Firm Under Cloud Gets $33-Million Airport Pact

Times Staff Writers

The administration of Mayor James K. Hahn awarded a $33-million airport construction contract Tuesday to a firm that Hahn, as city attorney, helped block from a city project because of concerns about its business practices.

Since the actions of Hahn's city attorney's office two years ago, the firm, Tutor-Saliba, was found by a Superior Court judge to have submitted false claims to the Metropolitan Transportation Authority. The company also became a major financial backer of Hahn's political campaigns.

Hahn administration officials denied any connection between campaign contributions and the contract award. "This decision was truly staff-driven," said Airport Commission President Ted Stein, himself a major Hahn fund-raiser.

A spokeswoman for the mayor, who was in Washington, said he was unavailable, but he issued a statement saying Tutor-Saliba is a firm with "a solid record."

Tuesday's unanimous decision to award Tutor-Saliba the construction contract for an airport parking garage and bus shuttle terminal in Van Nuys represented a dramatic turnaround.

As recently as September, airport staff members prepared a draft letter to Ronald N. Tutor, company president, warning that because of the MTA case he faced disqualification as a "non-responsible contractor."

Tutor-Saliba became notorious in the early 1990s for installing less than the required 12 inches of concrete in parts of subway tunnels in downtown Los Angeles. It was later required to make repairs.

The firm's troubles with the city started 2 1/2 years ago. It withdrew from competition for a $250-million sewer construction project after the Department of Public Works and the city attorney's office, then headed by Hahn, raised questions about its fitness.

The firm's lawyer appealed in October 2000 to Timothy McOsker, then Hahn's chief deputy in the city attorney's office and now his chief of staff. But city officials stuck by a decision requiring that Tutor-Saliba prove its fitness at a hearing, and the firm withdrew. McOsker did not respond to a call to his office Tuesday.

Tutor-Saliba suffered another setback in July 2001, when Los Angeles Superior Court Judge Joseph Kalin terminated the company's lawsuit against the MTA in mid-trial.

The construction company, which was the largest contractor on the Los Angeles subway, said it had been underpaid for construction of three subway stations along Wilshire Boulevard.

But the judge ruled that the firm so misused the judicial process it did not deserve a jury's decision. "There has been intentional withholding, concealment and destruction of documents by [Tutor-Saliba] and its attorneys," Kalin wrote.

He allowed an MTA countersuit against Tutor-Saliba to proceed, ruling that the firm owed the agency money but leaving it to a jury to decide how much.

Jurors decided that Tutor-Saliba should pay the MTA $29.5 million for submitting false claims for payment and using fronts posing as minority contractors to meet its minority contracting goals. With lawyer fees and other awards, Tutor-Saliba's debt came to $63 million, court records show. The company has appealed.

By the time of the verdict, the Sylmar-based firm had become a major financial backer of Hahn, then locked in a campaign for mayor against former Assembly Speaker Antonio Villaraigosa. Records show that Tutor, his employees and their spouses have given $39,000 to Hahn since early 1999, most of it in a May 2001 fund-raiser hosted by Tutor himself. The same month, records show, Tutor also paid $75,000 for an independently produced mailer that criticized Hahn's opponent.

Last year, records show, Tutor-Saliba contributed $100,000 to a Hahn-led effort to defeat San Fernando Valley secession, making the firm one of the largest donors to that campaign. Stein, the Airport Commission president, was a major anti-secession fund-raiser, although he said in an interview Tuesday that he had no role in soliciting Tutor's contributions.

The airport contract Tutor-Saliba won Tuesday is to build a parking garage and a shuttle bus terminal that Los Angeles International Airport-bound travelers can use near city-owned Van Nuys Airport. Tutor-Saliba was the low bidder for the Flyaway Bus Terminal contract.

Even so, the adverse verdict in the MTA case threatened the firm's effort to obtain the job. Airport staff members prepared their letter in September warning Tutor-Saliba that it faced possible disqualification, but that letter was never sent.

Instead, the staffers wrote in an internal report, they conferred with two lawyers in the office of City Atty. Rocky Delgadillo, who told them that the MTA judgment was still on appeal and that it might be overturned. "They also advised that the Board of Airport Commissioners was not compelled to act upon a matter which is currently under appeal," the staff wrote.

Eduardo Angeles, managing assistant city attorney at the airport, said Tuesday that he did not recall giving that advice, but "the fact that a case is on appeal is certainly a component of a decision they can consider." He emphasized that the city attorney's office role is advisory.

Delgadillo has his own relationship with Tutor. Weeks before Delgadillo won the election for city attorney in June 2001, Tutor paid $25,000 for a mass mailing of 200,000 fliers on his behalf, records show. During the campaign, Tutor also hosted a Delgadillo fund-raiser at his Hidden Hills home. Delgadillo's acting communications director, Josh Pertulla, had no comment.

At about the same time that airport officials were noting that Tutor might be qualified despite the MTA verdict, Public Works officials were conducting another review of Tutor's fitness to bid on other city contracts.

They raised a number of questions about his fitness and recommended a hearing by the Board of Public Works, whose members -- including Ellen Stein, wife of the Airport Commission president -- are appointed to their full-time salaried positions by the mayor. The board voted unanimously to shelve the report -- an action that allows Tutor to continue bidding on city projects.

While city officials in Los Angeles were evaluating how to deal with Tutor, some of their counterparts in San Francisco were moving aggressively against him.

San Francisco City Atty. Dennis Herrera filed a lawsuit in November seeking to "recover tens of millions of dollars of public funds that Tutor-Saliba pocketed as the result of a pervasive and sophisticated pattern of fraud" as lead contractor for expansion of San Francisco International Airport, it claims.

The suit, which is pending, alleges that Tutor-Saliba created bogus minority subcontractors so that it could pretend to comply with San Francisco's program for disadvantaged minority and women-owned businesses. It also asserts that the firm submitted inflated claims for payments, including fraudulent change.

At the Airport Commission meeting Tuesday morning, Kim Day, a deputy executive director at the airport, acknowledged: "There is some controversy" about Tutor-Saliba's record. But she said an investigation found "absolutely no viable evidence to disqualify Tutor-Saliba as a responsible contractor."

She told commissioners, however, that the airport staff was taking an unprecedented step in seeking the appointment a special panel to review the firm's work in Van Nuys, with particular attention to change orders that can dramatically increase the cost of a job.

Her comments prompted Stein to inquire: "So, it's an insurance policy?" Then he and other members of the board, all appointed by Hahn, approved it, along with the contract award.

Stein said in an interview that, despite its problems with the MTA, the Tutor firm "got nothing but rave reviews" as the lead contractor on the massive Alameda Corridor project, linking the ports of Los Angeles and Long Beach to rail yards near downtown.

Stein said Tutor had previously worked at the airport, double-decking the roadway that connects passenger terminals at LAX and upgrading the Tom Bradley International Terminal.

Tutor said in an interview that he thought he never got a fair hearing in the MTA case and that he expects an appellate court to throw out the judgment against his firm. "We'll get our day in court," he said. "Justice will prevail."

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