S.F. City Attorney’s lawsuit seeks tens of millions in restitution and penalties and debarment of contractor for fraud
In one of the largest civil actions ever initiated by the City and County of San Francisco for public works fraud, City Attorney Dennis Herrera today announced that he has filed suit against Tutor-Saliba Corporation and its joint venture partners for a sophisticated pattern of fraud while they were construction contractors at San Francisco International Airport (SFO). Beginning in 1996, Sylmar, Calif.-based construction company was awarded contracts worth $620 million to build the new International Terminal and related projects at SFO. Tutor-Saliba dramatically increased costs of the project, however, when it submitted change orders totaling over $100 million. The suit, which alleges that some change orders were based on inflated or completely fabricated delays, charges that the company
also conspired with subcontractors to falsely claim credit under the City’s minority business ordinance, paying minority companies to claim that they were performing work or supplying materials that Tutor itself or non-minority companies were actually providing.
Alleging more than $30 million in damages, Herrera’s suit charges multiple violations of federal, state and local laws for which additional penalties could reach still further into the tens of millions. If successful, the civil action also would “debar” Tutor-Saliba — one of the largest construction companies in the nation — prohibiting the contractor from bidding on future San Francisco public works projects.
“With this action, San Francisco is sending a clear message that fraud will not be tolerated,” said Herrera. “Change order fraud drives up the cost of City projects and deprives the City of funds it could use to build other high priority projects. Fraud in minority contracting cheats legitimate minority contractors out of the opportunity to do real work and reap their fair share of the profits that public works contracts generate.”
According to the civil suit filed in Federal District Court, Tutor-Saliba perpetrated several schemes to defraud SFO’s expansion project, extracting millions of dollars in additional payments to which it was not entitled:
- The complaint alleges that Tutor-Saliba submitted false pay applications to the airport on numerous occasions and repeatedly submitted pay applications that were falsely inflated — even for construction work that was otherwise properly monitored and completed.
- Tutor-Saliba is alleged to have illegally exploited San Francisco’s Minority-Owned Business Enterprise and Women-Owned Business Enterprise (MBE/WBE) ordinance, an outreach program intended for local businesses traditionally disadvantaged in public works contracting processes. Conspiring with minority-owned subcontractors to serve as “minority fronts” for the company — in some cases, even creating bogus companies for its fraudulent purpose — Tutor-Saliba allegedly secured lucrative airport construction contracts to which it would not otherwise have been entitled. Among the company’s accomplices in the conspiracy, according to the complaint, is Scott-Norman Mechanical, Inc., a subcontractor that has already pled guilty to felony federal wire fraud in conjunction with Tutor-Saliba projects at SFO.
- Tutor-Saliba is charged with failing to comply with contract provisions requiring the proper filing of construction schedules, job cost reports and documents relating to their original bid. According to the complaint, the deliberate failure to provide complete or accurate information allowed Tutor-Saliba to make false claims for “unplanned” and “extra” work, manipulating schedules, inventing costly construction “delays,” pinning blame on airport officials for delays that resulted from Tutor-Saliba’s own malfeasance, and falsely claiming credit for accelerated work it had never undertaken.
- “This lawsuit comes as the result of a lengthy and highly complex investigation into wrongdoing by Tutor-Saliba and its joint venture partners,” said City Attorney Herrera. “And we are very pleased with the combined efforts of the Airport Commission, Airport Director John Martin and his staff in helping to ensure that the investigation was thorough and fair.”
In July 2001, a Superior Court judge in Los Angeles found Tutor-Saliba Corp. guilty of fraud in a subway construction contract that included many of the same charges now being leveled in San Francisco, including using minority business “fronts” and more than 1,000 instances of unfair business practices and false claims. The company was ordered to pay the Metropolitan Transit Authority in Los Angeles $29.5 million – plus an additional $22 million in legal fees that was levied last March. The company is currently appealing.
San Francisco’s civil suit, which is the latest of several undertaken by City Attorney Herrera’s newly created Public Integrity Unit, is seeking restitution and penalties under a panoply of federal, state and local civil law, with claims under the federal Racketeer Influenced and Corrupt Organizations Act — or RICO — the California and San Francisco False Claims Acts, the California Unfair Competition Act and numerous other state and local laws.