Construction giant Tutor-Saliba Corp. was ordered Wednesday to pay more than $29.5 million for assorted acts of business misconduct related to Los Angeles' long-troubled subway system, a damage award that could hamper the firm's ability to land future public works jobs.
Although less than the $41 million sought by the Metropolitan Transportation Authority, the hefty amount awarded by a Los Angeles Superior Court jury is still a bitter disappointment for officials at Tutor-Saliba, one of the largest contractors in the state. The verdict blemishes the reputation of the well-known contractor and could make it more difficult for the company to land contracts for the massive airport, rail and other public projects that are its hallmark.
Jurors awarded the large sum on the eighth day of deliberations. Afterward, several said they based the verdict on evidence presented by the MTA that the contractor submitted false claims for payment, used fronts posing as minority subcontractors and committed more than 1,000 acts of other unfair business practices.
David Casselman, the MTA's lead attorney on the case, said Tutor-Saliba shifted the costs of one subway project to another to misrepresent the company's revenue. The firm also stopped quality inspection because of a contract dispute, he said, risking the safety of the project.
Although Tutor-Saliba officials said they would appeal, MTA officials expressed relief at the conclusion of the six-year, multimillion-dollar case that grew increasingly bitter as it dragged on. By the trial's end, a lawyer for the MTA had compared Tutor-Saliba to a shark, and the company's chief executive had vowed never to work with Los Angeles' transit agency again.
On Wednesday, MTA officials said they hoped the verdict would dissuade other contractors from attempting to defraud public agencies.
"This is not just about the money that we lost or the damages that have been assessed, but is an important message to the contracting community in general," said MTA Chief Executive Julian Burke, adding that he believed Tutor-Saliba's actions were atypical among contractors that work for the agency.
The award represents a major court victory for the MTA and comes after a protracted legal battle that severed its relationship with its largest contractor. No matter what the outcome of the appeal, that relationship is now dead.
"I wouldn't work for them if they were the last owner on the face of the Earth," said a furious Ron Tutor, president of the company, after the verdict.
He declared himself "outraged" and "flabbergasted" by the outcome of the trial and said Judge Joseph Kalin prevented the company from fully presenting its case.
"There is no question in my mind that this is a terrible injustice," Tutor said. "Had we been given the opportunity to put on our witnesses, there's no question in my mind the verdict would have been different. I never had a trial."
Tutor-Saliba plans to appeal immediately. The company's attorneys argued in May that Kalin was biased and was acting as an advocate for the transit agency.
But the award to the MTA could damage Tutor's carefully cultivated political standing. The company is a major supporter of Mayor James K. Hahn, Gov. Gray Davis and U.S. Sen. Dianne Feinstein (D-Calif.). The senator's husband, Richard Blum, and his investment firms are major shareholders in a construction company that partnered with Tutor-Saliba on the subway project.
Most ominous for the company is the possibility of the Federal Transit Administration following up on the verdict by moving to temporarily bar the Sylmar-based firm from bidding on federally funded public works projects. States are often wary of contractors that are blocked from federal projects, and subcontractors also face limitations in doing work with such companies.
A spokeswoman for the federal agency said officials were considering the issue and would decide whether to hold a hearing.
Public works projects are the lifeblood of Tutor-Saliba, which has constructed more than $5 billion worth of projects in California, including public buildings, highways, bridges, airports and rail systems. The company received $945 million for its work on the $4.7-billion Los Angeles subway system, making it the largest contractor on that project.
Tutor-Saliba attorney Nomi Castle acknowledged that the case was not good for the company's reputation but insisted that, "in the long run, it won't have a lasting effect."
The lawsuit was the latest in a series of controversies that have dogged the subway project, including three workers' deaths, thin walls, misaligned tunnels and cost overruns.
In pursuing Tutor-Saliba through the courts, the MTA was forced to spend about $19 million in legal fees--money that officials said they expect the judge to order the company to pay.
County Supervisor Zev Yaroslavsky, a MTA board member, said the agency was right to pursue the litigation even in the face of such staggering costs.