Virginia officials said today they are cooperating with a U.S. grand jury investigation of alleged fraud and bid rigging in the state's multimillion dollar highway construction and paving industry.
The grand jury began meeting here last week to probe bids and contracts let by the State Department of Highwaays and Transportation, which dispenses $350 million annually in state and federal road funds, officials said.
The probe is a follow-up to a previous federal grand jury's investigation that led to the indictment of three companies for allegedly conspiring to rig bids on a Richmond airport paving contract.
Those three companies -- Ashland-Warren Inc. of Atlanta, Rea Construction Co. of Charlotte, N.C., and Central Contracting Co. Inc. of Farmville, Va. -- have won $74 million in state highway contracts over the last three years. State officials say the grand jury apparently wants to determine whether those companies -- and possibly others -- conspired illegally on state contracts as they allegedly did on the city airport project.
Rea Construction, which has pleaded guilty in the Richmond case and a similar bid-rigging charge in North Carolina, was barred earlier this week from bidding on state contracts. Virginia Gov. John N. Dalton said today the state also would remove from its list of eligible bidders any other firms that have pleaded guilty or been convicted either in Virginia or other states.
"If there is collusion on the part of people making bids, we're just not going to let them operate in Virginia," said Dalton. "It concerns me if they are actively getting together and determining who's to bid what."
The probe could prove politically embarrassing to the Republican governor, who received more than $80,000 in contributions from road builders and related businesses in his 1977 gubernatorial campaign. The politically influential industry also strongly backed Dalton earlier this year when he persuaded a reluctant state General Assembly to approve a 2-cent-per gallon statewide increase in state gasoline taxes to pay for highway construction.
Dalton acknowledged the political aspect of the probe today when he noted that his advisers had checked his list of 1977 campaign contributors and had not found any of the three indicted firms on it.
Deputy State Attorney General Walter McFarlane, counsel to the highway department, said the agency voluntarily would supply the grand jury with records of bids and contracts and may follow up any federal criminal indictments with civil lawsuits to recover any money lost to the state due to fraud.
In Washington, Hays Gorey Jr., the Justice Department antitrust lawyer directing the Richmond investigation, confirmed the existence of the grand jury probe, but would not discuss its content or predict when it would be concluded.
The highway probe marks the second time in less than two years that a grand jury has investigated an arm of the state's huge purchasing operations. A special state grand jury impaneled in December 1978, is still returning reports and urging indictments of businessmen and state employes for alleged fraud and bid-rigging in contracts dispensed by the state Division of Purchases and Supply, whose operation is totally separate from that of the highway department.
State officials contend that, unlike the Purchase and Supply probe, there have been no indications in the highway department investigation that state employes knew about or profited from alleged wrongdoing.
The Justice Department began probing bidding irregularities in Virginia last year after Richmond airport officials grew suspicious about alleged similarities in bids submitted by Rea, Ashland-Warren and Central Contracting on a runway paving job financed largely with federal funds. The grand jury indictment handed down earlier this year charges the three companies conspired to rig the bids so that Ashland-Warren won the contract.
Law enforcement officials say the case is an example of bid fraud in which companies preselect a low bidder who then wins the contract with an inflated bid. Ashland-Warren's "low bid" of $3.1 million on the airport contract was well above the $2.2 million that airport officials had estimated for the project.
After pleading guilty in the Richmond case and similar bid-rigging charges in Charlotte, Rea was fined a total of $500,000. Two company officials have been sentenced to up to six months in jail for the North Carolina case and a third has pleaded guilty and awaits sentencing in the Richmond one. The officials are said to be cooperating with the grand jury probe as part of a plea bargaining arrangement. c
Both Ashland-Warren and Central Contracting are contesting the Richmond indictment and are due to be tried in late July. Neither would comment publicly on the case.
The new federal grand jury is said to be specially interested in monthly market-style sessions held by contractors at the Richmond Hyatt House the night before state highway bids are due. At those sessions, contractors shop for prices from subcontractors and construction material suppliers who come to town for the monthly event. While no highway department officials attend the sessions, the department supplies a bid box on the morning bids are due for the cenvenience of contractors, many of whom do not submit their sealed bids until the last minute.
Critics contend the system could encourage contractors and suppliers to compare prices and agree to rig their bids, although no one has made specific allegations of wrongdoing.