Officials question MTA’s spending on protracted legal battle

The Metropolitan Transportation Authority has spent more than $34 million in a legal battle with one of America’s largest contractors -- even though the most the transit agency could win in damages would be about half that sum.

The case has dragged on for 15 years, with new hearings set to begin in coming weeks.

With the agency now considering fare increases and service cuts, some officials are calling for an audit of the expenditures and wonder if the lawsuit represents a waste of taxpayer dollars.

Many MTA board members disagree, saying contractor Tutor-Saliba tried to cheat the agency out of millions of dollars by submitting a low bid and then asking for dozens of change orders and other requests that dramatically increased the price of constructing parts of the Red Line subway.

They argue that the lawsuit is about more than recovering money. If the MTA wins, they say, it will send a message to other contractors doing work for the agency. It could also give the MTA and other public agencies the ammunition to dismiss Tutor-Saliba from future bidding processes even if the company submits the lowest bid for a project.

“Success in the Tutor-Saliba case will protect taxpayers from future unscrupulous contractors,” said Los Angeles County Supervisor Mike Antonovich. He and some other MTA board members accused the company of purposely dragging out the lawsuit, hoping the MTA will give in.

Tutor-Saliba President and Chief Executive Ron Tutor denied that charge and said he’s willing to consider a settlement.

The lawsuit has also become a political issue, with the MTA facing a historic operating deficit projected at $251.3 million.

“It’s a significant amount of money, and there seems to be a lack of internal controls with respect to the expenditure of resources,” said county Supervisor Mark Ridley-Thomas, who has called for an audit of the agency’s expenditures on lawsuits.

“This is not to comment pro or con on the merits of the case,” he added. “The MTA has lost its grip on managing these resources.”

The case began in 1995, when Tutor-Saliba-Perini, a major contractor during building of the Red Line, sued the MTA, saying it was owed roughly $16 million for unanticipated expenses incurred during construction.

The MTA filed a cross-complaint about four years later, alleging that Tutor violated the False Claims Act and Unfair Competition Law, among other violations. The MTA alleged that Tutor was demanding money for claims that were not legitimate.

In 2001, a jury awarded the MTA about $29 million plus lawyer fees and other expenses, according to documents reviewed by The Times.

But four years later, an appellate court judge overturned the decision and sent the case back to Los Angeles County Superior Court.

There have since been mostly small developments in the legal struggle, including a roughly $353,000 judgment the MTA received in 2006, the documents show.

It is unlikely that the MTA Board of Directors would approve any settlement with Tutor-Saliba.

“I think there’s strong sentiment on the board that the message needs to be sent out to current contractors and future contractors and subcontractors that the MTA is going to expect them to submit fair, verified and legal documents for payment and that they’re going to perform a fair and quality workmanship,” said board Chairman Ara Najarian.

He and others argue that the MTA is not on a vendetta. The agency has spent $34 million in litigation on this case, the documents show. But officials said that sum includes the agency’s legal defense against Tutor’s lawsuits.

If the MTA is victorious in all parts of the legal battle with Tutor, the most the agency could recover would be about $15 million, Najarian added.

Even though that’s less than half of what the MTA has spent on the case, Najarian and others said there are benefits to having a judgment and few benefits to settling.

“Some would argue that settling now would send the wrong message for those people that may be looking for contracts,” he said.

Tutor estimated that the trial has cost his company about $25 million and said he’d like to see an end to the proceedings.

“The whole thing is unimaginable,” he said. “Now 15 years later, we’re down to fighting over a million dollars one way or another.”

ari.bloomekatz @latimes.com