Howard P. Foley Co., which is based in Alexandria and is one of the nation's largest electrical contractors, filed for bankruptcy this week to cope with a wave of lawsuits accusing the firm of bid-rigging.
Nine other affiliated companies also filed for protection under Chapter 11 of the federal bankruptcy code. Under Chapter 11, a company continues to operate, and is protected from action by its creditors, while it maps out a plan for paying off its debts.
Litigation against the Foley companies also will be halted as a result of the bankruptcy filings -- a key factor behind the company's decision to enter court proceedings, according to officials representing the firm.
"It freezes all claims against us and allows us a reorganization in order to rehabilitate the company," said Christopher Kane, corporate legal counsel for Howard P. Foley Enterprises, the parent for the firms filing for bankruptcy.
Kane and said that the company hopes to negotiate a "global" solution to settle all the lawsuits pending against the firm, much in the same way that Manville Corp. has sought to deal with claims from persons injured by exposure to asbestos.
The Foley firm has been operating under a cloud since the early 1980s, when the Justice Department investigated allegations of bid-rigging in the electrical-contracting industry.
The government accused Foley and other companies of violating federal antitrust laws by dividing work among themselves and designating who would be the low bidder in a variety of ostensibly competitive projects.
The investigation resulted in several indictments against Foley. As part of a settlement with the government in 1983, the firm agreed to pay $3 million in fines, and Bancroft T. Foley Jr., who then was president of the firm, was sentenced to one year in prison. Bancroft Foley no longer is with the firm, Kane said.
Since settling with the government, however, the Foley firm has been hit by a barrage of lawsuits from former customers seeking civil damages as a result of the alleged antitrust violations.
The company said 10 such lawsuits have been filed and more could follow. Although it has settled a number of the suits out of court, Foley said the remaining cases threaten the firm with "potential liability in the millions of dollars."
"We have got a viable business if we can get out from under this unending line of lawsuits," Kane said.
"We are not going anywhere. We will attempt to continue our business as much in a normal manner as possible."
Kane said that the bankruptcy filing will help the company by removing uncertainty about the exact amount of Foley's ultimate liability. He said this uncertainty has led to various problems with the firm's customers, vendors and links in the financial community.
Foley is a privately held firm, and Kane refused to discuss the company's financial performance in recent years.
According to Engineering News Record, an industry trade publication, Foley was the nation's third-largest electrical contractor in 1984, the last year the company submitted figures for the journal's annual survey of firms. At that time, the company reported revenue of $345 million and new contracts worth $285.7 million for 1983.