Lawsuit Accuses Subway Firm of Overbilling MTA

A construction safety engineer for the Metropolitan Transportation Authority has accused a former subway builder in federal court of overcharging the agency by at least $10 million in a fraud involving systematic contract “low-balling” and the use of substandard materials.

In a lawsuit filed last year and unsealed by a judge last week, Gary L. Buffington alleges that the overbilling was partly the result of Shea-Kiewit-Kenny intentionally underestimating the cost of digging tunnels beneath Hollywood and Vermont boulevards to win a $163-million contract in 1992.

The suit contends that the company subsequently submitted fraudulent change orders that increased the project’s cost to more than $179 million. The suit filed by Buffington, a former executive for the company that supervised the contractor for the MTA, alleges that SKK never intended to build the tunnel to contract specifications.

An MTA attorney said the agency would seek authorization from its board of directors to join the lawsuit on Buffington’s side. “Our plan is to intervene,” said Daniel J. McLoon of Jones, Day, Reavis & Pogue, which has represented the agency in a series of legal actions against SKK.

John Morrissey, a spokesman for SKK, said allegations in the complaint are old and have no merit. He said that any decision by the MTA to join the suit would be “politically and tactically motivated.”

The MTA fired SKK in July 1995, a few weeks after a giant sinkhole swallowed a 70-foot section of Hollywood Boulevard near Barnsdall Park above two of the contractor’s tunnels, and two days after the U.S. Department of Transportation’s inspector general raided SKK offices. An affidavit filed by federal agents to obtain the search warrant contained numerous allegations of fraud by SKK.

The contractor subsequently sued the MTA in state court, contending that its contract was wrongfully terminated and that the MTA owes it $100 million. The MTA has since filed countercharges against SKK, seeking up to $100 million in damages relating to the contract termination and suspected breach of contract.

The agency has accused SKK of improperly using low-grade wooden wedges, which failed to meet strength requirements specified in its contract, between segments of its concrete tunnel linings.

The MTA has also accused the company of regularly filling spaces between tunnel liner segments with trash, wood scraps and plaster instead of the high-strength grout called for in contract documents. Sections of Hollywood Boulevard sank as much as 10 inches in 1994 above SKK’s twin tunnels.

Buffington’s suit spells out broad accusations that SKK was not planning to adhere to the contract it first signed with the MTA. Instead, said his attorney, Louis J. Cohen, Buffington has evidence that the firm “constantly sought ways to bill more money for doing less.”

Buffington worked from 1992 to 1995 as manager of safety and security for Parsons-Dillingham--a construction management firm hired by the MTA to monitor the quality of SKK’s work--before being hired by the MTA. Parsons-Dillingham has contended in public statements that the tunnel builder concealed deficiencies from its inspectors.

Buffington, a former federal mine inspector and South Dakota deputy sheriff, said in an interview that he tried as early as 1992 to tell his bosses at Parsons-Dillingham and executives at the MTA of his suspicions that SKK billed for work it never completed and charged for materials and equipment it never used. He said he only filed suit after they failed to take legal action against the builder.

“I was paid to ensure that taxpayers got what they paid for,” the Santa Clarita resident said at his attorney’s Encino office. “I asked myself whether I could turn my head on wrongdoing, and my answer was no.”

Buffington’s is the second suit against an MTA contractor under the federal False Claims Act to be unsealed this year. In the previous case, former Parsons-Dillingham finance manager J. Martin Gerlinger accused his bosses of overcharging the MTA by nearly $20 million. The MTA joined his suit as a co-plaintiff two weeks ago.

Gerlinger had separately sued Parsons-Dillingham for firing him after he brought his allegations to the Pasadena-based consortium’s senior managers. Parsons-Dillingham settled the wrongful-termination case Friday by agreeing to pay the accountant $300,000, according to his attorney, Sharon Green of Las Vegas.

The False Claims Act allows individuals to sue contractors on behalf of the government and share 20% to 25% of any recoveries. The statute requires fraud damages to be tripled.

The U.S. attorney’s office in Los Angeles has not yet decided whether to join Buffington’s suit, according to Cohen.

The assistant U.S. attorney assigned to investigate the civil fraud charges in Buffington’s suit, Hong Dea, declined to comment. The assistant U.S. attorney assigned to study possible criminal charges, Mark Harris, declined to comment.

Morrissey said SKK is cooperating with Harris’ investigation.