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Housing Agency's Handling of Labor Violations Probed

Recovery: Officials question why quake-repair contractors who underpaid workers were not prosecuted.


Federal and local officials called on the Los Angeles Housing Department on Tuesday to explain why most contractors who violated labor laws by underpaying their workers on earthquake repair jobs have not been prosecuted.

A Times article reported Sunday that housing officials have uncovered numerous cases of contractors who failed to pay "prevailing wages" for federally funded repair work, but none of the cases have been turned over for prosecution.

Officials in the city attorney's office, meanwhile, have insisted that laws were broken in some of the cases and have asked that the most egregious examples be turned over to them.

Councilman Rudy Svorinich Jr., chairman of the City Council's Housing and Community Redevelopment Committee, said he will call on housing officials to appear before his panel next week to explain how they enforced the prevailing wage laws on contractors who received public funds.

"A loud and clear message needs to be sent to people who are contracting with public dollars and are not paying the proper wages: 'The city will hold you accountable,' " Svorinich said.

At the same time, Councilwoman Jackie Goldberg, a frequent defender of low-wage workers, called the Housing Department's actions "outrageous," and insisted that all of the violations be turned over for prosecution by the city attorney's office.

The federal Department of Housing and Urban Development--which funded the city's $300-million earthquake repair loan program--on Tuesday also asked city housing officials to explain how they monitored contractors to ensure they complied with labor laws.

"There is definitely enough here that we need to find out what is going on," said Nancy Flores, a HUD spokeswoman.

Mayor Richard Riordan, meanwhile, instructed labor law experts in the Public Works Department to provide housing officials additional training on prevailing wage laws.

Criticism of the department is not new.

The city controller's office has already launched an audit of the loan program that is managed by the Housing Department, saying the department has not adequately monitored earthquake repair projects to ensure that contractors are paying prevailing wages.

State and federal law require contractors to pay local prevailing wages on all government-funded projects to protect workers from being victimized by cutthroat competition among contractors.

The city's earthquake loans even include a 15% grant so contractors can pay the prevailing wages. But before any loans are issued, contractors and subcontractors are required to sign a document promising to pay prevailing wages.

As administrators of the federal earthquake loans, housing officials are responsible for ensuring that the prevailing wages are paid.

Since the Jan. 17, 1994, earthquake, the Housing Department has documented 17 cases of contractors who failed to pay prevailing wages to 155 workers. But housing officials say the cases showed no criminal intent and therefore were not turned over to the city attorney. Instead, housing officials forced the contractors to pay the shortchanged workers nearly $240,000 in back wages.

The department is investigating another 26 cases involving an additional 191 workers.

The only case that is being prosecuted by the city attorney's office was a prevailing wage case that the Housing Department determined was not a criminal violation. That case was brought to the city attorney's office by a carpenters' cooperative.

That case involved Perriseau Development Co. of Reseda and Calabasas-based Ande Construction, which were accused of paying workers as little as $7 an hour when the prevailing wages were $22.89 per hour. Charges were later dropped on Perriseau.

Gary Squier, head of the Housing Department, acknowledged Tuesday that his staff was overwhelmed by the number of loans it had to process and didn't properly monitor all of the contractors.

"Our problem was that the scale of the workload after the earthquake just overwhelmed us," he said.

But Squier said the department has since beefed up its efforts to monitor the contractors and is reviewing some of the prevailing wage cases that were discovered in the past.

He also conceded that some of the cases probably involved criminal violations and he vowed to work with the city attorney's office to prosecute those cases.

"We are going to be seeking assistance from the city attorney and HUD's inspector general to pursue those, but the first step is to investigate the cases," he said.

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