Caltrans Must Pay Contractor for Defamation

The California Department of Transportation has been ordered to pay a former state contractor more than $2.1 million for defamation and breach of contract.

The arbitrator who made the ruling said Caltrans falsely accused Pacific/West Communications Group, known as Pac/West, of billing the state for frivolous charges, such as a ski trip and sports tickets. Those charges were never billed to the state, the ruling said.

Arbitrator William Bettinelli, a retired Sonoma County Superior Court judge, also discredited Caltrans audits that said Pac/West had overbilled the state by more than $600,000.

Publication of inaccurate audits and accompanying statements supplied to the news media drove the company out of business, Bettinelli said. The Associated Press and several other news organizations published accounts of Caltrans’ allegations in 1996.

Caltrans spokesman Robin Witt said last week that the department “will live with that decision.”

According to company owner Steve Tobia, Pac/West was the state’s largest environmental and transportation consulting firm when it won two contracts totaling about $13.3 million from Caltrans in 1992 and 1994. The company provided information, advertising and research services for Rideshare and traffic management programs.

A Caltrans audit published in 1996 reported that Pac/West had received $644,365 in unauthorized payments. The company disputed the findings, and sued the department for $72 million, claiming breach of contract and defamation. The two sides agreed to submit the dispute to binding arbitration.

Bettinelli said Caltrans improperly withheld $218,478 in payments for allegedly excessive labor costs under the first of the two contracts with Pac/West. Caltrans had previously agreed to pay the money and was not authorized by the contract to conduct an audit of actual labor costs, the arbitrator said.

He said an audit of the second contract, which found $425,837 in overpayments, was authorized by the contract but was “neither objective nor reliable” in its preparation.

A top Caltrans auditor, Maura Twomey, had a conflict of interest because her husband, Richard Pedroncelli, was involved in a separate dispute with Pac/West, Bettinelli said. Pedroncelli was then a freelance photographer and now works for Associated Press.

Pac/West’s lawsuit claimed that Twomey and Pedroncelli were angry over about $1,500 in late payments from the company for Pedroncelli’s photographs of the California Lottery’s weekly Big Spin game. Pac/West had a state contract to promote the lottery.

Twomey removed herself from the audit itself but “regularly and directly participated in audit activities . . . compromising the independence of the audit,” Bettinelli said.

The arbitrator, who issued his decision Nov. 17, is considering how much Pac/West should be paid for interest and for legal costs.