Name: City details fraud case against streets contractor in move to ban company from city work
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City details fraud case against streets contractor in move to ban company from city work

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Copyright © 2022, The San Diego Union-Tribune | | AdvertisementAdvertisement Almost a year after a city auditor’s report described a years-long gift giving scheme between a city contractor and an employee, San Diego has taken the first step toward permanently banning the contractor from city work.On Feb. 2, lawyers for San Diego filed a complaint in state administrative law court seeking to debar, or ban, American Asphalt South from any future city work. The company specializes in applying slurry seal, a material applied to streets that is meant to extend the life of the underlying asphalt. The city suspended the company from competing for any more contracts in June, though it allowed AAS to finish off work on contracts that were already underway. AAS has received tens of millions in city work since 2015 — a total of $65 million according to the company, and $72.4 in an accounting the city provided to The San Diego Union-Tribune. AdvertisementBut for a decade before it was suspended, lawyers for the city said, the company plied a city worker with numerous gifts, and in return got the worker’s help to bilk taxpayers on slurry seal contracts,The relationship was first reported to a confidential city fraud hotline in 2015. At that time the city referred the matter to the FBI and later the District Attorney’s Office, neither of which ended up filing charges.It was not until March 2019 that the city started its own probe. And the results were not revealed until they appeared in a redacted report from the auditor’s office last April.The complaint filed this month provides some more detail on the ways the city says the company bilked taxpayers by exploiting contracting rules. For instance, under the rules the city can exercise an option clause in contracts — which allows the city to extend the contract — but only for the same overall contract value, and with the original prices for materials that were part of the bid. The city says the company colluded with the employee to increase those prices by raising the per-square-foot price in the option. Slight increases can result in large payouts, because the contracts usually cover millions of square feet.In one instance in 2013, the price was increased from 16 cents per square foot to 19 cents per square foot, the complaint said. That meant AAS got $157,000 more than it should have. The cost for traffic control was also manipulated in some option contracts, the city contends. In one case from 2015, the price for traffic control was set at $148,615 for a job encompassing 7.5 million square feet. Under the option the city exercised, the company was paid $168,000 for work on a job of 6.3 million square feet. The employee who received the gifts was not publicly identified by the city. Among the gifts the auditor’s report said the employee received was a trip to a San Francisco 49ers football game in December 2014. The employee also had entrance fees to golf tournaments paid by AAS and had repair work done on his home.The new complaint says only that the employee does not work for the city any longer. City records show that on June 6, 2018, employee Walter Gefrom filed amendments to his economic interest disclosure reports, listing gifts he had received years earlier, including a trip to a 49ers game in December 2014. Gefrom originally had reported receiving no gifts each year from 2010 through 2016.The new reports identified gifts, including repair work at his home and tickets to play in a charitable golf tournament, from AAS and a second company in 2012, 2013, 2014 and 2015. Gefrom no longer works for the city. He retired on June 26, according to the city Personnel Department. He did not respond to a request for comment. The complaint also said AAs got paid twice for a 2012-2013 project along Aldine Drive in the Kensington-Talmadge area. City engineers had determined the slurry work was defective and wanted the company to redo it. But the complaint says the employee approved the work — then added the repair work for Aldine Drive into a separate AAS contract.Debarment is the most significant step that can be taken against a contractor by a public entity. AAS has denied the accusations, and has filed its own lawsuit contending the city withheld documents it sought under the state Public Records Act that the company it needs to defend the charges. The company also filed suit in federal court seeking an order lifting the suspension, but a judge denied that request. Scott Dauscher, the lawyer for the company, said the company has done nothing wrong, and said the suspension is hurting the city. In court papers the company said that the city has bid out 11 jobs American Asphalt South would have normally competed for but could not because of the suspension. After reviewing the winning bids the company said that in 10 of those jobs it would have been the low bidder— and saved the city about $914,000 combined.“The city is now paying more than it would if AAS was allowed to bid,” Dauscher said. “We are confident that once all the facts and evidence are reviewed by the administrative law judge, the debarment will not got forward.”The hearing is now scheduled for June 21 through June 24, and will likely be conducted via remote video access. Sign up to get Breaking News email alerts Get alerts on severe weather, road closures and other major breaking news. You may occasionally receive promotional content from the San Diego Union-Tribune. Show Comments Load More Advertisement Advertisement Advertisement AdvertisementAdvertisement AdvertisementAdvertisement

Copyright © 2022, The San Diego Union-Tribune | | AdvertisementAdvertisement Almost a year after a city auditor’s report described a years-long gift giving scheme between a city contractor and an employee, San Diego has taken the first step toward permanently banning the contractor from city work.On Feb. 2, lawyers for San Diego filed a complaint in state administrative law court seeking to debar, or ban, American Asphalt South from any future city work. The company specializes in applying slurry seal, a material applied to streets that is meant to extend the life of the underlying asphalt....

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Greg Moran

The San Diego Union-Tribune, the region's leading news source since 1868. Follow our journalists, too: http://j.mp/UTstaff

City details fraud case against streets contractor in move to ban company from city work

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