Subway Contractor to Get $12.5 Million From MTA

The Metropolitan Transportation Authority has reached an agreement to pay $12.5 million in past-due subway construction claims to beleaguered contracting giant Tutor-Saliba--a firm found guilty last year of engaging in a complex scheme to defraud the transit agency.

According to the agreement, Sylmar-based Tutor-Saliba Corp.--whose chief executive is a major donor to Mayor and MTA board member James K. Hahn--will receive payment for outstanding claims related to the building of tunnels and four subway stops on the 17-mile Red Line’s extension to the San Fernando Valley.

The MTA board signed off on the settlement, avoiding litigation, in a closed meeting last month without public comment.

The MTA had refused to pay for much of the construction, arguing that Tutor-Saliba was unfairly charging for its work.

In July 2001, in a dispute that sprang from charges Tutor-Saliba had mishandled other portions of Red Line construction, a Superior Court judge found the contractor guilty of fraud, including using minority businesses as fronts, more than 1,000 instances of unfair business practices and submitting false claims.

The construction giant, one of the largest public works contractors in the nation, was forced to pay the MTA $29.5 million. In March, the judge added to the fine by ordering Tutor-Saliba to pay nearly $22 million in legal fees. The company is appealing.

Despite its success in the lawsuit, the MTA chose not to pursue more litigation with Tutor-Saliba over the Red Line work that included the four subway stops.

“The board felt that periodically you have to try these cases just to show contractors you can’t get away with overreaching. That’s what we did with the case that we won,” said MTA chief legal counsel Steve Carnevale. “But in this second case, we felt it was appropriate to negotiate a payment both sides could agree upon.”

Carnevale said that at one point Tutor-Saliba was asking for more than $40 million for the claims.

Neither Tutor-Saliba President Ronald Tutor nor his lawyers returned repeated phone calls seeking comment.

Carnevale said the MTA came to the conclusion it would be best to settle the matter rather than pursue more litigation. The MTA became convinced that Tutor-Saliba was rightfully owed a good chunk of what it was asking for, he said. And after negotiations whittled the difference disputed to a matter of a few million dollars, “the risks and costs associated with a lawsuit” would not have been worthwhile, Carnevale said.

On July 17, MTA Chief Executive Roger Snoble and Tutor met in the MTA chief’s 25th-floor office downtown and agreed on the final details of the settlement. Days later, the MTA board voted 11 to 0 in the closed session to support Snoble’s recommendation.

Absent for that vote were City Councilman Hal Bernson, who is MTA chairman, and Hahn. Both board members were forced to recuse themselves because Tutor has contributed to them, most notably to the mayor. Tutor gave $75,000 to Hahn during his mayoral bid, in addition to $39,000 in contributions from employees and their spouses. Tutor also recently gave $50,000 to the mayor’s anti-secession drive.

Tutor-Saliba was the subway’s biggest contractor, with the MTA paying nearly $945 million for work on the underground line. Some of that work came under scrutiny for its quality, particularly after The Times reported that some of the walls built by the contractor were thinner than required.