Excavation Construction Inc., a multimillion-dollar Prince George's County construction firm whose business activities have been under law enforcement scrutiny for more than a year, has filed for reorganization under federal bankruptcy law.
Financial problems, including problems with cash flow and in finding bonding, and a cloud of suspicion created by the continuing federal grand jury investigation in Baltimore, precipitated the filing in a Maryland federal court, according to the company's attorneys.
The company, which listed $27.1 million in assets, $20 million worth of liabilities and more than 500 creditors as of October 1978 in its filing, is part of a network of construction and related companies controlled by John W. Lyon and Larry A. Campbell. Lyon is general manager of Parking Management Inc. (PMI), the area's largest commercial parking concern.
The company's problems in the last 18 months have included investigations of its dealings with a local Teamster official who was convicted of misdemeanor violations of federal labor law; a separate investigation in the District of Columbia of its relations with a local judge who was alleged to have suspended fines for traffic tickets against the company; and the still-unsolved murder in May 1978 of the president of another construction company controlled by Lyon and Campbell.
More recently, in May 1979, the two black operators of a Washington-based construction firm were convicted of illegally posing as owners of a small minority business to obtain federal contracts, then funneling portions of the contracts to Lyon and Campbell.
In the filing for a Chapter 11 reorganization under the bankruptcy law, Excavation Construction Inc. noted that "the corporation has been experiencing financial problems in satisfying outstanding obligations to creditors."
Those problems included immediate difficulty in meeting monthly bills, such as mortgage payments for equipment, and concern over possible repossessions, said attorney Alan S. Kerxton, who is representing the company in the bankruptcy proceedings.
Underlying those immediate problems were adverse publicity and an aura of uncertainty created by the continuing grand jury investigation into Excavation Construction's business activities, said attorney Ronald West, who has handled lawsuits and corporation matters for the company.
"Their records have been subpoenaed repeatedly so that they've had to operate half from headquarters and half out of Baltimore (where the subpoenaed records are)," said West. The grand jury investigation has also created "nervousness among employes" subpoenaed to testify, he said.
Even more serious has been "the hesitation of banks and bonding companies and suppliers to deal with the company," West said. To bid for major public contracts, construction companies must furnish completion bonds -- insurance policies that guarantee that the job will be completed. According to West and to sources, Excavation Construction has encountered difficulties with bonding companies in the last year and a half.
The company's filing included a 91-page list of creditors that included attorneys, utility companies, oil companies and the consumer credit department at the National Bank of Washington, where Lyon is a member of the board of directors.
According to an internal memo from a bonding company, in 1977 Excavation Construction had an unsecured line of credit of $1.5 million at NBW. In a proxy statement earlier this year the bank noted that three loans to Lyon's business ventures "involve more than a normal risk of collectibility and may also present other unfavorable features" because of their terms. However, it also noted that the bank expected no losses because the loans were adequately secured.
Also listed as creditors were the company's employes' credit union, the local laborers' union pension fund, and several related corporations, including the Ohio Valley Construction Co., Shenandoah Quarry and Asphalt Construction Inc.
As of the end of July, the company was at work on $30 million worth of jobs, Kerxton said. "We plan at this time to complete all the jobs," he said. Federal bankruptcy law allows the company to continue to operate under any one of a variety of formats while arrangements are made to repay its debts in full or part.
Another potential creditor is Teamster Local 639, which represents truck drivers who worked for the company until they lost their jobs in a strike last year when the company replaced them.
An administrative law judge for the National Labor Relations Board found that the company had engaged in unfair labor practices and recommended that it be ordered to rehire dismissed workers who applied for work and who had not been hired.
The administrative law judge also recommended that the company be ordered to reinstate union drivers with their seniority intact and award them back pay with interest for the period between their application for reinstatement and their actual rehiring.