More trouble at Philadelphia School District, exec accused of bid-rigging

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The Philadelphia School District’s chief procurement officer, John J. Byars, has been accused of bid-rigging by a lawyer representing the firm that lost out on a lucrative contract to maintain the district’s Board Street headquarters, and the PHA’s senior management apparently agrees.

Byars was accused of steering a multimillion dollar management contract to U.S. Facilities, Inc. a subsidiary of a minority-owned company run by Willie F. Johnson, a former state and city official, according to a story in the Philadelphia Inquirer.

Former City Solicitor, Carl E. Singley, who represents the firm currently handling the contract, Elliot-Lewis Corp., said that Byars interfered with the competitive bidding process, causing the contract to be awarded to U. S Facilities, Inc. The contract is valued at $2.4 million each year and covers operations, maintenance, and food service at the facility.

Singley’s claims were backed up in a memo written by Jeffrey D. Cardwell, the PSD’s senior vice president for facilities management. The memo called the process “biased” and read in part “the Procurement Office made comments about who they should select.” It said that the intent was clear that U.S. Facilities was the favored vendor.

The school district’s general counsel issued a statement in response to information requests by The Inquirer, saying that PHA lawyers had reviewed the bidding process and “determined that there were anomalies present. Based upon this information and as part of our continued commitment to fairness and transparency in our contracting and procurement efforts, we decided to . . . start the process over.”

A source knowledgeable with the parties said that prior to the bidding process for the contract, Byars made it known that “it was his mission to make sure that Elliott-Lewis did not get the contract. That was a firm statement from him on numerous occasions.”

When Elliot-Lewis made their presentation, Byars was present, which was not typical for such a meeting. The source said that Byars asked “some mean-spirited questions that Elliot-Lewis couldn’t answer. That’s the telltale sign. He was meddling.”

The source went on to say that Byars was making “smart-ass, offhand remarks for the purpose of undermining the process, …and shuffling through (PowerPoint) slides on paper, muttering in an audible voice, ‘Well, this doesn’t make any sense.’ He was definitely there to disrupt things.”

Based on the chain of events, Cardwell suggested that the School Reform Commission, which oversees the district, extend the Elliot-Lewis contract through June, and start over with the bidding process.

The parent company of U.S. Facilities, PRWT Services, Inc. is a politically connected operation that was formed in 1988 by Johnson, a former regional commissioner of the State Office of Social Service. A lobbyist currently under contract with the PSD, Melonease Shaw, was an executive at PRWT for 15 years.

On Dec. 13, Byars and five other PSD executives were suspended over a controversial $7.5 million contract involving the installation of surveillance cameras at 19 of the district’s high schools. The district’s superintendent Arlene C. Ackerman abruptly fired a contractor that had already started services on the project, and awarded it to a little-known minority firm that was not on the state-approved list to handle the work.

The matter is currently under investigation by the state attorney general’s office and the Pa. Department of Education.

The Philadelphia Inquirer

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Feds sue Kilpatrick associate for $16.4 million

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Federal prosecutors filed forfeiture papers over the weekend, seeking more than $16.4 million from Bobby Ferguson, the contractor friend of ex-mayor Kwame Kilpatrick. Ferguson was indicted in September on charges of bid-rigging a $12 million contract connected to a Detroit affordable housing development.

Officials are looking to recover more than $3.9 million in cash, checks and certificates of deposit seized or frozen by authorities, as well as two handguns and ammunition.

In addition, if Ferguson and his co-defendants are convicted, the government wants damages of $12.5 million, the amount they received on the bid-rigged housing contract.

Ferguson’s co-defendants are all executives at companies owned by Ferguson, and include Shakib Deria, vice president of A&F Environmental/Johnson Construction Services; Michael Woodhouse, president of Xcel Construction and Calvin Hall, vice president of Xcel Construction.

Separately, in December, Ferguson was indicted on charges of extortion, bribery and fraud over construction contracts involving city sewer and water main work, in which millions of dollars were diverted to Ferguson, Kilpatrick’s father and other city hall insiders.

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Liberty Mutual settles bid-rigging lawsuits

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Insurance giant Liberty Mutual has agreed to pay $5.5 million to New York and $2 million to Connecticut, in a settlement agreement over charges that it had rigged bids and paid contingent commissions to agents who illegally steered business to the insurer’s products.

The charges were part of lawsuits filed by former New York Attorney General Elliot Spitzer and Connecticut Attorney General Richard Blumenthal against a group of insurance companies and brokers in 2006 as part of a nationwide investigation into illegal sales practices in the insurance industry.

The lawsuits alleged that Liberty Mutual paid secret commissions to brokers that steered business to it, even though its quotes were not the lowest available. The practice directly increased the cost of insurance to thousands of customers.

Liberty Mutual was also accused of providing “fake” bids to brokers to insure that other companies, agreed to in advance, would win a contract. The lawsuit said that one such bid allowed American International Group to increase its premium by 20 percent with an existing customer.

Other companies, including Marsh & McLelland, St. Paul Travelers, and Aon Corp. have already reached settlement agreements with authorities.

The company blamed the conduct on two former “rogue” employees. “Unfortunately, two former lower-level employees seriously violated our trust and our standards of conduct in their quotation activity,” the company said. Both employees resigned before the 2006 lawsuit was filed.

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Detroit grand jury indicts former mayor Kilpatrick’s fraud and corruption ring

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A 17-member federal grand jury indicted former Detroit Mayor Kwame Kilpatrick, his father Bernard Kilpatrick, former mayoral aide Derrick A Miller, Kilpatrick close friend Bobby Ferguson and former Detroit water chief Victor Mercado.

The U.S. Attorney’s Detroit office announced the 38-count indictment, charging the group with racketeering conspiracy and accusing them with extortion, bribery and fraud. “Tens of millions of dollars of municipal contracts” were steered to Ferguson using coercion exerted by Kilpatrick’s office.

Kwame Kilpatrick, Detroit's mayor from 2002 through 2008, is currently serving time in a federal prison for violating parole in another case.

Ferguson is a close friend of Kwame Kilpatrick and a hauling and construction contractor. He was previously indicted in September on charges of bid-rigging a $12 million contract connected to a HUD affordable housing project in the Detroit area.

The government brought charges under the Racketeer Influenced and Corrupt Organizations Act which makes it easier to sue interconnected entities in complex cases. A RICO case, often used in instances of organized crime, also provides harsher sentencing provisions and recovery of triple damages.

The FBI said that it has been investigating the case for six years, and alleges that some of the corruption can be traced back to when the younger Kilpatrick was a state representative, prior to his election as mayor in 2001. The FBI says that its investigation of the Kilpatrick-era city hall corruption is not over.

Besides the FBI, other agencies involved in the investigation include the criminal division of the IRS, the U.S. Environmental Protection Agency and Department of Housing and Urban Development.

Bernard Kilpatrick was involved in the corruption schemes through a consulting firm, Maestro Associates LLC, that he started around the time his son was elected mayor. He was part of the team including Kwame Kilpatrick, Derrick Miller and Victor Mercado that regularly extorted monies from legitimate contractors involved in city sewer and water main work, often steering a portion of the contract to pal Bobby Ferguson. In some cases, Ferguson received big fees for doing no work at all.

The government alleges that Ferguson kicked back over $420,000 to Kilpatrick and his father Bernard, and said Bernard Kilpatrick deposited more than $600,000 in cash into his personal bank accounts while his son served as the mayor of Detroit from 2002 through 2008.

Most of the contracts were valued in the tens of millions of dollars, although the men tried to extort a company into giving Ferguson a large piece of a $140 million contract for a new pumping station. The group also worked together in instances of rig-bidding, so that Ferguson would be guaranteed contract wins by manipulating the bidding process.

Kilpatrick resigned from office in 2008 after being charged with 10 felonies, including perjury, misconduct in office and obstruction of justice. He pleaded guilty to lesser charges and served 99 days in jail, but was sent back for violating the terms of his parole.  He is currently serving time in federal prison in Milan, Michigan.

The Detroit News

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Bank of America fined $137 million for bid-rigging municipal contracts

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Attorney generals from 20 states and federal officials have reached a settlement agreement with Bank of America, requiring it to pay $137.3 million for its role in a nationwide scheme to rig bids for the purchase of municipal bond derivatives and other municipal finance contracts.

The settlement acknowledges that Bank of America and its marketers illegally profited by rigging bids and receiving “last looks” for municipal bond derivatives, a practice which is prohibited under U.S. Treasury regulations.

The settlement is part of a broad investigation of widespread price-fixing and bid-rigging conspiracies among competitors in the municipal derivatives market. A number of other bankers and professionals have already pleaded guilty in the probe, and the investigation is ongoing.

“Bank of America’s disclosure of wrongdoing and cooperation has led to an aggressive, ongoing investigation by the Department of Justice into anticompetitive activity in the municipal bond derivatives industry,” said Christine Varney, the department’s antitrust chief. “The Division’s investigation of this matter continues, and the prosecution of anticompetitive conduct in the financial markets remains our highest priority.”

Authorities said that the bank defrauded hospitals, schools and scores of state and local government entities during the period from 1998 to 2003. Secret arrangements with derivative brokers and providers gave Bank of America a competitive advantage by getting a “look back” at final bids, some of which were non-competitive courtesy bids.

Without the fraudulent arrangements, the business would have gone to other providers, or caused Bank of America to agree to better terms with issuers.

Bank of America was granted leniency under the Federal Department of Justice’s Corporate Leniency Program, because it self-reported the wrongdoing and agreed to pay restitution to those harmed by the bank.

Most of the fine, about $107 million, will be paid to various organizations as restitution. Another $25 million will be paid to the IRS for abuses relative to the tax-free status of municipal bonds, and state attorneys general will get $4.5 million to cover their costs of investigations.

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Another guilty plea obtained in Detroit City Hall corruption scandal

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A hauling contractor charged last month for his involvement in bid-rigging a HUD project, has pleaded guilty. Rodney Burrell, owner of R & R Heavy Hauling, agreed to plead guilty to the charge of misprision of felony, meaning that he admitted to knowing about a conspiracy to defraud the government but gave misleading and incomplete information about it.

Burrell was implicated in a bidding scheme that set up former mayor Kwame Kilpatrick’s longtime friend, Bobby Ferguson, to be awarded a $12 million contract in connection with a low-income housing project, Garden View Estates. Burrell and another contractor, submitted bogus bids on the contract, so that Ferguson’s inflated bid appeared to be the lowest, and would be awarded the work.

The other contractor, Brian Dodds, was promised a $300,000 subcontract from Ferguson. Dodds pleaded guilty last month to identical charges and is awaiting sentencing.

The Detroit City Hall corruption scandal has resulted in over 10 felony convictions for corruption, all of which were tied to disgraced former mayor Kilpatrick, who is now serving time in federal prison.

The Detroit News

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Contractor Admits to Bid-Rigging, Implicates Former Mayor’s Longtime Pal

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Will Ferguson join pal Kilpatrick in prison?

A hauling contractor says he’s ready to admit to manipulating a City of Detroit bid process, then lying to a federal grand jury about it. Rodney Burrell, owner of R & R Heavy Haulers, was charged by authorities in a scheme to inflate competing bids on a city public housing contract, in order to throw the contract to Bobby Ferguson, a crony of disgraced former Mayor Kwame Kilpatrick.

According to court records, Burrell and another contractor, Brian Dodds, submitted bogus bids for a demolition contract to make it appear that Ferguson had the lowest bid.  Ferguson was awarded an $11.9 million contract for the Garden View Estates housing project.

In return for his phony bid, Dodds was given a $300,000 subcontract from Ferguson. Dodds has since pleaded guilty to his role in the scheme and is scheduled to be sentenced in January. In September, authorities charged Ferguson and the others with fraud and money laundering in connection with the contract on the housing project, largely funded through the U.S. Department of Housing and Urban Development. Read more

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