

II OME OFF ICE lJ.J OM UMIUM

II

PAYROll IURODI

Cl

OVIAH UJl.f1£UI

CZ

OVl:AH~HOME

01

SUICOIiTRACT COSTS

OZ

SUICOIiTRACT oon. HES

D3

OTH~

OFFICI

SUiCONUACT COSTI

TOTAl.UBOR &UUTEO cosn

5~.1Z1.I7

....

lOU.

.."

lUH,U2.U 44 ....&311

11.171.541.5%

~)a:u.

~)13.I'

447.145."

1SI.w

ISU4

331,135.14

1,17l,m~

1,5f7.M3.n

Z~.21U4

5,13(,"2.1' 17S,MU7

U3l.27SJ%

".13 I7tltUI

U.7n,lt4.w

171.001.4' U.Ul.215.1J

JUll.w

l.m.IU1'

l.m)7 ....

J3.~5.~

U1l.354J7

t,tlttOOll

57,(7)'5.n

51,411.137 JI

1.~4.s51."

OTHER DIRECT COSTS

n

INSUUJlCE

El

RURooucnOi

7.~tll

115,13U1

lU)IO.OI

J'.I~J'

Z1I,t41.14

14USS.a

Ea TUfPllOIIE .. TWX

Z4,5~JS

ue,S.Ul

505,OS.u1

FRSCHT. POSTAGE

1.4OUI

41,11L«

41.124.15

1""l.1J 17,12SJl 7l)17 ....

nU74."

Z71.1R57

Ell

UA TuvaroEnEl £31 TR»lSPORTATIDI U

E5

CAffi'Al. & IrEC fOUlP FIWl OfFlct WEISel CROSS REctlPTS TAX" PEP.MhS MOl .. RElOCAnOi WEISEl

ElA eEl. ~.omollS rnM~

Ell

£7

EI

Ga· TUTlIG P«OGRAII

ElC ClUAAllI EIYlCl

liD

COlli nuenDi PlIOTOCWIT ElE WATH OUAl..lTl DUlca & MIle.. EI tOMMEl WEISEl EIO lUll· UP mAl OTMEllnKT mn F F

FII

HI .CSTM

TOTAl AIIOUIT ImlICII TOTAL eu canuCf ~

Mtlt1 •CUIIElIT

mAL I£W eat'UCT

~U7SJt

S~.40U'

J,Z 01.1 5•.«

Zl,m ....

J.1Jl.74L« U71,17W

117...

I1.USll

1.1'7,'1351 lten.O

141.451.4041

3es.w..l1

U3.t4l.74

UI

UI

I.M

1M

11l.IZUl

U3.IZUl

UI

33.111.71 IIi,SlLIC

31,135.14

II5,.5I.LIC 1,111,557.M

cn.u

llJ,ltU1

113,'0.51

3I,U'.a

m..mn

m,UU1

uuun

tU1~CSU1

11,41Z.11U1

"'II,IUD "1.14

l5IUIW

1,171,%11.11

nun.-

JIt,J1'"

lAlI)ft.17

71,PU'UC

71.117,111.11

t,.C71)1I..tJ

t,m,nUI

33.W1." UI

...

'1£ 15111111· CUIlJBf

1,411)1U7

TOTAL AMOUIfT II'fOIClI

L41t)tU7

1,111,"1.11

lI.I51,Itut

71,us.C1U1

7"RUCUt

7UJ7,1Cut .

PARSONS-DILLINGHAM :';:-._>-,---.::::-_ -~-:-~::._.

i

I,CETAO RAil CONSTRUCTION MANAGER



REF. Contrad No. 3369 R81·CM·RC·2845 SQ020.2-PA600

~.

I



., :

~

'i~S ~

~.

'.'

9/994 .

A~ust

1 , 1994

Mr. Richard Bennett ,::;:~'

Project Accounting r .. .. >J' '~". :~);';,:G

Los Angeles County Metropolila·nTransportation--------J Authority 818 West Seventh Street, Suite 1100 Los Angeles, California 90017-4606 l

..

Subject: Transmittal of Segment NO.3 Invoice No. 09 and Funds Request No. 14 Dear Mr. Bennett:

.'

Enclosed please find one fully supported original and one unsupported copy of Parsons-Dillingham's Invoice No. 09 for the period ending June 24, 1994. Enclosed is a funds request totaling $395,940.75 as per attached schedule. Upon your approval of funds request, please mail funds to our address shown below. The attachments to this invoice contain confidential payroll information. We will appreciate your discretion in handling the documents. If you have any questions on this invoice contact Douglas K.

He (213) 362-6033.

Sincerely,

/_.'(J~~ ~e~. Morschauser Construction Manager

GBM.pws Enclosures As noted Joel Sandberg ( w/o enclosures) RCC-RMC ( w/o enclosures)

cc:

,,,.-r..

" ' - c--. e- , CMIllIl'f

~.,

De l.-..

~e-.e-

.A.t ,

Exhibit 8-5, page 1 of 3

PARSONS·DILLINGHAM REQUEST Of fUNOS NO. \4 PIE 07/29/94

JOB TO DATE COSTS BILLED THROUGH PIE 05/27194

3.1\$.700.1'

ADD: COST FOR PIE 01l/2C/94 INVOICE NO ••

2C$.877.7e

TOTAL JOB TO DATE COSTS BILLED THROUGH 06/H/94

LESS: FUNDS RECEIVED C\JMULATIVELY THROUGH PIE 08/05194

BALANCE DUE

3.339.637.75

23.9cO.75

ADD·FUNDS ESTiMATEO COSTS FOR PIE 07/29194

372.000.00

TOTAL FUNDS RECUEST NO. 14

J95.9CO.75

DfTAll Of OUTSTANDING AMOUHTS

ESTIMATEO COSTS PIE 07/29194

DIFFERENCE 88WHN EST.lACTUAl C\JMULATIVE

TOTAL FUNOS REQUEST NO. 14

.

.

I

372.000 00

2J.940.75

395.940.75

CONTRACT NO. 3369 lOS ANGELES METROPOliTAN TRANSPORTATION AUTHORITY

SEGMENT 3 FOR PERIOD ENDING 06124194 PARSONS·DILLINGHAM INVOICE NO. 09

NO.

DESCRIPTION

TOTAL CURRENT

PREVIOUS

CUMULATIVE TO DATE

LABOR & RELATED COSTS: A1 A2 A3 A4 B1 C1 C2 D1 02 03

LABOR·FIELD STAFF LABOR·HOME OFFICE FIELD LABOR·PREMIUM HOME OFFICE LABOR·PREMIUM PAYROLL BURDEN OVERHEAD·FIELD OVERHEAD·HOME OFFICE SUBCONTRACT COSTS SUBCONTRACT ODC~EES OTHER SUBCONTRACTS TOTAL LABOR & RELA TED COSTS

54,510.71 0.00 0.00 0.00 32.350.67 17.611.05 0.00 65,516.47 12.190.82 0.00

765,684.33 11.245.93 0.00 0.00 468,458.14 380,628.83 4,032.52 691.125.02 29,598.51 119.506.90

192.179.72

2.470.280.18

.

820,195.04 11,245.93 0.00 0.00 500.808.81 408.239.88 4,032,52 756,641.49 41,789.33 119,506.90

2.662,459.90

OTHER DIRECT COSTS:

82 E1 E2A E2B E3A E3B E4 ES

E7 E8

EBB ESC E8D E8E E9 El0

INSURANCE REPRODUCTION TELEPHONE & TELEX FREIGHT & POSTAGE TRAVEL EXPENSES TRANSPORTA TlON CAPIT Ai. & SPEC EQUIP FIELD OFFICE EXPENSES GROSS RECEIPTS TAX & PERMITS MOB & RELOCATION EXPENSES Gel· TESnNG PROGRAM GUARD SEfWICE CONSTRUCTION PHOTOGRAPHY WATER QUALITY DESIGN & MISC. COMPUTER E.XP€NSES MARK UP TOTAL OTHER DIRECT COSTS

F

FEE TOTAL INVOICED AMOUNT

483.12 1.646.59 2.488.35 156.74 26.39 16.615.61 5.488.58 16.290.11 0.00 0.00 0.00 0.00 0.00 0.00 13.54 2.331.22

1.292.48 13.892.13. 10,200.42 1.121.21 8.419.82 101.982.75 263,751.54 36.559.82 0.00 31.045.89 0.00 0.00 0.00 10,370.49 14,330.28 23.049.75

1.775.60 15.538.72 12,688.77 1.277 .95 8.446.21 118.598.36 269,240.12 52,849.93 0.00 31.045.89 0.00 0.00 0.00 10,370.49 14,343.82 25.380.97

45,540.25

516,016.58

561,556.83

9.157.79

130,403.98

139.561.77

246.877 .76

3.116,700.74

3.363.578.50 INOS3

-, PARSONS-DILLINGHAM REF. Contract No. 3369 R81-CM-RC-4237 Sa020.2-PA600

1'/;.'

'0... e,.



"';

....... "- rhV}cCT

Mr. Jon Sotero · A ccountlng . P rOJect One Gateway Plaza, 20th Floor Los Angeles. California 90012

Cktober 21, 19

ACCO{("

NTiNG

!

...

I

Subject: Transmittal of Segment NO.3 Invoice No. ~nd Funds Re uest No.1lDear Mr. Sotero: , Enclosed please find one fully supported original and one unsupported copy of Pa'rsonsDillingham's Invoice No. 36 for the period ending September 27,1996 and a separate report detailing CCR information that you requested. We are requesting $500,072.78 for the month of October. A cumulative balance of $1,264,181.22. Upon your approval of funds request, please mail funds to our address shown below. The attachments to this invoice contain confidential payroll information. We would appreciate your discretion in handling these documents. If you have any questions on this invoice contact Robert G. Lansley (213) 362-6112. _....:Sincerely.

Richard S. Enriquez Business/Administration Manager DLD:pws Enclosures as noted cc: C. Stark (w/o enclosures) J. Mathis (w/o enclosures)

AjoW-._ I'wIofte ~ ..._ ....... , T~ 00 L.-. c....., C-..etoft It. A.. ....

e-,

e-v.-

! I

aro..lN.

:.w:

c-...._.

SldI

lAlI ........

111 JI *4000

....

Exhibit B-6. page 1 of 3

PARSONS·DILLINGHAM REQUEST OF FUNDS NO. 41

PIE 10125/96

JOB TO DA TE COSTS BILLED THROUGH PIE 08/30/96

$20,665,332.97

ADO: COST FOR PIE 09/27/96 INVOICE NO. 36

5525,072.78

TOTAL JOB TO DATE COSTS BILLED THROUGH 10/25/96

$21,190,405.75

LESS: FUNDS RECEIVED CUMULATIVELY THROUGH PIE 10/18196

$20,551 o224 ..~3

BALANCE DUE

$639,181.22

ADD - ESTIMATED COSTS FOR PIE 10/25/96

$625,000.00

TOTAL AMOUNT DUE

$1,264,181.22

DETAIL OF OUTSTANDING AMOUNT

GC, ? I ESTIMATED COSTS FOR PIE 10/25/96

$625,000.00

,

VARIANCE BETWEEN EST IACTUAL SEPTEMbR'1996' ...

_~

... _--~

($124,927.22)

TOTAL OF REQUEST NO. 41 PIE 10/25196

$500,072.78

OUTSTANQING FUNDS REQUEST 40 Pte 09127196

$764,108.«

$1,264,181.22

TOTAL AMOUNT DUE

.

I

~C:UI'(\Cl'f

TRANSPORTA TION AUTHORITY

I ;S

FOR PERIOD ENDING 09/27/96 PARSONS-DILLINGHAM INVOICE NO. 36

TOTAL CURRENT

PREVIOUS

CUMULATIVE TO DATE

LABOR-FIELD STAFF LABOR-HOME OFFICE FIELD LABOR·PREMIUM HOME OFFICE LABOR-PREMIUM LABOR BURDEN OVERHEAD-FIELD OVERHEAD-HOME OFFICE SUBCONTRACT COSTS SUBCONTRACT ODCIFEES OTHER SUBCONTRACTS

109.954.66 2,514.60 6,340.09 0.00 60,808.25 72,471.48 1.233.87 93,639.11 11,297.94 132,254.57

4,207,342.70 39,536.01 77,669.86 0.00 2,423,544.19 2,328,735.45 13,611.02 5,272.686.12 443,423.07 2,642,413.21

4.317,297.36 42.050.61 84.009.95 0.00 2,484,352.44 2,40' ,206.93 14,844.89 5.366,325.23 454.721.01 2.774,667.78

TOTAL LABOR & RELATED COSTS

490,514.57

17,448,961.63

17,939,476.20

NO. OESCRIP1'ION LABOR & RELATED COSTS:

. •

A1 A2 'A3 A4 81 C1 C2 01 02 03

!

OTHER DIRECT COSTS: INSURANCE REPRODUCTION TELEPHONE & TELEX FREIGHT & POSTAGE TRAVEL EXP~NSES TRANSPORTATION CAPITAL & SPEC EQUIP FIELD OFFICE EXPENSES GROSS RECEIPTS TAX & PERMITS MOB & RELOCATION EXPENSES GCI - TESTING PROGRAM GUARD SERVICE CONSTRUCTION PHOTOGRAPHY WATER QUALITY DESIGN & MISC. COMPUTER EXPENSES MARKUP

0.00 (9,295.01) 5,999.77 320.50 1,221.03 2,838.65 2,032.34 11,200.39 0.00 446.51 0.00 0.00 0.00 11.78 0.00 7,116.10

25,085.07 64,962.35 133,884.01 7,815.33 54,742.74 326,320.06 1,041,298.12 438,371.14 0.00 69.644.35 23,790.79 0.00 21,914.46 23,690.13 14,467.46 250,369.20

. 25,085.07 55,667.34 139,883.78 8,135.83 55,963.77 329,158.71 1,043.330.46 449,571.53 0.00 70,090.86 23,790.79 0.00 21,914.46 23,701.91 14,467.46 257,485.30

TOTAL OTHER DIRECT COSTS

21,892.06

2,496,355.21

2.518,247.27

F

FEE

12,666.15·

F

FEE INCENTIVE

0.00

653,873.29 66,142.84

666,539.44 66,142.84

525,072.78

20,665,332.97

21,190,405.75

B2 E1 E2A E2B E3A E3B E4 E5 E7 E8 E8B E8C E8D E8E E9 E10

TOTAL INVOICED AM(>UNT

1

OECLARAliON OF PROOF OF SERVICE BY MAIL

2 I, Joan Standafer, declare:

3 1.

I am employed in the County of Los Angeles, State of California, by

4 Nossaman, Guthner, Knox & Elliott, LLP. 445 South Figueroa Street. 31st Floor. Los

5 Angeles, California 90071-1602. I am over the age of 18 and not a party to this action.

6 2.

On today's date, I served FIRST AMENDED COMPLAINT FOR:

7 (1) BREACH OF CONTRACT, (2) SPECIFIC PERFORMANCE. (3) AN ACCOUNTING.

8 (4) DECLARATORY RELIEF. AND (5) FRAUD by placing true and correct copies of said

9. 10 .

complaint in sealed envelopes addressed as stated on the attached service listJ

5.

11

I then placed said envelopes for collection, processing and mailing by

; Nossaman, Guthner, Knox & Elliott, LLP personnel with the United States Postal Service on 12 ' today's date, following Nossaman, Guthner. Knox & Elliott. LLP's ordinary business 13 ;; practices. Pursuant to these practices, with which I am readily familiar, sealed. addressed

14 " . envelopes are deposited in the ordinary course of business with the United States Postal 15 I

. Service on the same date they are collected and processed, with postage thereon fully . , prepaid. 17 . I declare under penalty of pe~ury under the laws of the State of California that

16

18

. the foregoing is true and correct and that this declaration was executed this 16th day of 19 March 1998, at Los Angeles, California. 20

21

22 . 23 .

24 25 :

26 ::

27

28 LA1980690031

t8.

1

SERVICE LIST

2

STATE OF CALIFORNIA, et at. v. PARSONS-DILLINGHAM METRO RAIL CONSTRUCTION MANAGER JOINT VENTURE, et at. LOS ANGELES COUNTY SUPERIOR COURT CASE NO. BC179027

3 4

5 6 7

8 9 10

11 12 13 14 15 16 17 18 19 20 21

22

Steven G. Madison, Esq. William O. Stein, Esq. Phyllis Kupferstein, Esq. Sandra L. Rierson, Esq. Quinn Emanuel Urquhart & Oliver, LLP 865 South Figueroa Street. Tenth Floor Los Angeles, CA 90017-2543

Attorneys for Defendants

Daniel Robert Bartley, Esq. Post Office Box 686 Novato, CA 94948-0686

Attorneys for Plaintiff Martin Gerlinger

Sharon Green, Esq. 1721 Waldman Avenue Las Vegas, Nevada 89102

Attorneys for Plaintiff Martin Gertinger

Hong Dea, Esq. Assistant United States Attorney 300 North Los Angeles Street Federal Building, Room 7516 Los Angeles, CA 90012

Attorneys for United States of America

larry G. Raskin, Esq. Office of the Attorney General Post Office Box 944255 1300 I Street, Suite 125 Sacramento, CA 94244-2550

Attorneys for State of California

Jerome Montgomery, Esq. Office of the Los Angeles City Attorney 200 North Main Street, Room 1800 Los Angeles, CA 90012

Attorneys for City of Los Angeles

Eric R. Havian, Esq. Phillips & Cohen 131 Steuart Street, Suite 501 San Francisco, CA 94105

Co-Counsel for the County of Los Angeles and the Los Angeles County Metropolitan Transit Authority

23 24 25 26 27 28

r~;: 1 j.l .•• - .•. _ . _ ..•.

__ . l..A\98Q690931

'!('J '7 1.

- •• ...1.!J.

11 ,

~

19.

..

21-Jun-90 POCO, A JOINT VENTURE

5 I 95 a5

----------------

JU:I 2S 90

LETTER REQUEST FOR PAYMENT NO. 151 FOR PERIOD ENDEO 06/22/90

21-Jun-90

--------------------------------------------------------------DESCRIPTION

AMOUNT

:::::::::::::::====:::::::==::::::::::::=::::==:===:::=:===::::::

FIELD STAFF SALARIES PAYROLL BURDEN FIELD OVERHEAD

o

$193,135.JO 10.,293. JO 65,666.JO $363,094.00

o

HOME OFFICE LABOR

o

SUBCONTRACT/CONSULTANT COSTS: DIRECT COSTS INDIRECT COSTS AND FEES

15,9.64.00 91,314. JO 123,397.:0 214, 711. 00

o

VARIOUS FIELD EXPENSES (PHOTOS, TESTING, GUARD SERVICE, EQUIPMENT, SIGNAGE, ETC.)

32,000.00

o

OFFICE RENT (HAIN AND FIELD)

45,000.00

o

MISC. OFFICE EXPENSES (REPRODUCTION, SUPPLIES, COMPUTERS, TELEPHONES, ETC.)

o

PARTNERS' ODC'S (TRAVEL EXP., COMPUTER, RELOCATION ETC.) FEE

o

TOTAL ..... USE

RECAP:

.

PREVIOUS FUNDS RECEIVED ADO:, REQUEST FOR PAYMENT NO. 151 TOTAL FUNDS REQUEST EO TO DATE

8,000.00 20,000.00 0.00 -~

$698,769.00

--------------$699,000.00 --------------. --------------$64,262,000.00 699,000.00 $64,961.000.00

---------------

Documeot 3 of 3. Copyright 1989 U.P.I.

April1l, 1989, Tuesday, Be cycle SECTION: Financial

.

DISTRIBUTION: Texas LE~GTH:

58 words

HEADLINE: Texas Business Briefs DATELINE: BEAU1vfO!'-l"T, Ie-us BODY: The Port ofBeaumont has settled a 5175,000 lawsuit it filed in June 1985 against .DeIeuw Cathu and Co. of Chicago. The suit claimed Deleuw Cather failed to comply with the specifications of a contract ro rebuild the port's grain wharf:

Louis ~e!son, the attorney who lianciled the case for the pon, did not release details of the settlem~l. , LANGUAGE: ENGLISH

/M..ain ¥pUJ fL;u;t FOfP..\j lDocumeJltWsl] [Full ViewJ U
~rightiC

~.....

~

.._-_.

199& LEXlS-NEXlS. a division of Reed Elsevier Inc. All righIs reserved.

.. .ldocument?_ansset=GeHauKO-MsSDUARURUUWRZU-ZBY-CVU-AARBREUUZZDAEZR 7/17/98

19/'1

Page 1

LA Times article November 27, 1996

on

This page has been accessed 146 times.

LA Times Article 11/27/96 MTA Chief Withdraws Pick for Subway Job By JQ~P ~1ARK.Mr\N, RIC-liARD S\MO:"-i, Times Staff Writers

Acknowledging that the MTA's contracting process is seriously flawed, county transit chief Joseph ED. Drew on Tuesday withdrew his recommendation of a business team to supervise subway tunneling on the Eastside because it failed to fully disclose its legal troubles and a political

contribution. Drew took the surprise action after he received a report from the Metropolitan Transponarion Authority's chief auditor that rebukes the agency's system for checking bids, saying that uncovering deception is "left mainly to chance." The current process "lacks adequate internal controls,· auditor Tony Padilla wrote, noting that the agency relies on contractors resp~ing "the honor system."

I

In seeking to exclude Metro East Consultants from getting the contract, Drew noted that one of the consortium's partners failed to disclose that it had been sued in federal court for allegedly overcharglng the MT A for previous work. Another partner failed to disclose a SI,000 contnbution made by one of its executives to Mayor Richard Riordan, at! MT A board member, who returned the contribution. Officers of both companies unified the veracity of their statemc:lts under penalty of perjury. Transit officiaJs are now hoping for speedy action on the contract amid word that fede.ral official5 are growing weary of delays in the project, already a year behind schedule. Three members of Congress from the Eastside wrote to Drew last week urging him to proceed quickly to award the contract to a qualified bidder noting that the agency's credibility with federal officials was at stake. The federal government is paying about half of the nearly ~ I-billioD subway eXle:1sion from Union Station to Ist and Lorena streets in Boyle Heights. MTA board member Gloria Molina applauded Drew's decision to withdraw his controversial recommendation on the S65-million subway contract but ridiculed his reasoning. "Pleading ignoran~ whaJ you have a staff lbal costs tile taxpayers millions of dollars is not a good excuse," said Molina. a Los Angeles County supervisor. "I can't tell you bow diBsPlJointed I am.' Drew said the involvement of DeLeuw. Cather & Co. in the lawsuit was not discovert:d by MTA

Page 2 ofJ

LA Times article November 27, 1996

contract administrators in a search of legal and newspaper databases, even though The Times reported on the lawsuit May 21. The MTA chief executive officer said that while some staff members, including the agencys construction chief, were aware that a lawsuit had been filed agains1 Parsons-Dillingham. they were not aware that ne.uuw, Cather was a subsidiary of Parsons Corp. and a fuU partner in the joint venture. The MTA has paid more than $300 million to Parsons--Dillingh.tm to manage subway tunneling over the past decade. Drew also said the agency did not learn that another partner, TELACU Industries, made the campaign contribution to Riordan until questioned by The Tlmes. It was not immediately clear whether the M'l' A board-which appe31'ed ready to award the contract to Metro East until the agenCY'lJ inspector general launched a criminal investigation into the bidding process-can stili award the contract to Metro East. Drew said the inspector general has cleared the way for the MT A board to vote on the contract at its next meeting on Dec. 18, even as the investigation continues. He said he has not decided whether to recommend one of the other two bidders, both of whom he descn'bcd as qualified. His aerion probably will not end the controversy that has rocked the agency for nearly two months and threatened its political support in Washington.

A Metro East spokesman said the consortium will keep fighting for the contract. disputing the auditor's report as being -wrong as a legAl and practical matter" and will ask Drew to reconsider his disqualification of its bid. -The purpose of disclosure is to inform the MT A of any pending lawsuits., Uld the agency was already informed. There was no surprise," said Neil Papiano, a Los Angdcs attorney "1fthc MTA officials had any problem with the suit. they were obligated to bring it to DeLeuw:l atte:ltion during the bid pr~ss, and they didn't. Itls too late now. II

Officials from DeLeuw, Cather and TELACU referrd all questions to Papiaoo. DcLeuw, Ca.ther

had disputed. the fraud allegations in the lawsuit. James F. McNulty. president ofPanons, said the failure to disclose the lawsuit was "an honest mistake.· ~ A officials said they checked computer databases; for any lawsuits filed. against DeLeuw but turned up nothing. Said Papiano "These people coulent find an elephant in the snow if they couldn't find the Times miele."

The bitter controversy over the Eastside contract erupted in October when Drew recommended Metro East even though it was ranked last among three bidders by the agency's panel of outside tunne..!ing experts. Several of the business team's executives have Cther worked or raised money for Los Angde3 City Councilman and MTA board member Richard AlatOfTe.



Alatorre decided to commem Tuesday. Jame3 Cragin. a Gardena city councilman and MTA board member who criticized Drew's original recommendation, expressed fear that the board may still choose Metro East.

/93

X

LA Times article November 27, 1996

Page 300

"There is so much money. involved, I think that integrity, logic and common sense arc going to be thrown in the heap," he said. A spokesman for Riordan said the mayor did not want to "micro manage" the agency and believes the auditor's findings demonstrate the need for greater accountability at the MTA. Zev Yaroslavsky, an MTA board member and Los Angeles County supervisor, ripped Drew's decision making and called on the board to "urgently review the crisis of management" at the agency. "Drew's back back pedalling on his reconunendation does not address the fundamental issue that is growing at the executive offices of the MT A, II he said.

i1

C30Cef

But Nick Patsaouras, another board member, disagreed. "I won't think an isolated incident should penalize Joe Drew, n he said. "He has been so far an open, accessible leader, and if a leader makes one mistake and you kick him out, it would suppress initiative and risk taking and creativity. N

Dennis O'Connor, a spokesman for JMA, the consortium rated first by the outside panel of experts, said he was "stunned" by the latest turn of events. ·We hope to take the opportunity to regain Drew's confidc:Jce, N he said. Drew had rejected JMA, exprcs.sing concern that the business team was busy enough supervising tunneling en the ~orth Hollywood leg of the subway.

Copyritht Un

A ~ Ti~

.

Testimony Of CWA District One Research Director Dr. Kenneth R. Peres Before the New Jersey Senate Legislative Oversight Committee July 29, 1998 My name is Kenneth R. Peres, i am Research Director for CWA District One and have a Ph.D. in economics.



I appreciate the opportunity to address this committee concerning the Parsons proposal to privatize New Jersey's motor vehicle inspection program. The State Treasurer has stated that the citizens of New Jersey win save money if enhanced motor vehicle inspections are privatized. In support of this statement the State Treasurer provided New Jersey legislators with figures which purported to show that it would cost the State $26.32 per car while the Parsons bid amounted to just $24.25 - a savings of $2.07 per car. However, our analysis of the figures supplied by the State and by Parsons does not substantiate the State's conclusions. On the one hand, the Parsons bid actually will cost the State an additional $8.87 million a year or $4.39 per car. On the other hand, the state overestimated its own costs for enhanced inspections by at least $7.6 million or $3.76 per car. Thus, the revised State cost for enhanced inspections is at most $22.56 per car while the cost of the Parsons contract is at least $28.64 per car. Rather than benefiting taxpayers with savings, the Parsons contract will actually cost taxpayers an additional $6.08 per car or $ I2.28 million per year.

PART 0:"£: THE COSTS OF THE PARSONS BID ARE UNDERESTIMATED BY 58.87 MILLION A YEAR OR $4.39 PER CAR 1) The Parsons Bid Overbills The State $24.28 Million In Just The First Year of The Proposed Contract. Non-enhanced inspections will cost the state 232% more under the Parsons contract than the non-enhanced inspections currently done by state workers. This amounts to an additional $1. 72 per car when spread over the 7 year term of the contract. The State never has supplied CWA with a figure for the current cost of non-enhanced inspections. We calculated a State cost of $6.30 per car - the result of dividing the entire cost of the current vehicle inspection program by the number of cars inspected. Parsons proposes to charge the state $20.61 for each non-enhanced inspection $14.31 more per car than the current cost to the State. CWA calculates that the Parsons proposal will cost taxpayers an additional $24.28 million in the first year of the contract. This figure is based on the state's own estimate of the number of expected annual inspections - and assumes that there are no delays in the implementation schedule.

2) The Parsons Bid Does Not Include $5.4 Million In Annual Ongoing Operational And Indirect Costs That The State Will Still Be Required To Pay The State included $7.169 million for additional operating costs and other indirect expenses. The Parsons bid included $1. 764 million of these expenses for routine facility maintenance and the maintenance of safety inspection equipment. This leaves a balance of$5.4 million in other operational and indirect costs that are in addition to those specified by the Parsons bid. Unless the State proves otherwise, CWA assumes that this $5.4 million includes operational costs for which the state - not Parsons - continues to be responsible by the terms of the RFP namely, "The state will continue payment of utilities and facility maintenance, except as stated above [which we mentioned above] for all retrofitted facilities." The continued payment of utilities by the State could be substantial. One can imagine that the State \-vill have to pay substantial electric bills in order to run the electronic enhanced emissions equipment, etc. These costs, which are to be borne by the State, must be added to the Parsons bid to obtain a true figure for the cost of the contract to New Jersey taxpayers.

3) There Are Other Costs 'Vhich The State 'Vill Incur Because Of The Parsons Bid The State also has not included other costs that the State will incur even if the Parsons bid is accepted. These costs include items such as the cost of preparing, administering and negotiating the contract and the on-going costs of monitoring the contract. The State should add these additional State costs to the overall cost of the Parsons bid.

PART T\\'O: THE STATE HAS OVERESTThtATED ITS OWN COSTS BY AT LEAST $7.6 MILLION OR $3.76 PER CAR 4) The State Has Overestimated Its Salary And 'Vage Costs By $3.63 Million. The state, in work papers supplied to CWA, stated that "Salary and Wages for 94 supervisors and 470 safety specialists including salary adjustments to 1/99" amounts to $18,997,795. CWA believes the State is overestimating its labor costs by $3.63 million. The state has overestimated its wage and salary costs for safety specialists by $3.03 million. The state has concluded that it will need 94 lanes with five safety specialists each. This results in a total requirement of 470 safety specialists. However, each lane

2

c



will require only 3 safety specialists on the line. Thus, the state has factored an additional 2 safety specialists per lane to cover for absences, etc. This results in a 67% increase in the number of safety specialists. However, based on historical experience CWA knows that only 1 extra safety specialist should be required per lane. This still leaves the state with a very comfortable buffer of 33% more safety specialists.

• •

The state has also overestimated its wage costs for supervisors by $613,000. The state assumes it will need 94 supervisors or one supervisor per lane. However, based on historical experience the state will only need 79 supervisors - one supervisor and assistant for every two lanes with an additional supervisor to cover for absences, etc.

5) The State Has Overestimated Its Overtime Requirements By Over $2.92 Million• The state calculated 10 hours overtime for every worker for every week. Yet, there are just three safety specialists working at anyone time on each lane. The state has cakulated that it will pay overtime to the two workers who are not even on the line or working. Thus, even using the state's own assumptions - the state has overestimated its overtime requirements for safety specialists by $2.2 million. In addition, the state assumes that it will pay all of 94 supervisors overtime every week - even those who are not working. CWA asswnes that there will be 47 supervisors working at anyone time - there is no need to pay overtime for the other 47 supervisors if they are not working. The state, thus, overestimates supervisor overtime by $705,705.

6) The State Has Overestimated Its Employee Benefits By $984,388 Since the state overestimated its salary and wages and overtime, it has also overestimated it employee benefits. CWA calculates that the state overestimated its benefits cost by $984,388. This figure was calculated by using the same benefits rate as the Treasury (20.95% of base wage) and applying it to the State's $3.63 million overestimate for wages & salaries and using the same overtime rate as the Treasury (7.65%) and applying it to the $2.2 million overestimate for overtime.

7) The State Has Overestimated The Clothing Allowance By $59,950. As previously explained, the State analysis overestimates the number of workers required for the motor vehicle inspection program by 109 workers. This results in an overestimation of $59,950 for the clothing allowance which is $550 per worker.

..

8) The State Accepts Unverified Figures Supplied by Parsons• The State has no basis to accept unverified figures contained in the Parsons bid. The Parsons bid does not contain the detail to adequately judge its stated costs. Parsons even recognizes this when it stated that

1'171

" ... all budget categories that would be required to provide the State with a full cost breakdO\V11 have not been requested [by the state]." Yet, even without this detail, the State has accepted a number of costs from the Parsons bid and includes these in its calculation of what costs the State would incur if it were to run the enhanced inspection program. This assumption by the State calls its entire calculation of State costs into question. The example of emissions equipment maintenance will show how the State's decision to accept Parsons unverified costs results in wildly unrealistic costs to the state. The Parson's bid states that emissions equipment will cost a total of$19.28 million. This amounts to a straight-line depreciation cost of$2.75 million per year over the seven-year life of the contract. Yet, the Parson's bid also stated that it would cost $7.29 million per year to maintain the emissions equipment. Thus, the Parson's bid calculates the cost of maintenance to be 2.64 times the purchase cost of the equipment in the first place. This would be comparable to buying a car for $15,000 and expending $39,701 or $5,672 per year just for maintenance. The State's acceptance of the unverified Parsons maintenance cost figures calls into question the State's acceptance of the Parsons Data System Operations & Maintenance costs and Public Information cost figures.

4

EXHIBIT #1: CWA WORKPAPERS



First Year Taxpayer Loss on Non-Enhanced Inspections Using The State's Assumption of 2,020,000 Inspections Per Year Scheduled Time Period

c

~

non-enhanced

State Cost $6.20

Contracted Cost Loss to Taxpayers $20.61

1,347,340

$ 8,353,508

$

27,768,677

$

(19,415,169)

70%

236,138

$ 1,464,056

$

4,866,804

$

(3,402,749)

33%

101,202

$

627,452

$

2,085,773

$

(1,458,321)

$10,445,016

$

34,721,255

$

(24,276,239)

Oct '98-May '99

100%

June - July '99 Aug - Sep '99 TOTAL

9J D

% Non-Enhanced Projected Inspections

1,684,680

Assumptions & Calculations 1) we use the state's FY 1999 projected initial inspections of 2,020,000 2) current cost of non-enhanced inspections is obtained by dividing total state cost of vehicle inspection program by number of inspections 3) the number of non-enhanced inspections for Oct - May is calculated by multiplying 2,020,000 by.667 (the portion of the year represented by the 8 month Oct-May period) 4) the number of non-enhanced inspections for June & July is calculated by multiplying 2,020,000 by 0.167 (the portion of the year represented by the 2 month June-July period) and multiplying this by .7 which is the portion on non-enhanced inspections for this period 5) the number of non-enhanced inspections for June & July is calculated by multiplying 2,020,000 by .167 (the portion of the year represented by the 2 month Aug-Sept period) and multiplying this by .3 which is the portion on non-enhanced inspections for this period

~I

Page 1

~





Contract Cost According to Parsons & State Assumptions Operations Year 1 Year 2-7 total

# inspections cost per 20.61 1,684,680 $ 24.25 335,320 $ 24.25 12,120,000 $ 14,140,000

non enhanced enhanced all enhanced

$ $ $

Total 34,721,255 8,131,510 293,910,000 $

$63,155,836

Capital $

Total

9J o

--...

")(

336,762,765

Note:The Parsons contract allows for vehicle inspection fees to escalate with the NY and Philadelphia CPI after the first year.

Capital & Maintenance Costs of Emissions Testing Equipment II

Capital Costs Emissions Equipment Leased Emissions Equipment Total

$ $ $

Total 16,527,948 2,754,492 19,282,440

Maintenance Costs Emissions Equipment Leased Emissions Equipment Total

$ $ $

Per Month 585,000 22,500 607,500

Per Year $ 2,361,135 $ 393,499

$ 2,754,634

$ $

Per Year 7,020,000 270,000

$ 7,290,000

Page 2

399,918,601

STATE OVERESTIMATES OF ITS OWN COSTS WAGE & SALARY state projections safety specialists 1 safety specialists 2 supervisors cwa projections safety specialists 1 safety specialists 2 supervisors total

9J 0

SlJ

~

# workers

total 7,417,685 7,651,183 3,839,035

,') "'t

18,907,903

annual wage rate 38,434 193 $ 18.84 $ 27,622 277 $ 13.54 $ 40,841 ~$ 20.02 $

154 $ 222 $ ~$

18.84 13.54 20.02

$ $ $

455

state overestimates safety specialists 1 safety specialists 2 supervisors

39 55 15

18.84 $ 13.54 $ 20.02 $

1

i

15,278,923

38,434 27,622 40,841

500 hours

OVERTIME safety specialists 1 safety specialists 2 supervisors

78 110 47

39,000 55,000 23,500

BENEFITS State Calculation Overtime

base $18,997,795 $ 6,951,435

rate benefits 0.2095 $ 3,980,038 0.0765 $ 531,785

Extra Wage Extra Overtime

$ 3,630,710 $ 2,924,895

0.2095 $ 0.0765 $

people 109

CLOTHING extra

TOTAL OVERESTIMATE ADDITIONAL PER CAR COST

allowance $550

5,924,924 6,127,576 3,226,423

38,434 27,622 40 ,841

760,634 223,754

rate 28.26 20.31 30.03

$1,498,910 $ 1,519,188 $ 612,612

$ 3,630,710

$1,102,140 $1,117,050 705,705

$2,924,895

$

cost $59,950

$59,950 $ 7,599,944 $ 3.76

~

<.J

984,388

EXHIBIT #2: STATE COST ESTIMATES FOR STATE OPERATED ENHANCED INSPECTIONS



.. •

~bh

.n ~riP :tent(

·

oma: OF mE GovnNClr. OWQ CI' ~ 1hu.'t1CICS l'OlaIC2JI tmm:ltcN1~

July 9, 1998

• Robert Angelo. Lobbyist 109 CoDnoDy :Driw Milltown. New retXY 08850

Robert ~ Area ~ Co~ons Workers

ofAmerica 10 Rutgers Place Trenton. New Jersey 08616

In our recent meeting.'l to disalss the privatiza!ion of the Enhanced Vehicle fuspection and Maintenance S~ you requested clari:fication md additional information pc:naining to the SOl marional response dated June 29, 1998 sent [0 you via fax on June 30, 1998. Aa:ordingly. I provide the following information in reply to your questions... In'i1J'f Il.l.De 29. 1998 1euer, the cost of pafonning an enhanced inspection if the State operated and maintained the enIwtcai inspection system was estimated to be S2632 per enhanced inspection. Yau requested that this figure be broken down 'into its ~ costs. The State utilized in part RFP requ.iremems aDd Parsons' bid response fI> dde1mine the Stue's cost of pafuwD:ng' an c:nlmnced inspedion.. Using p~' throughput and efficiency Cl$SUWptiou.s. the St4tc concluded that 94 3-position lanc:::s woo1d handle the 2,020,00 inspet;tion per year specified in the RFP. Specific cost items are: 1. Salaty and Wages fur 94 supaviso~ and 470 SlIf'cty specialists, including salary adjustments to 1/99 2.

$18.997,795;

Overtime foc 10 hnJwk fur 50 w'c;Iyr;; a. mal 500 1dJrIemployee 31 the specified O'mtime me fur 94 [email protected] SJO.03/br, 193 safi:ty specialist 1 @ S28.26Ibx- and 2TT safety specialist

[email protected]$20.Jl1hr.

.. .

S6.9S1A3S;

Robert PundI Robert ADgdo July 9. 1998 Pa,geZ 3. Employa; Bc:ncfib at a nm. 20.95% ofbasc saWy and 7.65% of overtime rate per Trcasmy Circular

$4,511.823;

letter 98-98-OMB

4. ClotIDng allowance per negotined ~eat.s

$310.200;

S. eIF Data System Opcnrions ami Maintenance. per Parsons' bid



6. Ma:intenam:e ofEmi«ions Equipment. per

Parsons' bid

$1.290.000;

7. Public 1I1fonoation pa- Parsons' bid

$2,.144,S6B;

8. Customer Complaint ResolutionITelephone Center. salary, fri:oge:s and openting costs for 20 employees

9. Additional opd"3ring costs and other indirect expenses Total Costs

..

SS42,m; $1.168,599; $53.164.599

Section 3.4.7 of the RfP spc:cijied that Parsons shatl be respol151OIe fuT the maintenance and upkeep of all inspection facilities and the maiutcll'WCC. tepair. upkr.cp and n:pl a ccnc:nt of all inspection equipment utilin:d for vehicle inspection during the term of the contract. {tan 9 includes these rosts.

F1D2lJy, the me:nbers of the Treasurer's Bid Ewluation Team were John Kennedy and Paul ShidIowslci, Treasury; David West, Environmental Protection; and Thomas Wright. Thomas Bednar.z, WilrQm Donahue, Richard Dube and Tun McGough, T ransporta.tion.

Dhe F. Gn1dfub

Employee R.elations Coot'dinator

c: Arnold Cohen I
.

EXHIBIT #3: PARSONS CAPITAL & OPERATIONAL COSTS



-

ID.

J1JK-1l3-sa ".24 FROM. eVA

"DBOM" CAPITAL COSTS In the spaces provided below the BIdder Is requfred to fiIlln the c:;apitaI cost portion d Its bid sobmission. The total ~ C06t category (Une 18 below) is designatacj as an evatuation Item. This cost represem the anIy C8pItaI cost categoiy that wiP be compared with 080M ptoposaJs from other~. The other eategor1es listed below (lJnes 1-17) have been· estaeUshed for budget putpOSeS to distinguish between costs wnicJl are eligible tor Federal funding and COSb; which ate not eRgible Mel to verify the establlshmeot of the toCa1 capital cosr price.

All costs associated with the retrotifIconstruetiOn of etrf leased facUlttes are not eIgIble for FedefaI funding and must be separately identified below. There are five (5) leased facilities which are fnctuded in the profect Jersey Oty. MontclaJr. Plainfiek:l, Ridgewood and SomerviUe. (See ~ 2, Section 3.3). Also Federal Mding can not pay fOr safety Inspection equipment All plices submitted in \tle following budget categories must add up to the to1al submitted ..in Line 1 below. In the event the bOOget eategoties do not add up to Une 18. the State will ~ the totaJ on line '8 to corredfy add up to the sum of the various budget categories and 1his corrected tataJ shall be used to evaluate the Bidders proposal.

a

"OBOII- CAPfTAt COSTS

Phase'

line

Phasell

PllBse.

PbaseIV

~ Pattic:ipatioa

1.

Emissions EQuipment

I

RequirQ(1lO Conform to 1he c:ean Ar h:J.. at State-Owoed FaciItIes (JOWde;s Tom $7.556,176 Fliv«. Freehoi:1, and Spec:ialy Sites, but dOes not incU1e Toms River. Ftee:hold , and the five leased sites). 2-

3.



S3.3J5,390

S944,397

Relrofit Of State-OINned ~ Faciities I SpeQaI1y sa. but does m! $12,268,257 $6.soo.985 , induCe Toms RiYer, Freehad I and the five leased sites)

$1.549.697

X

rlfdJdes

Site Work and Related CosIl!I at Sta2e-QwnQd FadIties (ildJdes SpeciaIy Sites. wt does not ~ TOC'llG ffeetkX1 am the lYe Jeased ~)

30U'd

I

$4,721,985

r:wer.

8/1

... 2/B

Cost Propo$d

It

.

PACII

$7.c2,$46

sm,8S7

1$457.013

-- .

X

_. .

. .,.

.- ..,

-oSOU- CAPITAL cosrs

,

UoI

4.

Phase I

~.

Phase II

Phase IV

X

X

X

$3.912.446

X

X

X

$12S,701

ConsIructiOn ot New ~ FadflSea {f~ Rfver&~

• 5.

N::ef!JSS RoadS (at Toms Rivet & Freet1:lIcJ, If

appicabIe) 6-

DeQgn & ImpIemertation r:J !he OF Data Commonica-

$800.(0)

$4SO.tQ)

$487.930

X

$685.714

$42S.571

$385.714

X

SZ2,OSl.793

$12,600.428

S12.1SS,7+4

$4~

X

X

X

$1.043.992

tion$ SYstem

7.

&.

9.

Oesign & lmpIemenla110n of Wait ra"l"Je System

Subtota Federal Particfpat500 8Udget Categories Usted ~ EQUipment Requited for ~ Te$tit'Jg a1 SWeOwned Facmties ~

Toms Rivet & Freehold. Spec:ia!y &te:s and five leased sites}

",

10.

11. I

l1e~ of the

5 Leased tnspection FaciIfties

$582,625

$.1

$1.&52.695

$4101,797

$)

$39,282

$0

X

Emissioos EquIpment

Required to Conform to me Clean M k:J:. at Ave L~

12-

S873,r£'!

me

X

Facilities

Site Work and Related Cost5 at the Five Leased InSpeCtiOn $)

X

Facifilie$

Relocation of ~ (2) FvlI Chassis Venae L.ifts at Specialy SiteS

S35.ro:l

14.

SUbtotal StaIe-Onty Budget Categories L..isted Abc:Mt

S2.5Q1.632

$1.723.704

$0

$7.oot3.002

Hi

SoI:Jb1al f'edec1II PartidpatIon Budget Categories La 8 AbOYe

S22..051.7'93

$12,606,428

$12.185,744

$4,962.544

13-

r

S/l;

51

-

X

X

/

X



tD.

PAC:. 4/'11 Jr;\..1IU1' U

Cost Proposd -060II- CAPITAL COSTS ~1

L.ide 16.

Sal*aI Sb*0nIy ~ C*gories Une 14 Above

17.

Subtotal Federal Par1IcipraOan and State Only 8ud9-t categories add Ur1e 15 ucf Line 16

Total capital Costs DBOIf

18.



~AddUne1a

ActOas Ew"r¥ton ftIlm



PbIIIeI

$2.561,632 . $1,723.703

~.

A.-IV I $7,OC3,992

$0

I

$24,613,0

$14.J').131

$12..1SS,7«

S12,,026,SS8

I

X

X

X

563,155,9 (hIdtwe ~~)

Note: fn p~paring the Total Capital ~ be sure ~ a
'DBOM OPERATIONAl COSTS: .~. -.....

In the spaces provijed below the Bidder Is· required to fill in the 0peIa1JalaI COst poctiO(t of its bid submission. The categories designs:ted as Enhanced Emissions Inspections (line 1 OOlow) and Non-Enhanced Emissions Inspections (Line 2 below) are designated as evaluatioo items. These costs. ~ressed as per transaction fees. represent the only Operational Cost categories ~ wiU be compared with proposals from other Bidders.

~~....

-oBoIr' 0PERAnaw.. COSTS

Enhanced Emls90ns ~ (EB).

1.

EVALUATION I1F.M

Noo-Eohancad EmiSSialS Inspedions (NESt EVALUAT10N ITEM

2-

$ 24.25 (E:qxess as Per lnspectioo Cost)

$ 20.61 (Express as Per Inspedton CQSQ

! "
(

\



.. •

8/E:

..,

w.

• '

-_._.

."

ett. . .-,-. ... "'

..rroBOM OPERATIONAL COSTS-DETAIL The budget categories listed belOW (Lines '.0) have been estabIiW!d tor budget ~ between costs which are eligible for fedQraI fund"1ng costs which are not tagJble and to verify the estabishmttlt"Of the total Opwational Costs pr1ca.

am

purposes 10

Because a:lJ budget ca!egortes that WOUld be reqtired to provide the State with a full cost breakdown have not been requested, !he State In:ferSlattds that the sum totiJ cl these 0pe!ati0naI Costs-OetaJl categories. do not add ~ 10 the NEEJ or EEl inSpection cates.

-DSOM- OPERATIONAL ~

1-

OF Data System Operatlon & Mai1tmance

$431.283 Pel' roonIl cost

2-

Mait1enance of Emissions Equlxnent (at all SIles exdudi"lg \he 5 Leased ~ Facities)

$58$,000

Mah1enance ol emiSSionS ~ (at 1M 5l.eased ~ection FacilitieS}

$223)Q Per moo1h cost

Mai1tenatlce of safety ~ EQuipment {at all ~ ~ the 5 leased fadIities}.

$135.000 Per momh cost

5.

Public Information

S 178.714

6.

Routine Fdy Mai'ttenala (Sealing floors. rnaintenanca of paMng areas, clearU1g supplies. lawn maintenance, ~ of

s 12.009

3-

• 4.

Per monih oost

Per rnalft\ cost

Per momh cost

signs)

"DBOM" PIF DATA COMMUNICATION SYSIL.V1 All COGts associated with the development. operation and maintenance of the P/F Data CommunicationS System shall be billed by 1he Contractor directty to the P\Fs and shaD ~ be a cost obligation to the State- PIF costs wiIJ be evaluated, however. as they will have a material effect upon me cost of inSpectjoos in tt1e private sedor and U'lus upon the total cost of inspections paid tor by the State. These fees shall be presented em e. ~ inspection fee even thOugh !here may be mJltiple connections U$OCiated with the Cata transfer that is l"ecesssry to complete one inspectjoo.

r.

8/1>'

3~'dd

tIC

EXHIBIT #4: STATE RESPONSIBILITY FOR UTILITY & OTHER COSTS UNDER PARSONS PROPOSAL

,

3.A.7 Maintenance oflnsptnion Farilitirs and Equipmebt A "DBOM" Contractor shaD be TeSponsible {or the mainteuance and upkeep. of all inspection facilities during the entire term of the contract. Both a ""!>BOM'" and a "DB" Connactor shall be responsible for the maiIttenance, repair uplceep a.od replacement. when necessary. of all inspection . equipment utilized for the inspection of vehicles, during the entire t.em1 of the cootr3Ct

All existing inspection f3cilities and equipment are and shall tcmaiD the property of the State. inclusive of any and all n:pairs.. alterations and modificatiODS made to them during the term ofeither a ocnBOM" or "DB" contract.. All newly constructed facilities shall become the property of the Sw.e upon acceptance and all equipment pnrchased by the Contractor in furtherance of the requirements of the contract shall become the property of the State upon installarion. All such .fAcilities and equipment shall remain the property ofthe State after expiration Or termination of the contract. ~

3All Maintenance of Inspection Equipment ("DBOM" and "DB" Contracts) One of the most important ongoing tasks associated with maximizing motorist convenience and maintaining lane throughput is to ensure that all emission, safety and data processing equipment remains in proper working condition. Equipment breakdowns and scheduled maintenance cahOrations during motorist hours shall be kept to a minimum and lane availability up-time kept to a maximum.. All scheduled maintenance at single-lane facilities shall be conducted outside the posted station hOlm. The Contractor will be respoI1S1ble for perfonning or ensuring that timely repairs and the appropriate mainle:oance calibrations are perfonned on all installed equipment. The Contractor shall submit a maintenance schedule (within 30 days from the Contract Start Date). to be approved by the State. to establish a mutually agreed upon plan for assuring timely. but nol intrusive maintenance. The Contractor sha]J be required to utilize reliable and durable equipment (as specified in Section 3.6.5), establish an effective ongoing program ofpreventive maintenance (in accordance with the manufacturer's standards). insure the availability of sufficient spare parts and repair or replace defective or worn out equipment. For each piece equipment purchased by the Contractor, the State shall be provided with both a bill of sale sufficient to show the price paid for it and a Release of Lien signed by the supplier of each piece of equipment

of

Preventive maintenance on ali inspection equipment necessary to insure accurate and consistent operation shall be performed on a periodic basis by the Contractor. The State requires that the Comractor submit a maintenance plan. to be coordinated with the State

Mal.2 Maintenance of laspectioD Facilities ("'DBOM" Contract Only) Under a '"DBOM" proposal. the Contractor shall be responstble for the upkeep, for the entire tenn of the contract, of all inspection facilities, buildings. and grounds, including. but not limited to:

a.

Cle2I1ing and maintenance of building interiors. exteriors. and all public spaces (including -customer waiting ~ the customer service area., public restroom. de.).

b.

Periodic se:i1inglpainting of the inspection lane floor, as necessary to provide adequate surface protection. and to f.aciIitate c1eaDi.ng md ranoval of accumulated oil/fluid leaks and material

46

.

traekro.in by vehicles.

c.

Regular mai.trtawlce of queuing. parldng. cntrcmce and exit driveways. and aU walkways. All paved areas shall be adequately maintained. During winter months. these areas shall be plowed, salted and/or sanded, as necessary.

d.

Regular maintenance of all landscaping. including the regular mowing of grass and the removal of trash, litter and other accumulated debris.

e.

Mainte:aance. rc:pairlreplacemcnt, as necessary, ofall signs and other required items (i.e. traffic

"

control devices. flags/flagpoles, etc.).

'-"'L



J

The State will continuc-payment of utilities (gas. electric. water, sewer, trash) and facility maintmanre., except as stated above. for all retrofitted f3ci1itie:s. The Contr3clor shall be responsible for the payment of all utilities and all main~cctasks at each newly construetc:d facility. _

The Contractor shall be responsl.ble for the maintenance/upkeep, as described in this section, with respect to all shared facilities, including those sections of shared facilities utiJized by the State.

:M.1...3. Retun of Facilities to State ("DBOW Cootract Only) At the inception of the Contract, the State and the Contractor shall, petfonn a detailed inspection of each State facility that the Contractor shall use. Photographs will be taken of each component of the facility, and agreemmts will be reached and recorded. as to the condition of each component of the facility. At the termination or expiration of the Contract, either at the end of the anticipated seven years, or earlier if such should be the case, an inspection shall be made by the State and the Contractor, to determine if the Contractor has maintained the buildings and their systems in a satis&ctory condition. Any deficiencies shall be repaired by the Contractor, or the State shall make a deduction from any monies the State owes the Contractor, in an amount sufficient to repair, replace, or correct, the noted deficiencies in any equipment, or fixtures. in orde:" to maintain full and uninterrupted operation ofthe facilities in their post-improvement condition.. The Contractor shall be responsible for all upkeep maiotemnce and operating expenses for equipment, facilities and lanes at the State-Qwued facilities. Structural repairs to the facilities will be the responsibility of the S~ to be coordinated with the Contractor as necessary. See Section 8.9.8, "Facility Repair Reimbursement".

3.S

OPERATE A I&5T=ONLY INSPEcrIQN t.BOGRAM - ("'DRaW ONYx)

3..5a1..l. Monthly StIlus Meetings





"

The Contractor siWI conduct monthly operations status meetings with the State's Project Manager and the State's management team, after the Contract Start Date, at a time and location to be set by the Stale. At these meetings, the Contractor and Swe representatives shall discuss operational issues and CQncems. Minutes of the meetings shall be CQmpiled and transmitted by the Project Manager

47

Phyllis Salowe-Kaye!Executive Director

ard of Directors De Luca. (Chair) Stem. (Vice ChaIr) )n,on 01 Needlandes, Industriat & -axlile Employees. NJ Council ,i-anne Shuehter. (SecretaryfTreasurer) nlllmefion.ll Union 01 El«tronic Worlcers. J;stricl3 lty Rosenstein lIegale 10 nalional organizalion) ';ommunications WorkBIS 01 Americ.a. .oca/l037 lyne Smith ,le98'o 10 nalional organization) 3lack Uttlan Alliance Evanon )ni/ed Senior Alliance efTyt Gordon ,a F. Lang (Allernale) lmerican Federalion 01 Slatll. County & Aunidpal Employees. Administrative Council I borah Han_II Piggins 'WCA Stale Council ,yis Hurd )niversal Improvemenl Associalion ;hael Johnson ~J Education Association ch Kahn nhaw B. Shapiro (Ahernate) JJ TenanlS OrganizaliOn .heedah Muhammad nt8rnatlOnaf Federation 01 Professional ; Technical Enginaers. Local 195 , Schulman ;ommunications WOrkBIS 01 America. .ocall034 v. Ronald Tull 'alerson Task FOfC8 for COfnmunity Action ,nk Viggiano 1n M. Abeigon (Atternale) iJJ S!ala FedaraliOn ot Teachers

Testimony to the Senate Legislative Oversight Committee Regarding the Parsons Corp. Contract for Emissions Testing Equipment Staci A. Berger, NJCA Organizer (732) 246-4772 July 29, 1998

Good morning. My name is Staci Berger, and I am here on behalf of New Jersey Citizen Action's 60,000 family members and 85 affiliated community, labor, tenant and senior organizations. I want to thank Sen. Mattheussen and the members of this committee for holding this hearing.

It is crucial that taxpayers have the opportunity to exercise their rights in a representative democracy - and in this case, that right is to have decisions that are made fairly and with the best interest of the majority in mind.

am of Trustees ,n Altas 'laDonal Housing InSlitula iam Dickman )lder WOfnen ~ League (OWl) ;hael Ooldia 'k Kourambis (Anernate) lergen County C6nllal Trades & Labor ')cuneil. AFL-CIO rothy Emerson ')cmmuniCIJtions WorlrBrs 01 America• •oca/l031 v. F. E. Gilliard ')cmmunity Uttlan Ren6WB1 EnterpriS8 May Hollinshead ..ard J. Punill (Anernalo) )ray Pantl>ers ot Norlhern NJ <. Reginald Jackson ;r. Mallhe'" A.M.E. Church Kane nk DeMaria (Alternato) IJ Induslriol Union Council n Kaufman ':ommunicabons WOr*'8tS 01 America. ),strict , 'old Morrison 11ernalionat Union 01 Eledronic Worleers. );slnct3 rd< Morrissy lousing & Neighborllood Davelopmenl :erviCBS. Inc. iam G. Terre" lniled AuIO Worleers. Region 9 I Twomey nne Olersen (Aile rnaIe) 'eallh Professionals & Allied Employees INJ.AFT lima

It is painfully clear that State Treasurer DiEluetorio's decision to award the contract to the Parsons Corporation was made without full disclosure by the bidder and serves a very well entrenched minority of the population. It is disgraceful that the Treasurer seems uninterested in investigating legal action pending against Parsons in other states. But more importantly, it is illegal for Parsons purposefully to exclude that information from its application. On that basis alone, the Administration must be prevented from awarding the contract.

Wolf

'ommunications Workers of America. xall038 ",olas Yoynelio ouool 01 NJ Stara Collega Locals. AFT

Main Office

Central Jersey

400 Main Slreel Hackensack. New Jorsey 07601 (201)468-2604 fa1l: (201) 488-1253

85 Raritan Avenue. Suite 100

tf I 0\ -

Highland Park. New Jorsey 08904 (732) 246-4 n2 Fax: (732) 214-8385

""'\

...

South Jersey 556 Haddon Avenue CollingswOOd. New Jersey 08' 08 ~ (609) 86g·0007 ,. Fax: (609) 869-01 I 1

Shore Office 707 Arnold Avenue. Suite E Point Pleasant Beach. New Jersey 08742 (732) 714-5330 Fax: (732) 714-5386

New Jersey elections have become increasingly expensive. In the last Gubernatorial election, the majority of contributions came from large corporations. Business interests outspent labor six times over. Nationally, only a fraction of the population makes campaign contributions. The Parsons contract is further proof of the chilling effect that exc(;ssive private money has on the political process. Last year alone, Parsons contributed over $60,000 to the Republican campaign committees, virtually sealing their sweetheart deal. Instead of open competition and fair play, this deal represents closed-door politicking and foul play.

NJCA urges the Legislative Oversight committee to do all in its power to stop Parsons from receiving this contract. In addition, we hope that the Legislature will take this opportunity to craft and pass a bill that puts an end to the revolving door at the State Hou.>e. The public deserves to know that its appointed and elected officials will not jump ship to the highest bidder, only to use their inside knowledge to that bidders benefit. Taxpayers already feel isolated from their government, but the Legislature can help by putting a block in the pathway.

We suggest a five-year ban on state staff and officials from working in the industries they oversaw while in public service. Such a law might return the public confidence to some



small degree. Otherwise, you may as well hang a "For Sale" sign in the middle of West State Street.

t
~e4L fl~ Suee 11e~ lIeMde E~ ~tJC<:d?UtI President KEVIN P. MATTIS 680 E. 5th St., Aorence, NJ 08518 FaxNoice 609·499·9729

UItLfut,

51 r

SERVICE EMPLOYEES INTERNATIONAL UNION Affiliated with the AFL·CID-CLC 609-764-0902

Sacr9t9ry-T"~21\l1lrQr

MICHAEL CANNARQZZI

Consultant: ROBERT ANGELO, 908-821-9622

02 WMhlngton 51,

Hoboken, NJ 07030

Vice Preoid.. nl-North

NICK MINUTILLO



Vloo President·South

MIKE FALCO Recording Sec·y.-North MOE DECANDIA

TO: Senator John Matheussen, Chair

Recording Sec·y. -South

Legislative Oversight Committee

RICHARD JAROCt<;1

Executive Board JOSEPH CATENA NICK LUCIVERO KEITH l.ONEY DAN BOGNANNO JIM LETA TONY NAPUTANO

FROM:

Bob Angelo, Legislati.ve Representative SEnJ, AFL-CIO

DATE:

July 29,1998

/,4

Trustees EDLYN JONES

BERNARD GRECO ROBERT SYREK Sgt.·At·Arms RONALD CANNICI

Here are two documents you requested from Local 518 at today's hearing on the proposed DMV Inspections contract. They are: 1) Side Letter of Agreement between the State and Local 518 regarding a procedure to conduct cost savings alternatives to privatization, and 2) the cost savings and productivity improvements given to the State in August of 1997 that have been totally and intentionally ignored! Please contact me if you have any questions. Thank you for your interest.

~7/2S!1998

21:22

ROBt:.~IANt:it.L

7328213931

DMY JMPROVEMENI AND EFFICIENCY RECOMMENDAnONS

SEIU. LocalS)' and IFPTE, Local 195

(FOR DISCUSSION PURPOSES)



These suggestions are put forth with the understanding that by improving auto inspection services and effectiveness, it will be in the best interests of the state govenunent, the citizens of New Jersey and the members ofLocals 518 and 195 for the DMV Inspection system remain state-

operated. REVENUE ENHANCEMENTS ... Collect Fines from PIC and Diesel Operators 01<

Increase PIC and Diesel Teams to increase revenue from fines

01<

Increase PIC and PIF License Fees

.. Collect full pennit and Test Fees Upfront ($2 extra for picture ill) • Increase fee for dealer plates II<

to

same fee as all others

Increase fines for misuse of dealer plates

... Sell advertising in and around inspection stations (billboards, wall signs, etc) ... Increase Driver Training School fees • Charge $1 .00 for new car stickers " Collect additional fees for inspection of "Monster Trucks" III



Assess charges for In-terminal Bus Inspections

• Seek federal funding

PROPUCTJYITY {MPROVEMENIS

'" Supervisors to cover breaks and other shortages .,

'" Reduce sticker scrapping

*

"

Initiate pre-printed inspection card



'" Cap number of supervisors per station ... Eliminate Regional structure '" Rcvi:)c Uniform distribution process

*

Eliminate 2nd shift Coordinators

*

Re-assign Diesel and PIC teams as needed, especially during peak periods

... Voluntary option for employees to work vacations '" Review Comp Time Policies

DIRECT COST SA VINGS

... Eliminate Holiday Saturday hours .. Eliminate Outside contractor snow-plowing •

Eliminate contract maintenance

*

Eliminate Failure Stickers

.I

... Increase use of trainee title +

Use Interim titles

7.7.:T7.

RhhT/h7./L0

SIDE LE1TER OF A.GRE"EMENT ~'l (Not included in CODtract)

JOB SECURITY - JANITORIAL SERVICES FOR STATE HOUSE COM:PLEX, .MARLBORO AND NORm PRINCETON; ENHANCED MOTOR VEIDCLE lNSPECllON



AND MAINTENANCE PROGRAM This side ietter will confirm the understandUtg between the plUties regarding

50me

of the

efforts the Statc of New Iersey (State) will undertake to lcssen the impact of future privatization

initia.tives or the closing of State facilities that occur during the period from ratification of this contract through June 30, 1999, and which impact ou employees in IFPTE and SEW bargaining

units. This letter refers to bargaining unit employees who

are u/tlrnately laid off at th~ conclusion of

the State's layoff procedures. but the 'layoff would have to be the result of the State's deci,ion to privatize .a. function or to close

Go

facility.

In the ~ent the Statc seriously considers privatization ofa facility or function for purely fiscal

or cconomic reasons impacting bargaining unit employees, the State agrees to give the Union' reasonable: advance:: notice and, upon request, to meet with the Union to giv~ the Union an

opportunity to present its position on the economic issues. The Union shall be given the opportunity to

demonstrat~ that unit

employees will do the same work more efficiently than a. private contractor.

The State 3gfee5 to provide the Union with rekvant cost information to enable the Union to develop its economic position, including public docum(:nts involving the RFP. once issued.

When the privatization do:>eision is based upon policy reasons, and will result in a la.yoff or job

displacement of bargaining unit employees. the

~tate will

give the Union reasonable advance notice

afits decision and.. upon request, meet with the Union to explain its I.I.tionale -.nd discuss the impact

on affected employees. It is Wldcrstood that in any even(, th~ decision to privatize is a managerial



prerogative that may not be: subject to the negotiation process. The efforts the State will undert:lke to alleviate the impact on employees laid off a:s a result

of such actions shall include one: or more of the following as appropria.te under the ex:isting circu n\stances:

H'h~T7R7~J

77.:T7.

RMMT/M7./I~

....

.

--_.-.:-

-

-~--

-

- . _..-

.. -.. -

.

-

:; • f) .; .~.

. ~.:.~. "'.

..

: :.,~.: ~.::.:.

.. .... .. .:.

~

... . '

.. ,

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1. Establishing preferential hiring list.f with the private employer; 2, Establishing hiring freezes for positions determined by the Department ofPersonnol to

. have the same or 'similar duties and responsibilities at other &tate locations within the depllrtmcnt affidod to create openings which will be filled by quatified laid otrempfoyees and. ifpracticable. by employees wgeted for layoff; all in accordance with DOP and SAC rules and regulations; 3. Continuing health coverage under COBRA ~hieh the State will pay for ill certain limited transition period but not

le$~ than thr~

months in duration: and

4. Provide training for qualified employees to the eXtent there are openings and laid off emptoyeos requiring training to fill them.. The Sta.te agrees to make good faith efforts which shall include compliance with all

nop

regulations to lessen the possibility of the layoffor demotion-in-lieu-oflayoff of employees in the bargaining units. Whes-e practiC3ble, these efforts will be made: whenever workers are placed at risk

through. privatization, or program reductions or eliminations for reasons of economy, efficiency, or other reason.. The efforts the State may take to lessen the possibility of layoff or demotion may

include, wherever practicable voluntary reduced work time and voluntary layoff or demotion which ~hall be

offered to employees before the employer takes involuntary action to reduce the workforce. Consistent with

nop regulations. the SWe will consider the follouting pre-layoff actions prior

to any permanent employees being laid off or demoted: 1. Hi ring and promotion freezes; 2. Separation of non-permanent employees; 3. R.eturning provisional employees to their permanent titles;

4. Securing of transfers and reassignment to other employment; and

5. Filling of existing vacancies. Good faith attempts will be made to fill positions determined by the Department of Pen.onnel to have substantia..lly the same or similar duties and responSibilities at other $t;tte locations by qualified

laid off or demoted employees and, lfpracticablc, by employees targeted for layoff. As practicable, the

State:

shall

tr.un "at risk" employees to allow movement from the "al risk" location to work

locations within or outside rhe appointing authority where position!: are available. It is understood

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that all such actions raust he consistent with operative law and DOP regula.tions.

For the State:

For Local 195. InternAtional Federation of

Professional and Teclmica1 Engineers. AFL-CIO:

For~

518, New Jersey Stale Motor

Vehicle Employees Union, SEIU, AFL-CIO;



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~~ President KEVIN P. MATTIS 880 E. 5th St., Florence. NJ 08518 FaxNoice 609-499-9729

'1t(J., 5/K

SERVICE EMPLOYEES INTERNATIONAL UNION Affiliated with the AFL-CIO-CLC 609-764-0902 Consultant: ROBERT ANGELO. 908-821-9622

Secretary-Treasurer MICHAEL CANNAROZZI 62 Washington SI. Hoboken, NJ 07030

Vice President-North NICK MINUTILLO

,

Vice President-South MIKE FALCO Recording Sec·y.-North MOE DECANDIA Recording Sec'y. ·South RICHARD JAROCKI Executive Board JOSEPH CATENA NICK LUCIVERO KEITH LONEY DAN BOGNANNO JIM LETA TONY NAPUTANO Trustees EDLYN JONES BERNARD GRECO ROBERT SYREK

TESTIMONY OF KEVIN P. MATTIS, PRESIDENT

Local 518, SEIU, AFL-CIO

Sgt.-At·Arms RONALD CANNICI

Before the Senate Legislative Oversight Committee

July 29, 1998 • )

STATEMENT OF KEVIN P. MATTIS, Pres. L. 518 SEIU

For most the past decade, the men and women of Local 518 SEIU have lived with the threat of privatization hanging over their heads.

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Governors, Commissioners, and Legislators of both political parties have from time to time called for the contracting out of motor vehicle inspections. Now it appears, that barring action by this Committee, a decision to privatize the state-operated auto inspection system will be carried out in the immediate future.

Local 518 opposes this decision. The members of our union strongly believe that motor vehicle inspections playa critical role in maintaining the quality of life in New Jersey. As such, auto inspections should be maintained and operated by government, not by a for-profit entity. Since 1938 the State of New Jersey bas had an aggressive inspection program aimed at preventing unsafe vehicles from causing accidents, injuries and deaths on our heavily congested roads. Our members take their jobs very seriously. They know the danger that an unsafe vehicle presents to unsuspecting motorists. As a state-operated program, our motive is the safety and health of the public, not the concerns and interests of stockholders. The Safety Specialists working in inspection lanes, as we sit in this hearing room, are an experienced and dedicated group of public servants. Six days a week, fifty-two weeks a years, on the co'idest days of winter and in the heat and humidity of a day like today, these state employees, with only a bare minimum of training and support, are saving lives by keeping dangerous and polluting autos off the roads.

We can, and are, doing the job efficiently and effectively. As we saw prior to the election 'last year, with the hiring of 120 interim employees, when given enough staff, there are virtually no waiting lines and the system operates convenientfy and in a customer-friendly manner.

Much of the support for the privatization of public services comes from those who claim that it will magically save the taxpayers money. In the case of the proposed privatization of New Jersey's auto inspection program, THIS IS ABSOLUTELY UNTRUE.

Privatization o(motor vehicle inspection will be MORE costly than continued state operation.

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The Economic Analysis prepared by the Treasurer's Office raises more questions than it answers. The cost comparison of state operation, and that of Parsons, is faulty in a number of areas. The overtime hours are inaccurate, the cost of consultant contracts are inappropriately added to the cost of state operation, and the equipment prices mayor may not be the most competitive.



But more importantly, over the past few months, Local 518 and the Governor's Office of Employee Relations has held a series of so-called "cost savings" meetings. Our contract with the State of New Jersey provides for this process, so that taxpayers can get the best deal for their money, and so state employees have an opportunity to ward off privatization by becoming more cost competitive. At the first session, almost one year ago, Local 518 presented a three page list of revenue enhancing suggestions and productivity improvements. In addition, our union agreed to consider any and all cost saving proposals or other concessions that would prevent the contemplated privatization of auto inspections. THE STAE REJECTED EACH AND EVERY SUGGESTION WE OFFERED AND NEVER MADE A SINGLE PROPOSAL OR REQUEST FOR A COST SAVING CONCESSION AT ANY MEETING !!! In fact, they refused to provide the current cost of state operations until after the Treasurer had announced his intent to award the contract to Parsons.



It is important that the Committee and the taxpayers of New Jersey

understand that, despite representations to the contrary, continued state operation could and would be more cost effective. The safety and health of every New Jersey resident is impacted by the vehicle inspection program. ..,

It can and should be one of our most protected public services.

Instead, it has become a coveted enterprise. I urge the Committee to use their oversight powers to protect the public interest and keep motor vehicle state-operated. Thank you for your time and interest.

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