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MTA delays decision on extending Italian firm's rail contract

Officials will wait two months before making a final ruling on AnsaldoBreda's bid to build 100 train cars in Los Angeles. The deal is worth $300 million.

July 24, 2009|Maeve Reston

Los Angeles County transportation officials Thursday delayed for two months a decision on whether to extend the contract options of AnsaldoBreda, an Italian rail-car maker that has pledged to build a plant in downtown Los Angeles if it gets the $300-million deal.

The Metropolitan Transportation Authority's chief executive, Art Leahy, said agency staff and the firm had made significant progress this week in hammering out an agreement for 100 additional light-rail cars that includes up to $300 million in guarantees.

But in the lengthy discussion preceding the vote, several board members drilled the firm's attorney, Jeffrey M. Capaccio, with tough questions about the company's performance under its current contract, its financial promises and its business connections in Iran -- with one director sharply critical of the company's tactics and intensive lobbying.

MTA staff members had previously favored seeking competitive bids for the new work, citing AnsaldoBreda's performance problems under its base contract for 50 light-rail cars.

As negotiations grew heated over the last week, the firm's lobbyist urged greater scrutiny of a potential competitor, Siemens Transportation Systems. The head of the Los Angeles County Federation of Labor, Maria Elena Durazo, echoed many of the firm's arguments in a letter Monday to board members, also raising questions about Siemens' dealings in Iran. Durazo is backing the firm because of its pledge to hire union workers for the proposed plant.

At Thursday's meeting, Supervisor Zev Yaroslavsky, a board member, charged AnsaldoBreda's lobbyists with organizing the campaign against Siemens while misleading public officials about the Iranian projects of its own sister company, Ansaldo Energia. The two companies are both owned by Finmeccanica.

Calling the lobbying campaign "despicable," Yaroslavsky read from a news article and a recent Ansaldo Energia company report suggesting ongoing work in Iran. "I don't trust your company," Yaroslavsky told Capaccio.

Yaroslavsky said the company owed board members an apology "for this incessant campaign, which you thought would intimidate me and others to fold."

Company representatives told officials and The Times that its most recent project in Iran was completed in 2002.

Capaccio said after the meeting that he would seek clarification from company officials overseas.

Supervisor Mike Antonovich, who also sits on the board and is an AnsaldoBreda critic, questioned Leahy about why fellow board member Richard Katz, appointed by Los Angeles Mayor Antonio Villaraigosa, was the sole director in this week's negotiations.

Leahy said Katz asked him if he could sit in. He added Katz did not lead the negotiations and said he consulted agency ethics officials, who did not object to Katz's attending.

Other members of the board did not know that Katz was part of the talks, according to an exchange between Antonovich and Leahy. Alluding to past problems at the MTA, Antonovich said: "We would like to have more openness. . . . Reverting back to some of those old methods of doing business is really counterproductive to the entire region."

With the opportunity to create between 500 to 1,000 jobs, Katz said he would "not let any stone go unturned in an attempt to make that happen. . . . My concern has only been that the MTA get the best deal possible," he said. Katz added that he did not know of any other deal in the country in which a rail firm had offered an irrevocable letter of credit of up to $300 million that could be drawn down by the MTA in the event of poor performance.

Capaccio said the company was committed to fixing the issues with the first 50 cars and making a fresh start with agency officials. "Mistakes were made, we understand that," Capaccio said. "We are going to rectify those mistakes, and we have a very, very powerful financial instrument that you guys can hold over our heads, and hold us to the fire, to make sure that we comply."

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maeve.reston@latimes.com

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