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Beverly Hills Suing Civic Center Contractors : Construction: The city alleges fraud and negligence. One firm plans a countersuit charging that the city owes it $13 million.

December 02, 1990|MATHIS CHAZANOV | TIMES STAFF WRITER

The city of Beverly Hills is suing its general contractor and its construction management firm for $8 million, charging fraud, negligence and breach of contract in the building of its $120-million Civic Center.

A spokesman for the contractor, J.A. Jones Construction Co., denied the allegations, saying that the city owes the firm between $13 million and $14 million, and that Jones plans to file a countersuit by the end of the year.

According to the city's complaint, Jones Construction knew all along that its winning bid vastly understated the actual cost of building the Civic Center's computerized library, Italianate courtyards and high-tech police station and jail.

The city charged that Jones conspired with JLH Construction Inc., which oversaw the project, and with John N. Hartsock, site manager for JLH, to approve substantial payments that were not authorized by the City Council.

The suit also said that Jones failed to supervise the job, failed to hire competent managers, failed to provide experienced engineers and failed to build the project to the specifications of the contract. The suit also charges that Jones managed the work of its employees and its subcontractors "in an inefficient, uneconomical and dilatory manner."

Jefferson Welch, senior business development manager for Jones, dismissed the allegations as "generalizations that are absolutely not supported by the facts."

Welch said his company was surprised by the lawsuit, since it had expected to work out its differences with the city in a mediation session that Jones proposed for Dec. 10.

"We're surprised to see them take this tack on the eve of mediation," he said. "Our attorneys feel that when you're on the doorstep of mediation and one side sues the other, it generally indicates they have a weak case. It's kind of like beating your chest."

Welch also said his company had acted in good faith.

"It's kind of ironic at this point that they think we owe them money," he added. "It's kind of bizarre. Our attorneys really feel that the city kind of is defrauding Jones."

Phone calls to JLH seeking comment on the suit were not returned.

Hartsock, who now works for a construction firm in Portland, Ore., declined to comment on the allegations, saying only that he had not known about the lawsuit and that he found it "interesting."

The legal action is the latest development in a dispute between Jones Construction and the city that erupted nearly a year ago. Jones staged a two-month work stoppage early this year to dramatize its claims that the city owed it $13 million to $14 million because of delays and change orders that increased its costs of construction.

With about $61 million already spent on Jones' portion of the Civic Center job, work resumed only after the two sides agreed to put off their legal wrangling while the company finished the job for an additional $9 million.

But now that the Civic Center is completed and occupied, and with little else but landscaping work remaining to be done, the legal briefs are flying.

Indeed, the city was not the first to go to court. Steiny & Co. Inc., the electrical subcontractor on the job, has sued Jones and the city for $2.2 million in unpaid bills.

The city's suit, filed Nov. 19, cites its 1986 contract with Jones, a German-owned, North Carolina-based firm, to build the library, courtyards and police station for $43.6 million, and complete it by April 6, 1989.

But after the discovery of asbestos in an old library building and water in the ground below the new police station, the completion date for the final phase was pushed back to Dec. 22, 1989, and price was raised to nearly $53 million. Subsequent amendments to the contract raised the price and extended the job still further.

Although JLH was not supposed to be making deals on behalf of the city, the firm then agreed to Jones' request to modify the contract by allowing additional payments to itself, to Steiny and to two other major subcontractors, the complaint alleged.

"Beginning in or about January, 1989, and continuing thereafter, Jones knew or should have known that Hartsock and JLH were acting outside the scope of their employment with the city, and were acting with an interest that was adverse to the interest of the city," the suit said.

The city also charges that Jones knowingly misled the city into believing that the Civic Center would be ready for occupancy within 822 calendar days, as required by the original contract, when it fact it took more than 1,300 days.

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