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Port Files Countersuit Over Bridge Contract

June 27, 2000|DAN WEIKEL | TIMES STAFF WRITER

In a three-year dispute between the Port of Los Angeles and the world's largest construction firm, harbor officials have filed a counter lawsuit accusing a Japanese firm of fraud and racketeering over a $34.7-million bridge project.

The port's lawsuit filed late Friday in Long Beach Superior Court seeks $100 million in damages from Kajima Engineering and Construction Inc. of Monterey Park, a local subsidiary of Kajima Corp., headquartered in Tokyo. Kajima filed a lawsuit against the port a year ago, alleging breach of contract.

"From a monetary standpoint this is the largest lawsuit we have had at the port and certainly the largest construction-related case," said Assistant City Atty. David McKenna, one of the port's lawyers. "This is a very serious step for us. We intend to vigorously pursue our claims."

The case involves a March 1995 contract to dismantle and replace the Badger Avenue Bridge, a 1920s structure over Cerritos Channel that links the port to Terminal Island. Of seven competing companies, Kajima Engineering won the contract with the lowest bid.

After a difficult construction phase, the new bridge--with a center span that can be lifted to allow ships to pass--went into operation in November 1997, at least 230 days behind schedule and $12.5 million over budget, according to court records.

Since then, the port has responded with legal claims of its own. In the latest and perhaps most serious round of charges, the Harbor Department alleges in its 51-page countersuit that Kajima officials deliberately underbid the project although they knew the company was incapable of carrying out the required work.

Had the firm's plans to float out the old bridge been carried out, the structure would have sunk to the bottom of Cerritos Channel, blocking the waterway for ships and disrupting all rail traffic in and out of a busy part of the seaport, harbor attorneys contend.

The port lawsuit contends that Kajima's unrealistically low bid was part of a broad effort to recover business after the parent company was suspended in the mid-1990s from obtaining public contracts in Asia because of bribery scandals and other criminal activity.

Named in the countersuit are Kajima Engineering, Kajima USA Inc. based in New York, and Kajima Corp., a global company with home offices in Japan. The giant firm has been involved in numerous construction projects in the United States, including the $140-million Long Beach Aquarium of the Pacific and the Belmont Learning Complex in Los Angeles.

Mark D. Johnson, an attorney for Kajima Engineering, denied the port's allegations Monday, saying that the Harbor Department is responsible for a host of problems encountered by the company during construction of the bridge.

Johnson said the port did not disclose the adverse conditions Kajima would find at the site, including badly deteriorated pilings that made the structure far more expensive to build.

"The theory of an international conspiracy to underbid projects doesn't make sense," Johnson said. "At the end of the day, the port will not prevail on these claims. They are just tales the port is conjuring up to intimidate my client into settling for less than they are entitled to."

The new cross-complaint, the filing of which was approved by a Long Beach judge late Friday, is the latest development in the harbor's three-year-old battle with Kajima Engineering, which contends that the port owes it $35 million in damages and other claims related to the bridge.

Company officials say that Kajima Engineering was qualified to do the work, and that its own plan to float the 5,000-ton span out on barges was safe. The price of the project only increased, they contend, because the port insisted on another subcontractor for the removal phase.

Harbor officials said they asked Kajima to hire a "competent" marine contractor because a team of experts in early 1997 identified a serious omission in the company's plan, which they warned would cause the span to sink. Manson Construction and Engineering eventually was hired for the job and removed the old bridge using a different method.

The port contends that Kajima Engineering has underbid and mismanaged so many projects that Kajima Corp. in 1996 and 1997 pumped about $170 million into its local subsidiary to make up for the massive losses.

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