It all began four years ago in Chicago, where a federal grand jury was hearing the results of an investigation of price-fixing in the contracts awarded for paving Stevenson Expressway and the runways at O'Hare International Airport.
"If you think it's bad here," a grand-jury witness told federal prosecutor Richard Braun, "you ought to see the way they do business in Tennessee."
Late in 1979, a task force of the same FBI agents and Justice Department lawyers who investigated the two Chicago cases acted on the tip and moved into Tennessee, where they discovered that the grand-jury witness was right. The federal task force found that paving firms in Tennessee had been rigging their bids for five years to ensure they'd all get a share of the $1 million business the city of Nashville handed out every year to pave the streets.
At the same time, a separate federal task force was moving into Virginia, investigating reports that the bids solicited for the paving of runways and taxiways at Richmond's Byrd Airport were being rigged. Not only were they being rigged so the business could be shared, but grand-jury witnesses suggested some of the same firms were rigging the bids for paving federal highways in Georgia and Mississippi.
So began an investigation that soon spread into 14 states as far apart as Florida and Nebraska, Texas and Kentucky, North Carolina and Kansas. Led by a squad of unrelated and unconnected informants, the Justice Department found that price-fixing and bid-rigging for asphalt and concrete paving contracts was so widespread it appeared to be rampant in every state where federal funds were being spent to pave streets, highways and airport runways.
In less than two years, the Justice Department's Antitrust Division put through 97 criminal prosecutions of 73 paving firms and 97 of their officials in connection with conspiracies to rig bids on highway and airport construction projects in seven states. Ten cases are still awaiting trial, but no fewer than 83 cases were resolved by guilty pleas, which have already resulted in fines totalling more than $13.3 million, jail sentences lasting more than 25 years and probation terms that go on for 73 years.
Federal judges have sent 58 contractors to prison, including the millionaire presidents of some of the largest paving firms in the country and the brother and uncle of former Tennessee governor Ray Blanton.
One contractor was fined $1 million. Another had to pave a park in Nashville for free as his punishment, and three others were ordered to pave bridges across the Tennessee River as their debt to the state's taxpayers.
Meanwhile, the Federal Highway Administration has noted that the cost of paving interstate highways has dropped as much as 25 percent in the 14 states where the price-fixing cases have occurred. Said FHA's assistant chief counsel, Hugh T. O'Reilly: "We have noticed that wherever the investigation has gone, the bids have gone down. There is an identifiable pattern."
Dubbed the "Roadrunner" cases by Justice Department officials, the asphalt and cement investigation is now the largest and longest price-fixing probe in department history. Only in Tennessee has Justice closed out its investigation. It shows no signs of stopping in the 13 other states, where as many as 40 department lawyers are engaged full-time in the investigations.
"We just keep discovering new cases," William Baxter, assistant attorney general in charge of the Antitrust Division, told The Washington Post. "We don't know where it's going to lead and when it's going to end."
While investigators insist the price-fixing cases in the 14 states are "mostly" unconnected, they seem to follow a remarkably similar pattern. The way investigators describe it, the paving contractors in most of the 14 states almost always gathered in the state capitals the night before bids for the highway contracts were opened.
In Nashville, paving contractors met down the street from the Tennessee Department of Transportation at the Radisson Plaza Hotel, where the state books a room to accept asphalt paving bids on Friday mornings about 10 times a year. In North Carolina, the contractors came together at Raleigh's Royal Villa on the Mondays before the Tuesdays when bids were opened. It was at the Royal Villa that investigators said contractors rigged the bids to pave the runways at the airport in Charlotte more than a year ago.
"The way it worked," said a Justice Department attorney who asked to be nameless, "the contractors decided who would be the low bidder. Since most state laws provide that the business go to the lowest bidder, the pre-arranged low bidder would usually get the job. The other contractors went along with it because they knew it would be their turn next."
The size of the paving contracts involved has varied from state to state but none was peanuts. The cost of paving the Richmond runways ran to $1.5 million. Over five years, rigged contracts to pave Nashville's city streets ran to more than $10 million. The total value of contracts opened by the Tennessee Department of Transportation on a typical Friday morning averaged $40 million. The contracts in the 14 states on which the bids are known to have been rigged run to almost $2 billion alone.
How did the Justice Department stumble on so many price-fixing cases in such a short period of time? There are two obvious reasons, according to FBI Director William Webster.
One is that white-collar crime thrives in times of inflation when the costs of doing business spiral higher than the contractors can afford. Another is that only in states doing a lot of paving business has price-fixing been found.
"You have to remember that there have to be enough projects to share for contractors to share bids," one Justice attorney says. "You're more likely to find price-fixing where they're spending money paving roads."