Fluor Daniel Named in $50-Million Suit Over Hurricane Hugo Work

A subcontractor hired to help repair hundreds of Navy housing units in Charleston destroyed by Hurricane Hugo has sued contractors, including Irvine-based Fluor Daniel, for at least $50 million in damages.

Meanwhile, the U.S. Justice Department is also investigating a case involving millions of dollars in alleged fraud in connection with the plan, called Project Hugo, the Post and Courier of Charleston reported Sunday.

Sources who asked to remain anonymous told the newspaper that the case may involve $6.9 million in civil fraud.

Justice Department spokesman Sara Maltby said the department’s policy is neither to confirm nor deny the existence of an investigation.

The subcontractor, Razor Enterprises Inc. of Hempstead, Tex., has sued FD Services Inc. and its sister company, the international contractor Fluor Daniel.

Razor, which was hired to repair roofs on the Charleston Naval Base, contends that the companies violated the Unfair Trade Practices Act and that FD hired away many of Razor’s employees.

Razor charges in the suit that FD officials agreed to give the roofer millions of dollars of work if it would quickly take on the Charleston project.

In December, 1989, and also in February and March, 1990, FD Services told Razor that it was under pressure from the Navy because the project was plagued with cost overruns. By the spring, FD Services terminated the contracts with Razor, the lawsuit contends.

According to a letter filed with the lawsuit, the Navy notified FD Services on Oct. 31, 1990, that the company had 10 days to explain why it should not be taken off the job.

“In the past and continuing at the present, we are frequently experiencing cost overruns, schedule failures, ineffective subcontractor management, ineffective procurement, poor planning and cost control, improper contract actions, improper accounting systems, low work force efficiency, and a lack of material accountability,” said the letter from Navy Capt. A.L. Moyle.

FD Services said in a prepared statement Friday that the lawsuit is “without merit and (we) will vigorously defend our position in a court of law where the evidence will be presented.”

The company denies ever promising future work to Razor if it would agree to take on the roofing work.

FD Services called for the suit’s dismissal because Razor had been conducting business in South Carolina for more than a year without a license.

“Because Razor was not licensed, its contracts are void and unenforceable,” said FD Services attorney H. Donald Sellers of Greenville.

Navy officials refused to comment about the project, the Post and Courier reported. No one answered a call placed to the Naval Investigative Service in Charleston on Sunday.

Representatives from Fluor Daniel noticed irregularities in the project that possibly violated federal purchasing regulations, according to a July, 1990, letter from a company attorney.

The letter ordered an internal investigation and audit of the Project Hugo contracts.

Some workers involved in Project Hugo blamed spiraling costs on Navy bureaucracy, poor management by contractors, and unnecessary work.

Les McGraw, former maintenance project manager for FD Services, said the Navy told the company to “do what it had to do” to get the roofs on the housing units. But when the Navy required Fluor Daniel to justify costs, the company didn’t have records of all the work it had done, he said.