The state of Virginia acknowledged for the first time today that bid-rigging has occured in the state's multimillion-dollar highway construction and paving program.
The disclosure came as State Attorney General J. Marshall Coleman announced a settlement agreement under which one construction company agreed to pay a $50,000 penalty for engaging in what state officials said was collusive bidding on five state highway department contracts during a two-year period.
The company, Central Contracting Co. of Farmville, Va., is the first to "come in out of the cold" and agree to cooperate with the state's antitrust probe of possible fraud and bid-rigging on highway contracts, Coleman said.
Central's agreement with the state came two days after it and Ashland-Warren, Inc., another highway contractor, were assessed more than $1.6 million in fines in federal court here after pleading guilty to federal bid-rigging charges.
District Court Judge Robert R. Merhige Jr. fined Central $125,000 and ordered Ashland-Warren to pay $500,000 on charges that they rigged bids on a Richmond airport paving contract. Ashland-Warren was fined an additional $1 million after it agreed to plead guilty to two additional bid-rigging charges involving two state highway department contracts.
Until today's action, state officials had said only that they were investigating the possibility of bid-rigging in the state Department of Highways and Transportation, but had not found any conclusive evidence of contrived contracts. Coleman's statement was the first by a top state official, acknowledging that what he called "tainted contracts" had been discovered by state investigators.
Central Contracting, while agreeing to the $50,000 fine, did not admit to any wrongdoing in the agreement with the state.
Coleman acknowledged that the state penalty was small when compared to the federal fine Central received, but he said $50,000 was "just and reasonable for this case."
He said Central had received consideration for being the first company to submit to such an agreement and for doing so voluntarily. Coleman said he expects $50,000 to be the minimum penalty assessed by the state against companies accused in the scheme. "It's one of the most favorable offerings I think you'll see," he told a news conference.
"This agreement," Coleman said, should speed up the process of bringing other contractors to settlement. I expect an increase in the number of people coming in to talk with us voluntarily," he said.
Coleman, acknowledged that the alleged bid-rigging on the five contracts involving Central forced the state to pay more than it should have for the highway work, but "we believe we were made whole."
The state's agreement calls for Central to pay the $50,000 in three installments, beginning Sept. 1. Judge Merhige ordered Central to pay $75,000 by this coming Monday and the remaining $50,000 within three months.
The Virginia agreement also permits Central to resume bidding on state highway contracts after being suspended from the department's approval bidders list for three months.
Construction industry officials say major concern of highway contractors in the antitrust probe is the length of time they may be disqualified from bidding on lucrative state highway contracts.
In the last three years, Central has received about $24 million in state highway contracts out of more than $900 million awarded.
Virginia Highway Commissioner Harold C. King banned 14 companies, including Central and Ashland-Warren, from bidding on state contracts after they were convicted in bid-rigging probes here or in other states. King, who signed the attorney general's agreement with Central, has said he considers 90 days to be the minimum time a company should be barred from seeking state highway contracts.
Coleman's investigation was launched less than two months ago as a follow-up to a wide-ranging federal criminal antitrust probe into possible bid rigging.
A federal grand jury in Richmond is continuing its probe of the highway industry with additional indictments, perhaps more than a half-dozen, expected in the months ahead, according to a source familiar with the investigation. Coleman said his office, which is relying heavily on the federal probe, is looking into at least 20 construction companies.
Already more than 30 road construction companies and executives have pleaded guilty to bid-rigging-related charges in the federal antitrust probe that now stretched into six Southeastern states.