All Fraud Charges Against BKK Are Thrown Out

A Los Angeles Superior Court judge has dismissed all charges against BKK Corp. and two of its former employees who were accused of conspiring with a South El Monte contracting company to defraud the state.

But the deputy district attorney handling the case said his superiors are considering filing an appellate court writ seeking reinstatement of the charges.

“We strongly disagree with the judge’s decision,” Deputy Dist. Atty. Anthony Patchett said.

Judge Judith C. Chirlin last week dismissed charges against BKK, its former controller, Dean Virden, and the former manager of its West Covina dump, Jack Thompson. They had been accused of conspiring to defraud the state Department of Transportation by giving a dump fee discount to Andrew Papac & Sons of South El Monte. They had also been charged with concealing the discount from Caltrans, which was paying Papac to excavate and haul contaminated dirt from Lynwood to the BKK landfill in West Covina.

But Judge Chirlin ruled that BKK had done nothing improper in offering a discount.

The dismissals leave only Papac & Sons, owners Andrew Papac and his son, Andrew G. Papac, and their business associate, William Paul Dunlap, to face charges in the case, which was once billed as a million-dollar fraud, but has been whittled down to a dispute over $46,000.

Papac obtained a contract from Caltrans in 1982 to excavate contaminated dirt from the Willco dump in Lynwood to clear a path for the Century Freeway.

The company won the dirt-removal contract with a bid of $3.9 million, but the contract allowed the price to escalate if tests showed that the material was hazardous, requiring special handling and disposal.

Much of the dirt contained hazardous contaminants, and the state was billed for $12 million before Caltrans halted the excavation work in November, 1983.

Reduced Amount to $46,000

Prosecutors said the state was overcharged because Caltrans thought Papac was paying BKK $24 a ton to dump the waste, but BKK had lowered the price to $19.

Since Caltrans paid for the removal of more than 200,000 tons of dirt, the overpayment to Papac & Sons amounted to more than $1 million, the prosecution contended. But Los Angeles Municipal Judge Barbara Meiers last December reduced the amount to $46,000.

She said the overcharge applied only to dirt that was hauled during a four-month period when Caltrans paid Papac a hauling fee that was based on costs incurred. Most of the dirt was hauled for a fixed price.

The prosecution argued unsuccessfully that Caltrans would not have agreed to the fixed-price amount if it had known that the dirt was being dumped at a discount.

Behind in Payments

BKK officials agreed to the discount after Papac fell $800,000 behind in paying dump fees.

Attorney Warren Ettinger, who represented BKK, said company officials were called to the office of County Supervisor Mike Antonovich in August, 1983, after the Papacs, who were longtime family friends of the supervisor, asked for his help in resolving a billing dispute. BKK officials agreed to cut the dump fee retroactively if Papac & Sons would make back payments and pay future bills on a weekly basis.

BKK Corp. and its former employees were held to answer charges by a municipal court judge after an 11-week preliminary hearing. But Judge Chirlin reviewed the transcript of the preliminary hearing and concluded that BKK had done nothing improper and dismissed the charges.

Ettinger said the discount offer was “nothing more than a corporation entering into a contract with a desire to resolve a dispute for back fees.”

The prosecution argued that BKK had sought to conceal the discount from Caltrans, and produced testimony from a former office manager for BKK who said she was instructed by Thompson or Virden to omit dollar amounts on some billing information submitted to Papac & Sons.

But, Ettinger said, other bills submitted by BKK to Papac & Sons showed the discounted dump fee. And, in any event, he argued, BKK knew nothing of the details of Papac’s contract with Caltrans and had no obligation to inform Caltrans of the dump fee discount.

Chirlin said she found no evidence of wrongdoing by BKK, Thompson or Virden.

Legal Costs

Ronald Gastelum, counsel for BKK Corp., said it took 18 months and “upwards of half a million dollars” in legal fees for the company to clear itself of the charges. He said the company paid not only its own attorney fees, but also those of its retired employees.

“This should have been an open-and-shut case,” he said, adding that he believes BKK was charged at least partly because it has been a newsworthy company in the waste business, operating a dump in West Covina that was highly controversial until it stopped taking toxic waste in 1984.

Gastelum said he was not suggesting that BKK was targeted by the district attorney’s office solely to generate headlines. But, he said, “if we were another corporation, they might have been more careful in reviewing their facts.”

Alteration in Records

Patchett insisted that there was adequate evidence to bring charges against BKK, citing particularly the alteration in records. He said his superiors in the district attorney’s office are reviewing the case to determine whether to appeal the dismissal of charges.

Charges against Papac & Sons and the other remaining defendants have been scheduled for trial Oct. 17 after a pretrial hearing Sept. 19.

The charges include grand theft, forgery, embezzlement, diversion of construction funds, presentation of fraudulent claims and conspiracy. Papac’s attorneys have contended that the defendants should not be facing criminal charges, but are embroiled in what amounts to a billing dispute.

The defendants could be sent to prison for up to five years if convicted.