A federal investigation of alleged contract fraud by Holmes & Narver Corp. already has begun to haunt the Orange County company, one of the largest design, engineering and construction firms in the nation.
Only a day after the fraud allegations were revealed in testimony before a congressional committee, Los Angeles County Supervisor Kenneth Hahn Thursday called for cancellation of an $80-million fleet management contract just awarded to Holmes & Narver.
But in Orange County, where Holmes & Narver is part of a consortium of three firms managing the $200-million expansion of John Wayne Airport, the federal government's investigation appeared to have made little impression on county officials.
Karen Davis, a senior analyst in the county administrative office and coordinator of airport matters, said officials have seen no reason to be concerned about the federal investigation.
Possible Criminal Activity
On Wednesday, Holmes & Narver was accused by Government Accounting Office investigator David C. Williams of possible criminal activity in the management of a $250-million service contract at Redstone Arsenal, the Army's missile headquarters in Huntsville, Ala. Williams said the investigation has now been taken over by the Army.
A spokesman for the Army Criminal Investigations Division confirmed Thursday that the agency is conducting "an ongoing investigation" of the contract.
Officials at Holmes & Narver, which is headquartered in Orange and has about 6,000 employees at civilian and government projects around the world, have declined comment since the allegations were made public.
But the firm sent a statement Thursday to L.A. County supervisors, maintaining that the allegations of criminal activity involved subcontractors at Redstone and claiming that there is no evidence of wrongdoing by Holmes & Narver or by Morrison-Knudsen Corp., its partner in the Redstone management contract.
According to that statement, signed by Holmes & Narver's president, Reuben R. Alvy, the GAO investigation began in 1987 "and to the best of our knowledge has been completed." No reference was made to the Army investigation. Alvy said the company "brought in outside counsel and an independent accounting firm to conduct an independent review in conjunction with the GAO." Alvy's statement said "corrective action has been taken where warranted. There has been no evidence of any wrongdoing. On all matters brought to our attention by the government, we were able to satisfactorily address and resolve the matters. . . . The joint venture (with Morrison-Knudsen) has been praised on a number of occasions for bringing subcontractor irregularities to the attention of the government and for the resolution of problems. Unfortunately, the report read yesterday (Wednesday) to the committee did not distinguish between allegations pertaining to the joint venture and those pertaining to subcontractors."
According to Williams' testimony, however, the GAO found several instances of inflated billing under the contract, including a 262% overcharge for lubrication and oil changes for the Army base's fleet of vehicles. In his testimony, Williams said government auditors had discovered a "pattern of abuse by the contractor and its subcontractors, including illegal activities."
Holmes & Narver, a subsidiary of Ashland Oil since 1981, is a major government contractor, both as a construction and engineering firm and, through its service company unit, as a manager of maintenance, repair and food services on military bases and other government installations. It also designs and builds commercial and industrial buildings and works on smaller projects--recently bidding on design and construction of a new Police Department headquarters in Orange.
Helped Rebuild Santa Ana
The company was founded in Santa Ana in 1933, and its first job was to help with the rebuilding of the city's downtown, which had been badly damaged in the Long Beach earthquake earlier that year.
In the early 1970s, the company won a contract to provide support services for the U.S. Antarctic research program.
The company also has provided technical and support services for the government's nuclear weapons testing program in the Pacific since 1951 and at the Nevada Test Site since 1956. In 1985, it was awarded a five-year, $400-million renewal of that contract. Holmes & Narver and Morrison-Knudsen won the Redstone contract that same year.
Holmes & Narver is also partnered with MAACO Constructors of Paramount in a $50-million contract, awarded this year, to design and build a test chamber at Edwards Air Force Base for B-1B bomber electronic defense systems and several months ago won a $604,000 contract with the State Department for construction of upgraded security systems at various facilities. The company has been involved in construction and engineering projects in the Middle East