Probe Sought of Bonding Firm in Pact Defaults
A bonding company, which faces criminal charges in Arizona, has left behind a string of defaulted contracts in government jobs in the city and county of Los Angeles, prompting local authorities to call for an investigation of the firm.
The Board of Supervisors is expected to consider a proposal today seeking a criminal investigation into Contractors Surety Bonding Co. after the Washington, D.C.-based firm defaulted on its guarantee to finance a new fire station in Diamond Bar and a building expansion program at Martin Luther King Jr./Drew Medical Center.
First, the original contractor fell behind on the construction schedule of the projects and then Contractors Surety Bonding allegedly backed down from its guarantee to step in and finish the job, county officials said.
Company officials could not be reached for comment.
The county contends that as a result of problems with Contractors Surety, completion of the $631,750 fire station at Diamond Bar has fallen six months behind schedule and an $885,000 addition to the South-Central Los Angeles medical center remains only half-finished.
Officials said they could not estimate how much money the defaults will cost the county, but Henry Yee, head contract administrator for the Facilities Management Department, said there is certain to be some monetary loss, as well as unknown delays in completing the projects.
“We’re at a complete standstill,” Yee said of the hospital construction project.
Randy Gomez, construction coordinator for the Los Angeles County Fire Department, said problems in completing the Diamond Bar project have forced fire officials to scramble for another contractor to finish the job after the original contractor, Executive Engineering and Services Corp., was terminated for contract “deficiencies” and its bonding firm, Contractors Surety, also failed to perform under its contract.
Only later, Gomez said, did he learn that executives of the bonding company had been indicted in Arizona, along with other defendants in an alleged bond insurance fraud scheme.
A federal grand jury indicted six people on charges of defrauding federal agencies and private contractors by falsifying construction bonds.
The indictment charged the defendants with accepting money to provide bonding required for contractors bidding for government projects, but rather than obtaining the bonding, the defendants allegedly forged and falsified documents to make it appear as though the contractors were covered.
Among those named in the lawsuit were Gwendolyn Joseph, described as an officer or director of Contractors Surety Bonding, and two men identified as former Joseph employees, Eddie Dixon and Alonzo Campbell.
Joseph could not be reached for comment, although a secretary at the Washington office confirmed that Joseph was president of the company. A telephone operator for Contractors Surety in Century City said Campbell has received calls through the firm and that Dixon had worked with the company.
Meanwhile, officials with the Los Angeles Department of Water and Power said they dealt with both Joseph and Dixon in another construction project that ended with Contractors Surety defaulting on its contract.
Bruce Hamer, a DWP civil engineer, said the firm had provided performance bonds and labor and material payment bonds for a $3.5-million construction project in Van Nuys. But plans to build an equipment repair and office building were temporarily shelved after the original contractor, PIE Construction Co., fell four months behind schedule and Contractors Surety failed to follow through on its commitment to complete the work, Hamer said.
More than 30 subcontractors were left unpaid in the aftermath, he added, and the department is now faced with a revised plan on how to complete the building.
“It’s a potential overrun of $600,000,” he said of the added costs to the department.
Although county officials declined to provide a cost estimate of the defaults, Supervisor Pete Schabarum is asking the county counsel to attempt to recover the costs from Contractors Surety. In a proposal that will go before the board today, he also pushed for a district attorney’s investigation, claiming that the firm may be “engaging in fraudulent business practices” and indicating that officials should “determine whether the company is engaged in criminal business activities.”
Schabarum urged the county to ban Contractors Surety from any future construction projects. Yee said the Facilities Management Department is unaware of any other business with the firm.
Some county officials have advocated closer monitoring of such contracts. But Yee declined to say if this or some other avenue of inquiry was the subject of an ongoing administrative investigation.
Yee, whose office is in charge of such monitoring efforts, added that he was unaware of any problems with the firm until after he began his own investigation into the company.