November 9, 2005

Worth Construction Found Not a Responsible Vendor, Cannot Receive $46 Million Thruway Contract

Comptroller's Office to Work With Thruway Authority to Quickly Select Alternate Vendor for Construction of I87-I84 Interchange Near Newburgh

The Office of the State Comptroller (OSC) has found that Connecticut-based Worth Construction is not a responsible vendor and therefore will not receive a $46 million contract for construction of the interchange between Interstates 87 and 84 near Newburgh in Orange County, Comptroller Alan G. Hevesi announced today. After being informed of new information contained in OSC's findings, Thruway Authority Executive Director Michael Fleischer agreed that the contract should not be approved.

Following an extensive review of materials supplied by the Thruway Authority, as well as independent research by OSC investigators and contract auditors, the Comptroller's Office identified serious concerns about the construction firm. Some of these concerns were already known to the Thruway Authority, others were not. Among them:

Worth Construction's president is under investigation by Federal authorities in Connecticut and faces possible indictment for alleged municipal contracting corruption – allegations that were already made public in the Federal trial of the former mayor of Waterbury, Connecticut.

According to law enforcement and public records, the firm and its principals have a long history of association with members of organized crime, including business partnerships between one of its principals and convicted organized crime associates.

Worth failed to provide complete answers to questions on the vendor questionnaire by not reporting the existence of related companies and certain corporate officers, and filed troubling financial statements raising concern about its cash position and its billing practices. The company also provided inaccurate information to the Thruway Authority regarding its suspension from all work by the New York City School Construction Authority (SCA) and about the focus of the Connecticut investigation.

As a result of these findings, OSC is returning the Worth contract to Thruway unapproved. Without approval from the Comptroller's Office – which is required according to Thruway Authority policy for all construction contracts valued at $15,000 or greater – there is no contract.

“The I87-I84 interchange is a vital link in the mid-Hudson Valley's transportation infrastructure and essential for continued economic growth and job creation in the region,” Hevesi said. “We will work with the Thruway Authority to quickly approve a contract with a responsible vendor who can ensure a quality job.”

“As the Comptroller's Office indicated, the Thruway Authority has a strong contract review process, which includes review by the Comptroller's Office, to make sure important projects get done while protecting our customers' interests,” Fleischer said.

“Thruway Authority staff worked cooperatively with the Comptroller's Office in their investigation. Information provided by the Thruway Authority, along with additional information collected by the Comptroller's Office from other unrelated probes unknown to the Thruway, resulted in the finding that Worth was not a responsible contractor. Given the resources and investigative powers unique to the Comptroller's Office, the Thruway Authority will act decisively on their recommendation, and re-let the project as soon as possible to make optimum use of next year's construction season,” Fleischer said.

“The Comptroller's disapproval of this contract is the right and responsible thing to do, given the very serious concerns raised about Worth Construction,” said Senator William J. Larkin Jr. (R, Cornwall-On-Hudson). “The I-84/I-87 project is too important to the future of the Hudson Valley to entrust it to a disreputable contractor. We must now move forward as quickly as possible to find the best firm to do the job.”

“ This was a victory for common sense and public decency. I compliment the Comptroller for taking the actions that he did which restores faith in the justice system. If this outfit had gotten the contract this would have been affront to common sense and the people of the State of New York ,” said Assemblyman Thomas Kirwan (R-Newburgh).

Concerns about Worth Construction identified by the Comptroller's Office include:

According to the United States Attorney for the District of Connecticut, Worth Construction and its president, Joseph Pontoriero, are under investigation regarding allegations of bribery and municipal corruption in the city of Waterbury. Former Waterbury Mayor Phil Giordano testified in Federal court that Pontoriero gave him cash, trips, suits and Super Bowl tickets at the same time that Worth was performing city contracts and was under consideration for future awards. A Federal magistrate in Connecticut approved the issuance of an eavesdropping warrant, finding probable cause existed to believe that Pontoriero and others communicated their intentions to commit Federal criminal acts. Pontoriero has acknowledged that both he and Worth Construction have received document subpoenas from a Federal grand jury currently sitting in Connecticut. Based on these facts, although Pontoriero has not at this time been charged with a crime, OSC has concluded that he and his company face a significant risk of indictment in this ongoing investigation.

“The law is clear. If a company is under criminal investigation, that alone can be sufficient grounds to make a determination that the company is not responsible and therefore should not be awarded a State contract. In Worth's case, the investigation relates directly to an alleged attempt to corrupt the awarding of construction contracts, making the information even more relevant to a determination that the company is not a responsible bidder,” Hevesi said.

In a meeting with OSC, Pontoriero acknowledged that he had bought two suits valued at more than $6,000 for former Mayor Giordano, thereby confirming one of the allegations made against him. Giordano has testified in Federal court that he also received trips and other items of value from Pontoriero in violation of the law.

Worth told the Thruway Authority that the focus of the Connecticut investigation was on the former mayor's sexual misconduct. In fact, the former mayor's sexual misconduct was discovered during an investigation aimed at contract misconduct involving Worth.

Law enforcement officials have identified Pontoriero and Worth Construction as having a long history of association with individuals who have been identified as being members of organized crime. Pontoriero himself was named an unindicted co-conspirator in the trial of known Genovese crime family member Anthony Salerno, and has been a business partner with or has employed as subcontractors companies operated by individuals known to have connections with organized crime.

In the vendor responsibility questionnaire submitted by Worth to the Thruway Authority, the company failed to disclose, as required, certain companies in which its principals held financial interests. Cash was moved between Worth and other entities controlled by Pontoriero without creating any tax or accounting benefit and for no other apparent reason. When asked by OSC, Worth could provide no explanation for these money transfers, which raise questions about Worth's actual cash holdings and whether the company's financial reports are accurate.

Questionable practices were found in financial statements that Worth submitted to the Thruway Authority and to OSC. For example, the company engaged in accounting practices which resulted in inflated earned revenue, making it difficult to confirm its actual financial condition. An accurate picture of the company's financial condition is essential to determine if the company has sufficient resources to meet its obligations under the contract.

The Comptroller's Office also found several instances in which, despite the company's effort to characterize its actions to the contrary, Worth withdrew from consideration for public contracts to avoid inquiries regarding its connection with organized crime:

During construction of Public School 43 in Queens, questions arose regarding the quality and timeliness of Worth's work and allegations that some of its subcontractors had ties to organized crime. Although Worth characterized and continues to characterize these issues as a “petty contract dispute,” the SCA took a different view and ultimately Worth agreed in 1997 to voluntarily refrain from bidding on any SCA contracts for a period of three years. In 1998, when Worth's recertification on SCA's prequalification list came up, Worth and its principals were called in by the SCA Inspector General and questioned extensively about Pontoriero's ties to organized crime. Pontoriero refused to answer any of those questions, and Worth was subsequently suspended from doing business with the SCA and is still suspended to this day. Worth officials told the Thruway Authority that they stopped doing work for the SCA because they “did not want to do business with them anymore,” failing to disclose that the real reason for the suspension was Worth's refusal to answer legitimate questions from the SCA Inspector General regarding organized crime ties.

In November 2004, after Worth was awarded a contract by the Connecticut Department of Public Works, the company was asked to attend a hearing conducted by the Connecticut Attorney General regarding questions about Worth's connection to an investigation of organized crime in New Jersey and the company's suspension by the SCA. Worth declined to submit any information, the hearing was adjourned, and Worth withdrew its bid later the same day.

Also in November 2004, during a vendor responsibility review for a project for the Port Authority of New York and New Jersey, the Authority determined that Worth could be considered for the contract only if an outside monitor was placed in the company and if Pontoriero resigned. In February 2005, Worth withdrew its bid for the contract.

In September, 2005 Worth was the low bidder on two Connecticut Department of Public Works contracts valued at $80 million. The company agreed to attend a meeting on vendor responsibility issues, but then submitted a letter withdrawing without explanation from both bids.

A key stipulation in the proposed I87-I84 contract between the Thruway Authority and Worth was the use of an outside monitor to ensure that the company would maintain honesty and integrity while it completed work on the project. The Comptroller's Office noted that the use of a monitor is only effective when questionable conduct by a company has ended, and concluded this was clearly not the case with Worth. As noted above, the Port Authority would only consider contracting with Worth if there was an outside monitor and Pontoriero resigned. The proposed monitoring agreement on the Thruway Authority contract did indicate that Pontoriero would have to be placed on leave or terminated if indicted, terminated if convicted. However, he told Comptroller's Office representatives that he would not leave the company.

The Thruway Authority issued an invitation for bid for the I87-I84 interchange on October 5, 2004. Six bids were received, including one from Worth. The Worth bid was deemed to have the lowest cost. Following a January, 2005 meeting, Worth offered in April, 2005 to retain an independent monitor and threatened a lawsuit if the Authority made a final decision that Worth was not a responsible vendor. Based on information available to the Authority at the time and with an agreement to have an independent monitor, in May, 2005, the Authority determined that Worth was responsible and should be awarded the contract. The contract and procurement record were forwarded to OSC for review on June 8, 2005. On August 25, 2005, OSC asked for a 60-day extension of its 90-day review period. Officials from OSC met with Worth representatives in October, 2005. On November 3, 2005, OSC indicated to the Thruway Authority that there was good cause to extend the review period for an additional six days, through November 11, 2005.

State agencies and public authorities are required by law to determine that the vendors selected for State construction contracts are the lowest responsible bidders. Last year, Comptroller Hevesi initiated a multi-phase plan to improve the quality and consistency of responsibility determinations by State agencies. Contracts submitted to the Comptroller's Office for approval now must include an affirmative declaration that the vendor has been determined to be responsible, and the Comptroller's Office has begun to ask questions about specific information used to make the determination and provide resources to assist agencies in determining vendor responsibility.

All State agency contracts valued above certain cost thresholds are submitted to OSC for approval. The Thruway Authority is one of only two major public authorities whose contracts are not valid until approved by the Comptroller. Hevesi will continue to pursue increased oversight of public authority contracts as proposed in the public authority reform legislation he advanced with Attorney General Eliot Spitzer. Procurement review was one of the critical areas of reform left unaddressed by the legislation passed by both houses of the Legislature in June. Fifty-six of the 81 audits of public authorities conducted by Hevesi's auditors have addressed procurement and many have identified irregularities in the awarding of contracts. The 45 authorities that provided annual procurement data to the Comptroller's Office for the fiscal year ending in 2005 entered into 10,390 contracts valued at $5.5 billion.

Interstate 87 meets Interstate 84 at interchange 17, west of Newburgh in Orange County, New York. I-87 is the southeastern section of the New York State Thruway. I-84 is a major east-west route linking the Massachusetts Turnpike with I-80 and I-81 in Pennsylvania. Currently, traffic between I-87 and I-84 must exit to local roadways and then re-enter the highway. The proposed interchange will allow traffic to flow directly between the two highways, without using local roads.