YOU ARE HERE: LAT HomeCollections

Padded Bills for Airport Alleged

Lawsuit says contract management company aided in overcharging for John Wayne work by $1.5million in part for kickbacks and bribes.

June 17, 2005|Jean O. Pasco | Times Staff Writer

An Orange County company that managed paving and construction contracts for John Wayne Airport is accused in a federal civil lawsuit of steering work to a company that allegedly inflated its bills by $1.5 million and using the money partly for bribes and kickbacks.

According to the lawsuit, an employee of project manager JHTM & Associates allegedly received an initial $10,000 bribe in 1996, slipped into an envelope stuffed inches thick with $100 bills at a sushi restaurant near the airport.

Named in the lawsuit were JHTM & Associates, hired by the airport to manage its contracts, and company representatives David McMiller of Rancho Santa Margarita and Sean Donnelly of Mission Viejo.

Also named were Sequel Contractors Inc. of Santa Fe Springs, which did the airport work, and its principals, Thomas S. Pack, Mitchell W. Ward of Downey and Abel Magallanes of Bellflower.

The accusations are part of a false-claims lawsuit filed under seal last year in U.S. District Court in Santa Ana by a rival paving company. Orange County joined the litigation late last month, which led to the lawsuit becoming public.

Representatives for JHTM and Sequel couldn't be reached Thursday for comment. McMiller, who allegedly accepted the bribe at the restaurant, declined to comment.

The county is asking the court to award triple damages for the amount it says it lost -- or $4.5 million -- plus $10,000 for each false statement or claim, or not less than $420,000.

"We have direction from the Board of Supervisors to aggressively pursue this matter," county Counsel Benjamin P. de Mayo said Thursday.

The lawsuit has yet to be heard.

Mark Macaulay, spokesman for the Orange County district attorney's office, said Thursday that the county has not asked prosecutors to investigate the case.

Sequel won the annual paving contract in 1996 to maintain the airport's 11 million square feet of asphalt and concrete, according to county records. The bidding process was overseen by JHTM, which managed construction projects on behalf of the county-owned airfield. Sequel also won annual paving contracts for 1997 through 2004.

From 1996 to 2003, the suit alleges, Sequel padded charges on its county bills to pay for building a retaining wall, a swimming pool and a new driveway at McMiller's home, work allegedly disguised as airport jobs.

County investigators discovered that 30 job orders and 42 payment requests filed with the county through JHTM on behalf of Sequel contained false and misleading information that resulted in overcharges, according to the county in its lawsuit, which incorporated allegations by Sialic Contractors Corp.

County investigators also are reviewing other John Wayne Airport contracts managed by JHTM from 1994, when the company took over as project manager, to September 2004, when the county stopped using the company. The work was reassigned to airport staff and a different airport contractor.

The false-claims lawsuit originally was filed under seal in March 2004 by Sialic, which became suspicious after losing work to Sequel. Named as plaintiffs were the federal, state and county governments because work at the airport was paid from federal airport grants and county funds. The fraud claims were brought under the state's false-claims law, which forbids contractors to misrepresent work on government contracts.

Sialic's lawsuit triggered a separate investigation by county officials, who until then were unaware of the alleged fraud, according to court documents. The county officially intervened May 27, at which point the case was unsealed and the defendants were notified of the suit by county attorneys. The defendants have yet to file responses in court to the allegations.

Under the state's false-claims act, Sialic -- as a reward for blowing the whistle on the alleged wrongdoing -- could be awarded up to 33% of what the county eventually may recover for bringing the lawsuit. Sialic's investigation uncovered alleged bribery and kickbacks by Sequel, whose three principals had worked for Sialic before leaving to start their own firm, said Sialic's attorney, Don Warren of San Diego.

The investigation discovered that Sequel, in alleged collusion with JHTM, purportedly conspired to inflate their airport jobs by as much as 66% overall, Warren said. A paving job that was awarded for 1,000 square feet, for example, would be later billed for 10,000 square feet, said Warren's partner, Phil Benson of Anaheim.

A former employee of Sequel who went to work for Sialic is expected to testify on behalf of the county, the attorneys said.

"Cheating the government is the world's second-oldest profession," Warren said. He and Benson will remain involved with the suit, though Orange County officially has now taken the lead on the consolidated case.

From 1997 to September 2004, JHTM was paid about $5.5 million for its management role at the airport, county officials said. Sequel's contracts called for the company to be paid up to $1 million a year for paving work, although exact payments weren't available late Thursday.

According to Sialic's lawsuit, Pack, of Sequel, allegedly developed a relationship with McMiller when the two worked on a paving project on Airport Drive, near John Wayne Airport.

After Pack left Sialic to form Sequel, the suit alleges, he and McMiller colluded to unlawfully steer repair, maintenance and construction projects to Sequel and to inflate payments to Sequel for the projects in exchange for bribes and kickbacks to McMiller.

Attorneys Warren and Benson said airport officials weren't to blame for the alleged fraud.

"My view is that this was a system of trust," Warren said. "Government entities have to rely on the integrity of their contractors."

Los Angeles Times Articles