Well-Connected Builder Battles in L.A., Bay Area

Public works construction magnate Ron Tutor has lived by a simple, merciless creed: “We ask no quarter. We give no quarter.”

Now that is coming back to haunt him.

Tutor has made big marks on California’s landscape while amassing hundreds of millions of dollars, a yacht he rents out for hundreds of thousands of dollars a week, and a Boeing 737 jetliner.

In Los Angeles alone, he has built or rebuilt the Central Library, the international terminal at Los Angeles International Airport, the Coliseum, the new federal courthouse, the Alameda Corridor and most of Metro Rail.

Sharp and determined, he can speak for hours in perfect sentences and clearly remember details of business transactions from years ago. He is quick to turn others’ mistakes to his advantage.

He also is politically astute and well-connected. Records show that Tutor spent more than $75,000 to help elect James K. Hahn mayor of Los Angeles, and donated $50,000 to a cause favored by San Francisco Mayor Willie Brown. When Gov. Gray Davis needs to get somewhere quickly, Tutor’s private jet is at his disposal. But records show that Tutor has not voted in a county, state or federal election since 1994.

Though Tutor treats his friends well, he is unremittingly contentious with his adversaries. Today he is struggling to fend off the city of San Francisco and Southern California’s Metropolitan Transportation Authority, both of which have launched potentially catastrophic challenges to some of his business practices.

He also has found time to sue a small airport near his Idaho vacation home. Officials there had the nerve to tell him his plane was too heavy to land.

The MTA charges that Tutor is dishonest, and has pursued him in court with a sustained legal effort, hiring a team of lawyers with the patience and economic wherewithal to scour tens of thousands of highly technical documents -- years after the fact -- looking for undetected mistakes they can use against him.

Lawyers are nibbling at him, finding evidence that suggests, to them at least, that his company inflated bills by making a series of false claims. Tutor rails that the lawyers are not only wrong, they are also liars.

“You’ve got to understand that lawyers lie,” he said recently. “If you don’t understand that, we’re wasting this whole morning.”

His chief bete noir is a private attorney hired by the MTA , David Casselman, who beat him in a Superior Court trial in 2001. In that case, Tutor-Saliba, which Tutor owns, was ordered to pay the transit agency $30 million.

A lot of that was triple damages for alleged offenses that an outsider might see as niggling, such as a subcontractor’s cutting a corner by using a piece of foreign-made steel in a project that was supposed to be made of American goods. But some of it went to bigger questions of how well Tutor regulates his own hard-nosed approach to business.

The MTA’s victory, which Tutor is appealing, encouraged San Francisco to bring its own lawsuit, and has led a rival firm to challenge his bid to build new approaches for the Bay Bridge. The fate of Tutor’s construction empire hangs in the balance.

Tutor and the MTA

Tutor, like other public works contractors, gets most of his jobs by being the low bidder. He picks up a set of government plans, then estimates what it will cost him to follow those plans and make a profit.

If the plans leave something out, as frequently happens on complex projects, Tutor says, it is not his responsibility to include it, even if he knows it belongs. He comes back later for contract amendments called change orders. They are acknowledgments that changed conditions, often traceable to errors or ambiguities in plans, led to unanticipated costs.

Tutor’s ability to win change orders has been remarkable and lucrative. In the case of the subway, change orders increased contract values by tens of millions of dollars.

The late Los Angeles Mayor Tom Bradley called Tutor “a change-order artist.”

The MTA took a less charitable view, arguing that some of his change orders were contrived. It obtained a sworn declaration from David Goodarzi, one of Tutor-Saliba’s project managers for the subway, who said it was company “policy to make claims and write letters to substantiate them, even if they knew the claims were not valid.”

In an interview, Tutor dismissed Goodarzi’s statement as the work of a disgruntled former employee: “It’s just a lie.”

The oddity of Tutor’s legal fight with the MTA is that he started it. In 1995, Tutor sued the agency for refusing to pay him, saying he was owed millions for changed conditions encountered while building a subway station -- basically a concrete box placed in a hole in the ground -- at Wilshire Boulevard and Normandie Avenue. The MTA later countersued.

Tutor said he planned to excavate and pour concrete at night as he had done in building other stations. At night, he could shut down more of busy Wilshire and line up trucks more easily than during the day.

However, noise restrictions enforced by Los Angeles police, in deference to a nearby hotel, shut down his night work after 10 weeks. The switch to days, he said, led to delays, which meant, as he figured it, that the MTA owed him more money.

The MTA board of directors, composed of politicians and people they had designated, at first agreed and honored his initial claims for an extra $2.9 million on the station. But then the board balked at paying him $5 million more, despite recommendations from its staff and its construction management firm that he was entitled to the money.

When Tutor heard that he was not going to get the money, he vowed that he was “going to teach them a lesson.”

“How’s that for classic stupidity?” he said recently. “Being self-righteous, I probably made one of the biggest mistakes of my life, from a business standpoint.”

Four years after he sued, the MTA countersued, making its false-claims allegations while conceding in court that Tutor, as a builder, had done a good job.

By the time both lawsuits came to trial, most of Tutor’s allegations had been dismissed. The judge threw out his noise claim, for instance, ruling that he could not profit from his own failure to adhere to the Los Angeles law limiting noise.

The judge allowed the MTA, however, to proceed with its counter-allegation: that Tutor’s noise claim was false because he had never counted on being able to work at night.

The MTA offered statements from Tutor’s excavation and concrete subcontractors that they had bid for the project intending to do the work during the day. Tutor countered that he later disabused the subcontractors of the notion that they would be able to do significant daytime work on Wilshire.

Tutor also was accused of trying to gain unfair leverage with the MTA by billing for work that he intended to do but had not yet done.

And he was accused of colluding with subcontractors to cheat taxpayers by seeking extra payments for items he claimed were unanticipated but which he actually had known when he bid that he would have to do.

Exhibit A for the MTA in that regard was $110,000 for handrails on tunnel walkways. Tutor had by then installed handrails at other stations he had built. But at Wilshire and Normandie, his firm and a subcontractor said a change order should be approved because the plans were unclear.

One of the subcontractor’s executives became an important witness for the MTA at trial, telling an intricate story in which he portrayed Tutor as lying about the handrails.

Mauricio Lopez of All-Star Steel testified that he had known all along that handrails would be required but that a Tutor executive had told him to omit them when he bid. Lopez said he had done what he was told. But later, another Tutor executive switched signals on him, telling him to provide the handrails and eat their cost.

At that point, Lopez testified, he threatened to squawk publicly to the MTA board. Tutor, he said, then called him into his office and enlisted his help in filing a false claim so the MTA would pay.

Tutor says Lopez’s account is untrue.

The verdict in the case came, not on the merits of the MTA’s false-claims arguments, but as punishment for what Judge Joseph Kalin said had been Tutor-Saliba’s repeated failure to obey court orders to share its documents with the MTA, in a court process called discovery.

After sanctioning the company repeatedly for discovery violations, the judge finally concluded that Tutor-Saliba was intentionally withholding some documents.

He cut short the trial and ordered jurors to accept the proposition that Tutor had submitted false claims. The only question he left for them to decide was how much money Tutor should pay.

In appealing the verdict, Tutor claims he intentionally hid or destroyed nothing.

Meanwhile, he is arguing that, under the circumstances, it is not fair to use the MTA case against him as evidence that he actually made false claims. That’s a key contention as he tries to prevent challenges to his company’s fortunes in San Francisco and elsewhere.

Professor David Levine of the UC Hastings College of the Law, an expert in California civil procedure who is not involved in the case, agrees with him: The MTA’s victory, based on discovery sanctions, cannot fairly be used as proof that Tutor submitted false claims, the professor said.

Still, Tutor’s conflicts with the MTA made it difficult for him to get more work from the city of Los Angeles. That changed after Hahn was elected mayor with Tutor’s support. Hahn appointees and advisors cleared roadblocks to hiring the firm. Now Tutor is being allowed to work on city projects.

New Troubles

When the ruling against Tutor was delivered, government lawyers in San Francisco began checking into the job he had done in modernizing San Francisco International Airport. They found what they said were similar patterns of false claims.

And as that case was being debated, another trouble spot appeared. A competitor challenged Tutor’s winning $177-million low bid on a pending job to rebuild approaches to the Bay Bridge, alleging that the MTA case and the San Francisco allegations show that Tutor cannot be trusted and therefore should be disqualified.

Tutor figures he is in “a war to the death.” The California Department of Transportation has held a hearing on the competitor’s challenge. A decision is expected this week. If Tutor loses, he is bound to attract more challenges.

In San Francisco, meanwhile, Tutor has become embroiled in a complicated political fight involving Mayor Brown -- with whom he has a long history -- the city attorney and the county Board of Supervisors. Backed by the supervisors, the city attorney has filed a lawsuit against Tutor.

Brown has allied himself with Tutor against the board, whose members complain about cost overruns in that city’s long-running airport expansion project.

In his winning bids for five contracts, Tutor said he would complete the jobs for more than $600 million. After submitting numerous change orders, he wound up being paid nearly $1 billion.

Brown vetoed a $2.5-million appropriation that City Atty. Dennis Herrera says he needs to press contentions that the company made false claims on the airport project to increase profits. Brown proposed a different way of paying for the lawsuit, but no action has been taken on that proposal.

Although the veto put the future of the San Francisco case against Tutor up in the air, the city attorney has not given up. He has continued to argue that he should be given permission to proceed with his suit against Tutor, saying he could win back for taxpayers some part of the cost of the airport construction.

The city attorney again got the support of the Board of Supervisors, which overrode the mayor’s veto. But Brown’s appointed airport commissioners are still holding up the funds, saying a lawsuit is not necessary. According to the commissioners, most of the changes were initiated by them and Tutor did a good job.

If the case does go forward, it is expected to focus on areas similar to those raised in the MTA litigation.

Already, lawyers for San Francisco have opened up a safety deposit box where Tutor-Saliba had agreed to leave copies of bid preparation documents. The lawyers were looking for paperwork that might show that the firm had planned for eventualities it later claimed were surprises.

Given the complexity of the airport project, city lawyers said they expected to find thousands of pages. They found 43. Tutor-Saliba later furnished 1,200 more.

In going through them, Chief Deputy City Atty. Therese Stewart said they found “evidence of fraud very akin to the handrail situation.”

She declined to be more specific, saying she feared that Tutor-Saliba might destroy relevant documents if it knew details.

Tutor said her accusations are nonsense.

Beyond the issue of change orders, much of the San Francisco lawsuit, and some of the MTA litigation, is devoted to allegations that Tutor-Saliba cheated by relying on minority front companies to reach affirmative action touchstones.

Governments typically require public works contractors to make “good faith efforts” to hire a certain percentage of minority-owned firms as subcontractors.

Some small minority-owned companies try to make themselves attractive by aligning with larger, white-owned firms. Typically, minority-group partners are assigned 51% control of these joint ventures so the new businesses can qualify as minority-controlled.

Some of those arrangements are shams in which the minority partner takes no risk and does little or no work. One of them came to light on a Tutor project in San Francisco. It was disclosed when Al Norman, an African American plumber who owned 51% of a joint venture on paper, alarmed his white partners at Scott Co. of California by acting as if he actually wanted to run the show.

They sued him, saying that wasn’t part of the deal. They said his only job was to sit back and receive 1% or 2% of revenues “in consideration of qualifying the company as a minority-owned business.”

Tutor’s company also employed a “front” on the airport project allegedly run by Virgilio Talao, whose Filipino heritage qualified him as a minority contractor, according to Talao.

Talao lent his company name to William D. Spencer, the white owner of a sheet-metal contractor. They formed a joint venture, with Talao supposedly in control. But Talao said he had no duties. He testified in a deposition in a civil suit earlier this year that a key Tutor executive “knows from the beginning that I ... was not a real joint venture MBE” -- minority business enterprise.

Tutor, who is white, says it is not his fault that he used that and other questionable joint ventures.

In every case, the government had certified them as legitimate minority business enterprises. What was he supposed to do, Tutor asked, police the government?