Feinstein’s Husband, Subway Builder Sued in Securities Case : Courts: A concrete supplier for Metro Rail accuses Richard Blum, Ronald Tutor and a union trust fund of failing to disclose intention to take over the company.

U.S. Sen. Dianne Feinstein’s husband, Los Angeles’ top subway contractor and a local union face a lawsuit by a Texas concrete company alleging that the group has committed securities fraud while trying to take over the firm.

Feinstein’s husband, Richard C. Blum, is an investment adviser to the Carpenters Pension Trust. Subway contractor Ronald N. Tutor is co-chairman of the trust fund.

Since 1991, the fund has purchased $40 million of stock in Southdown Inc., a Houston-based company that has supplied virtually all the concrete for construction of the Metro Rail subway system.

Southdown leveled its charges in a federal court lawsuit filed April 1 in Houston. The company alleged that the defendants, including Douglas J. McCarron, president of the Los Angeles County District Council of Carpenters, failed to disclose their “intention to take effective control of Southdown.”

Federal law requires that investors who acquire more than 5% of a company’s stock disclose to the Securities and Exchange Commission whether they intend to change management or otherwise exercise control.

John Heine, a spokesman for the SEC in Washington, said that such disclosure is required to inform investors and the stock market of “potential changes in control . . . that could affect the value of a company’s stock.”

This week, the Blum group disclosed to the SEC its intention to sponsor three directors “in opposition to the management slate.”

Blum’s investment group alleged in a written statement that Southdown’s top executives have been “taking care of themselves at the expense of shareholders.” Earlier, the group had demanded management changes, including the naming of a new president.

Blum was traveling on Tuesday and was unavailable for comment.

N. Colin Lind, a managing director of Blum’s investment banking firm, Richard C. Blum & Associates Inc., called Southdown’s lawsuit frivolous and said it has “absolutely no merit.” Lind said the investment group hopes that a change of management would improve the company’s financial performance, which has been hurt by the recession and bad investments in industrial waste recovery operations.

“We have never done anything hostile in our lives (but) as fiduciaries for the carpenters, we could no longer sit by. . . ,” Lind said. “The current board has failed in their oversight of management.”

Lind said that Blum’s San Francisco firm was retained as investment adviser to the carpenters union roughly 2 1/2 years ago. Lind confirmed that the union pays Blum & Associates approximately $1 million annually to manage its investments--of which Southdown is the largest.

Southdown’s lawsuit states that Tutor has frequently overridden Blum’s advice in driving the carpenters’ “aggressive” investment in the company.

“Tutor’s blatant and unapologetic disregard for the expertise of Blum & Associates has been manifested time and again,” the lawsuit alleges, adding Tutor has contributed to inaccurate public disclosures of the investment group’s intentions. “Those disclosures . . . continue to work an insidious and irreparable fraud on the investing public and on the beneficiaries of the Carpenters Trust, to whom Tutor owes the highest fiduciary duty.”

Tutor, reached at his offices in Sylmar, declined to discuss the Southdown investment in detail but criticized the lawsuit.

“It’s an outrage and it’s a silly, trumped-up bunch of statements,” Tutor said. “They allege everything short of mass murder.”

There is no trial date yet for the lawsuit. A lawyer for Southdown said depositions of Tutor and others are scheduled to begin this month.

Over the past decade, Tutor has become one of California’s major public works contractors and political contributors. His company, Tutor-Saliba Corp., is the city’s largest subway contractor, with work finished or under way on more than $400 million in publicly bid contracts. He and his executives have contributed to Feinstein’s campaigns for state office and when she was mayor of San Francisco.

Regardless of Tutor’s role in the investment, Southdown already is important to Metro Rail. Subsidiaries of the company in Victorville and West Covina supply 99% of the concrete used to build the project’s multibillion-dollar subway, according to a spokeswoman for the Metropolitan Transportation Authority.

Beginning in 1991, Blum, the union pension fund and Tutor began jointly buying shares of Southdown Inc., which specializes in mining and delivering concrete products. Southdown shares are traded on the New York Stock Exchange.

The carpenters union has invested about $40 million in Southdown, gaining a 14.7% stake in the company. Because the stock price has dropped, the pension trust’s shares are currently worth about $25 million, according to SEC filings.

Union President McCarron did not return phone calls.

For Blum, the Southdown fight has brought renewed attention to aspects of his business career that emerged during Feinstein’s candidacies for governor in 1990 and the Senate in 1992.

In a letter to shareholders on April 7, Southdown attacked Blum and noted that three other companies he has invested in have paid $35 million to settle shareholders’ suits that accused Blum and other defendants of federal securities fraud. The settlements were paid without admission of wrongdoing by Blum or the other defendants.

Feinstein, in her successful Senate campaign last year, said that Blum’s wide-ranging investments would not conflict with her official duties.