The Justice Department investigation of the electrical contracting industry that began in late 1981 has thus far resulted in the indictments for bid-rigging of 18 firms--including four of the industry's five largest--and 20 of their executives in 11 separate prosecutions.
And the federal investigation is continuing before grand juries in the District of Columbia, Pennsylvania, North Carolina, Indiana, Washington and Georgia.
The firms indicted so far are a virtual Who's Who of the heavy electrical construction industry, including two prominent local contractors--the Howard P. Foley Co. and E. C. Ernst Inc.
The federal indictments allege that the firms violated U.S. antitrust laws by dividing work among themselves and designating each other as low bidders in contract competitions.
By avoiding competitive bidding, the electrical contractors allegedly inflated the costs of hundreds of millions of dollars worth of construction projects, including the debt-ridden Washington Public Power Supply System nuclear plants.
Indictments filed in the cases and other sources contend that executives of the firms exchanged bid prices and other information in sessions at the exclusive Duquesne Club in Pittsburgh, at an Indianapolis hotel and at regular meetings of a trade association in Philadelphia, as well as by telephone.
Bid-rigging, a felony violation under the Sherman Antitrust Act, is punishable by a maximum fine of $1 million per corporation, and a maximum fine of $100,000 and maximum jail sentence of three years for each defendant.
The indicted firms include:
* Fischbach and Moore of Dallas, the biggest electrical contractor in the nation, indicted for allegedly rigging bids on WPPSS nuclear plants, where cost overruns have been blamed for forcing the agency to default on bonds. Fischbach and Moore was also indicted in Pittsburgh for allegedly rigging bids for work on U.S. Steel mills.
* The Howard P. Foley Co. of Washington--third largest in the industry according to Engineering News Record, a trade publication--indicted in Seattle for alleged bid-rigging on the WPPSS nuclear plants, in Pittsburgh in the U.S. Steel investigation and in Philadelphia for Sun Co. refinery work.
* L. K. Comstock & Co. of Danbury, Conn., the fourth largest electrical contractor, Lord Electric Co. Inc. of New York, the fifth biggest firm, and seventh ranking Commonwealth Electric Co. Inc. of Lincoln, Neb.
All those firms have pleaded not guilty to the charges.
Records of Dynalectron Corp. of McLean, which operates the second largest electrical contracting business in the country, have been subpoenaed in the investigation, but no charges have been filed against the company. "We often furnish records in connection with government investigations," said Charles G. Gulledge, Dynalectron's vice chairman.
The Justice Department investigation of the electrical contracting industry is the government's biggest price-fixing probe since its attack on bid rigging in highway construction. Since that investigation began four years ago, 450 highway construction firms and executives have been prosecuted.
In addition to the federal investigation, state authorities in Nebraska and North Carolina have started their own investigations and the Washington Public Power Supply System has filed a civil lawsuit against contractors who allegedly rigged prices on the nuclear plants. Under federal law, victims of price fixing can sue for triple damages. North Carolina authorities have prosecuted 11 firms and collected fines of more than $2 million.
The largest bid-rigging case so far involves $367 million of heavy electrical contracts for four WPPSS nuclear power plants and one nuclear generating plant belonging to Public Service Co. of Indiana.
Six companies and eight individuals were indicted in Seattle on June 8, including Fischbach and Moore, the Foley Co., L. K. Comstock & Co., Lord Electric and Commonwealth Electric. The trial is set for Nov. 14.
All the defendants in Seattle have pleaded innocent except Wismer and Becker Contracting Engineers Inc., of Sacramento, Calif., which pleaded no contest and received a suspended $50,000 fine. Wismer and Becker was joint-venture partners with the Foley Co. in work for two WPPSS nuclear plants. Executives of the firm are expected to be called as witnesses in the case against the other firms.
WPPSS has filed a civil suit seeking unspecified damages against Fischbach and Moore; its parent company, the Fischbach Corp., of New York; the Foley Co.; Comstock and its parent, L.K.C. Inc. of Danbury, Conn.; Commonwealth Electric and its parent, the Commonwealth Companies Inc. of Lincoln, Neb.; Lord Electric Co. and Wismer & Becker.
Though some small contractors have pleaded guilty to bid-rigging charges, none of the major cases has come to trial yet. As a result, few details of the government's evidence against the companies has been made public.
The indictments filed in Pittsburgh say electrical contractors met at the Duquesne Club, a Pittsburgh social institution, to discuss preparation of bids for electrical work at eight United States Steel Corp. plants in Western Pennsylvania.
Electrical contractors charged with rigging bids on U.S. Steel work between 1974 and 1981 include the Foley Co. and its Pittsburgh branch manager, Joseph J. Rodgers, and E. C. Ernst Inc. of Fairfax. Also indicted in that case were Fischbach and Moore, Lord Electric Co. Inc., Sargent Electric Co., Tri-City Electric Co. Inc., and four executives of Lord, Sargent and Tri-City. All the defendants have pleaded not guilty.
Indictments filed in Philadelphia say contractors discussed bid-rigging at meetings of the Penn-Del-Jersey chapter of the National Electrical Contractors Association, a trade group, in Philadelphia.
In three separate cases, the Foley Co. and its vice president, Herbert C. Geuther, the H. B. Frazer Co.-Pennsylvania Inc., of Philadelphia, and its president, W. Edward Frazer Jr., and the Progressive Electric Construction Co. Inc., also of Philadelphia, were charged with rigging bids on work at Sun's Marcus Hook, Pa., refinery.
Geuther and the Foley company pleaded not guilty. The Frazer Co. and its president, and Progressive Electric pleaded guilty to the charges; Frazer Co. was fined $125,000 and Progressive Electric $50,000. The Frazer company president is awaiting sentencing.
Similar charges involving a Gulf Oil Corp. refinery in Philadelphia lead to a $225,000 fine against The Harry F. Ortlip Co. of Philadelphia, which pleaded guilty to federal charges.
Beside the investigations in Philadelphia, Pittsburgh and Seattle, the Justice Department has obtained indictments in three cases in Indianapolis and two in North Carolina.
So far, eight firms and six executives charged by federal authorities have pleaded guilty. More than $1 million in fines have been assessed, and two executives have received prison sentences of 90 and 50 days each.
Additional charges against electrical contractors are expected to result from the Justice Department investigation.
Gordon Spivack, an attorney for Fischbach and Moore, said he "would not be surprised" if that firm--already named in two indictments--were indicted again in Philadelphia. Fischbach and Moore is under investigation in Georgia as well, he added.
One source close to the cases in Indiana said Justice Department attorneys told him they are especially interested in Fischbach and Moore and have gathered extensive information about the company.
An attorney familiar with the Indiana investigation said that at an Indianapolis hotel in March 1978, contractors met to discuss bids for electrical work at General Motors Corp.'s Diesel Allison Division plant in that city.
Attorney Felson Bowman said the meeting involved executives of Watson-Flagg Electric Co., Ermco Inc. and Robbins Electric Co., all of Indianapolis, and Titan Electric Co., of Southfield, Mich. Watson-Flagg is owned by Fischbach and Moore, and Titan Electric is a subsidiary of Harlan Electric Co., of Southfield, Mich., the tenth largest contractor.
Bowman represents Ermco, its chairman, Edward M. Gossett, and its president, James A. Maddox, all of whom have pleaded guilty to bid rigging charges.
The companies allegedly agreed Ermco would be low bidder for the $1.2 million Allison job, and in return, Ermco was to pay Titan $120,000, and Watson-Flagg and Robbins $100,000 each, The Indianapolis Star reported. Ermco won the Allison contract.
"False, fraudulent and phony invoices" were used to pay off co-conspirators, the indictments say.
Ermco later agreed to share work with Watson-Flagg and Titan on contracts let by Chrysler Corp. for its foundry in Indianapolis, according to the indictments and a federal investigator.
Ermco, Gossett and Maddox were charged with rigging the Chrysler contracts. After pleading guilty to the charges, Ermco was fined $350,000, the biggest fine levied so far as a result of the Justice Department prosecutions; Gossett was fined $75,000 and Maddox fined $25,000.
Vincent A. Picciotti, former Robbins vice president and treasurer, charged with bid-rigging at the GM Allison plant, pleaded guilty and is due to be sentenced Sept. 9. Watson-Flagg; Titan; Robbins; C. Theodore Johnson, now retired Watson-Flagg chairman, and C. Richard Cline, retired president of Titan, were indicted in a separate case for bid-rigging at the Allison plant. Robbins pleaded no contest and is awaiting sentencing. The other defendants have pleaded not guilty and are also awaiting trial.
North Carolina investigations have lead to federal and state indictments for alleged bid-rigging on several hospital construction contracts. The federal cases involved M. B. Haynes Electric Corp., of Asheville, N.C. and its chairman, Nathaniel E. Cannady Jr., Bryant-Durham Electric Co. Inc., of Durham, N.C., and its executive vice president, Robert S. Shackleford.
During the bid-letting for two hospital contracts, Haynes, Bryant-Durham and others not indicted in the cases allegedly agreed that the designated low bidders on the job would compensate the other firms for submitting intentionally high bids, according to the indictment..
H. A. Cole Jr., the North Carolina deputy attorney general who headed the state investigation into electrical contracting, said in an interview that most of the price-fixing uncovered was planned the night before a bid-letting.
Cole said: "Let's just take a job in town A. Everybody goes into town A the night before . . . staying in the same hotel or motel. But they get there and see there are only about four or five of them there."
Company executives, he said, then suggest to their competitors, "Why don't you comp complement me on this one, and I'll comp you next month."
Most collusive arrangements among electrical contractors in his state took the form of "add-ons," where each contractor agree to add a certain amount onto whatever bid they planned to submit, Cole said.
Cole said that on a $4 million project for Eastern Carolina University's (ECU) medical complex, some companies simply signed blank bid forms and gave them to the designated low bidder to fill out, so they didn't have to go through the trouble of actually making a bid. Nine companies pleaded guilty to rigging bids for work at the complex.
Guilty pleas in the federal cases--obtained through plea agreements in which defendants agreed to plead guilty and to cooperate with investigators in return for immunity from further price-fixing charges--so far have all come from the smaller defendant electrical contractors.
Cole said he thinks the plea agreements made by smaller firms indicate federal authorities want to use smaller contractors as witnesses against larger firms.
"The feds will grant immunity to an official of the company and use one of their own employes as a witness against the company and the corporation," he added.
The attorney for Ermco Inc. in Indianapolis said he assumes Ermco executives will be called to testify for the government in the case against other contractors.