Frank Wilkinson and Dulany deButts were puzzled. And suspicious.
Three Virginia paving contractors had bid on a federally funded renovation project at Richmond's Byrd International Airport. On a table at their Falls Church office, the two Federal Aviation Administration engineers scanned an eight-page official bid report. The neat rows of numbers were curious: Of 56 line items making up the job, the three firms' bids on 26 were identical.
"These were a little too similar to be accidental," says the lean, leathery Wilkinson.
The bids were, as events later proved, illegal.
Wilkinson and the white-haired deButts--a descendant of Chief Justice John Marshall and cousin of former AT&T president John deButts--had stumbled on the first evidence in Virginia of a wide-ranging, sophisticated conspiracy that used coded phrases and secret meetings to fix prices in the state's multimillion dollar asphalt paving industry.
Following their May 1978 discovery, a 3 1/2-year Justice Department antitrust investigation resulted in convictions or indictments for dozens of contracting firms and their executives, including guilty pleas by the three Byrd airport bidders.
In Northern Virginia, where a federal grand jury began looking into alleged bid rigging on state paving contracts in September, there have been four guilty pleas and seven indictments in recent weeks. The Alexandria grand jury is scheduled to meet again in June, when more indictments are expected.
Although officials say cost calculations are difficult, an assistant state attorney general estimates bid rigging--a secret Virginia ritual since at least the early 1960s, according to trial testimony--has added a minimum of 10 percent to the cost of state road projects over the years. The state highway department spent an estimated $400 million resurfacing roads from 1962 to 1980, highway officials say.
In the case of Byrd Airport, Wilkinson and deButts found, collusion added a third to the price tag. The "low bid," by Warren Brothers, a subsidiary of giant, Atlanta-based Ashland-Warren, was for $3.1 million--$791,000 more than the airport's own estimate. Warren Brothers' two supposed competitors submitted bids a scant 5 percent higher, ensuring that Warren would win the job.
While the identical bids set off alarms, bid rigging apparently went on for years under state officials' noses. Prices alone, say Wilkinson and deButts, are a poor guide to possible wrongdoing. The Byrd airport bids, in fact, were the second bid-letting for the renovation project. On the first go-round two months earlier, only one company--Warren Brothers--bid, at an even higher $3.4 million. Where airport authorities estimated the price of one typical item--14-inch thick concrete--at $20 a square yard, Warren bid $32.06.
"But the price of concrete could have gone up," says Wilkinson. "We weren't sure." Officials rejected the bid in part because a sole-bidder contract made them uneasy, Wilkinson says. In May, after what the companies later acknowledged was illegal collusion, the three new bids were submitted and Warren's proposal was selected.
The investigation nearly stopped there. Although suspicious, Wilkinson and deButts, sitting in their second-story office on a busy Falls Church thoroughfare, were unsure if they had uncovered certain evidence of illegality. DeButts, the FAA engineer assigned to the Richmond project, was too busy to pursue it.
Wilkinson, assistant chief of the FAA office that oversees grants to Virginia and Maryland airports, met in Richmond with the Capital Region Airport Commission, the body that runs Byrd. "They were concerned by what we had found, but felt there was insufficient evidence to warrant an investigation," says Wilkinson.
Then on May 25, William Murphy, an auditor at FAA headquarters, passed through the Falls Church office. Murphy had investigative experience, and when Wilkinson showed him the similarities in the Byrd airport bids, Murphy agreed they were suspect.
Soon FAA security officers were sitting down with Richmond airport officials and the cheerful, soft-spoken Wilkinson. By late summer 1978, subpoenas were issued for company records and an assistant U.S. attorney began presenting evidence to a federal grand jury in Richmond. No witnesses were called to testify and the investigation seemed to bog down.
In April 1979, nearly a year after Wilkinson and deButts first questioned the bids, Hays Gorey Jr., a 37-year-old government antitrust attorney familiar with federal bid-rigging investigations already underway in Illinois and Tennessee, was poring through paperwork in his third-floor Justice office. In the documents were FBI reports of possible antitrust violations which had been routinely forwarded to Justice. And in the reports were summaries of agents' interviews on the Byrd airport bids.
"It seemed to me that many of the people who should have been talked to, hadn't been talked to," says Gorey, who agreed to an interview on condition that Justice's current highway investigation in Virginia not be discussed.
Gorey sought and received permission from his superiors to renew the investigation. As Gorey subpoenaed paving industry executives to give testimony before the Richmond grand jury, bid rigging moved for the first time to the front burner in Virginia.
On Feb. 29, 1980, after six months' investigation, the grand jury issued its first indictments. The three Byrd airport bidders--Ashland-Warren, Rea Construction Co. of North Carolina and Central Contracting Co. of Farmville, Va.--were accused of antitrust violations and later pleaded guilty.
Grand jury testimony by paving contractors has since indicated illicit bid rigging may have occurred in every geographical area of Virginia and in 16 other states where Justice is pursuing similar allegations. One Virginia company is scheduled for trial in Richmond next week. Another is set for trial next month in Harrisonburg. Three Northern Virginia firms and a Baltimore company are scheduled to start trial in Alexandria on July 6.
Testimony and court documents have revealed details of the hidden network operating across Virginia to parcel out government paving and construction work illegally and, Justice alleges, to inflate prices.
Contractors implicated in the state's Tidewater area referred to themselves as the "Southern Mafia," according to court papers, and met often at the Tidewater Auto Auction, a used car warehouse where bids were prearranged behind closed doors. Other meetings took place in a restaurant's private dining room. In Richmond, prosecutors say "understandings" were reached at a racquet club.
Price fixing over the telephone frequently was conducted in code in Tidewater, say Justice officials, with contractors discussing "parts numbers" that actually referred to jobs on the state's advertised project list. One witness at a trial in Norfolk testified that bid rigging was in full swing when he joined a Tidewater firm in 1963. Those aware of earlier collusion have either died or have cloudy memories, says Gorey.
To ensure that bid rigging worked, contractors needed to communicate often, checking on companies that might refuse to cooperate. According to court testimony, Ashland-Warren's Virginia representative once called a Tidewater firm, worried that the company's president might torpedo the arranged bids. While the Ashland executive waited on the phone, a secretary called her boss on a two-way radio.
"Tell him the weather's clear in Chesapeake," crackled back the reply, the signal Ashland-Warren was hoping for.
With the bids lined up, contractors gathered at a Richmond hotel on the eve of the state-run bid submission. It was there, according to numerous court statements, where last-minute dollar figures were exchanged. "They often stayed up until 2, 3, 4 a.m., working it out," says Gorey.
Despite the pavers' elaborate system--or perhaps because of it--Gorey agrees with Wilkinson and deButts that bid rigging was difficult to detect. "There appeared to be competition," he says. "It's easier to see in hindsight."
Meanwhile, the two FAA engineers continue their routine duties in Falls Church, the far-flung scandal long since taken out of their hands. "It's apparently been a way of business for years," says deButts, running a hand over his thick white hair. "I think it's sad."