Ernest C. Czarnecki, an employe of an Alexandria asphalt paving company, says Northern Virginia paving contractors met yearly--often in the Bethesda home of Czarnecki's boss--"as far back as I can remember" to illegally divide lucrative Virginia highway department business.
At the living room sessions, over endless cups of coffee, Czarnecki says, the region's major asphalt suppliers and pavers ran down a state-advertised list of upcoming highway projects, arguing and then deciding among themselves who would be low bidder on state contracts to repave hundreds of miles of area roads.
"I knew it was wrong," says Czarnecki, a tall, genial Falls Church resident who has worked at Newton Asphalt Co. since 1964 and who made the coffee at the Bethesda sessions. "It wasn't right. I told my employer it wasn't right and he told me that's how it was done."
For his role in a conspiracy that federal prosecutors say was duplicated in in the industry in 17 states and involved scores of companies, Czarnecki, 41, and the father of four children, faces a prison sentence of 60 days.
Last month he was among the first four Washington area paving officials to enter guilty pleas to charges growing from the probe. On Wednesday a special grand jury in Alexandria that has heard testimony from Czarnecki indicted four more asphalt companies and three of the firms' officers on charges of fixing bids for highway work in the Washington area.
Czarnecki and another paving executive whose company pleaded guilty to bid-rigging charges agreed to be interviewed by The Post only after their April 29 court appearance. In the interview the two executives laid out in detail how the conspiracy apportioned Northern Virginia contracts, usually assigning the low bid to the firm whose plant was closest to the road in question.
The sessions in Bethesda were not always smooth, Czarnecki recalled. He said one meeting went so long he had to make three pots of coffee before the arrangements over who would win what contract were completed.
Once the horse-trading was completed, Czarnecki says, the contractors would reconvene in Richmond on the eve of state-supervised highway bidding and exchange dollar figures that ensured the bids were submitted according to plan.
The meetings, which often determined the outcome of $3 million to $4 million in state-financed road projects in Washington's Virginia suburbs, stopped about two years ago after federal antitrust attorneys began sweeping grand jury investigations of alleged bid rigging across Virginia, Czarnecki said.
A probe by a special U.S. grand jury in Alexandria is now in its ninth month. Already, Newton, the company where Czarnecki is chief engineer, near the Capital Beltway in Alexandria's industrial west end, has been staggered by the force of the Justice Department's action. President Mark Miller, son of Newton's cofounder, has agreed to pay a$450,000 corporate fine for his firm's role in the conspiracy.
In addition to Czarnecki, officials of Sam Finley Inc., Tri-County Asphalt Co. Inc. of Leesburg and a since-renamed division of Atlanta-based Ashland-Warren Co., also pleaded guilty last month before District Judge Richard L. Williams.
The latest grand jury action leaves Ashland-Warren's subsidiary, now called APAC--Virginia, as the sole eligible bidder for state asphalt contracts in Northern Virginia. An $800 million-a-year industry giant, Ashland reclaimed its place on the state's bidder list after paying an $800,000 settlement to Virginia. The corporation -- but not its individual executives -- also is free of future federal prosecution after paying $1.5 million in U.S. fines.
Czarnecki says the Alexandria grand jury is focusing on Northern Virginia's entire asphalt paving industry, including road contracts let in Fairfax, Arlington, Loudoun and Prince William counties where the state Department of Highways and Transportation builds and maintains most of the localities' streets and highways.
Although federal prosecutors refuse to discuss the scope of their investigation, Miller says copies of all of Newton's state contracts dating back to Jan. 1, 1976, have been subpoenaed. Paving records from the City of Alexandria, which awarded its paving contracts independent of the state, and some records in Arlington, which also had independent contracts, have also been turned over to investigators, according to local officials.
Federal antitrust attorney Hays Gorey Jr. has said he is getting "very fine" cooperation from state highway officials in the probe.
The first hint of trouble came for Czarnecki in November 1980, he says, when Newton received a grand jury subpoena for records of the company's state contracts for amounts over $100,000. Miller, a junior company executive at the time, remembers seeing Czarnecki loading reams of folders into cardboard boxes. "I asked him if he was cleaning out his files," he says.
A second subpoena arrived, followed by a third demanding all records of the firm's dealings with the Virginia highway department. Meanwhile, Czarnecki had been summoned to his lawyer's office for an urgent meeting. Czarnecki gave away tickets to a college basketball tournament at the Capital Centre and met instead with the attorney. He was informed he had become a target of the grand jury probe.
Convinced in a meeting with Gorey at Justice that he could be successfully prosecuted, Czarnecki agreed to plead guilty and appear before the grand jury. He says he agreed to do so only after Gorey pledged that no other Northern Virginia bid-rigging defendant would receive a lesser sentence.
For Miller and Czarnecki alike, the march to the Alexandria courtroom was marked by a final twist. On March 3, when both men knew grand jury action was imminent, Miller's father, Nicholas, died. It was Nicholas Miller, according to court statements and interviews, who hosted the annual bid-rigging meetings and who looked out for Newton's share of the pie with Czarnecki's help.
"Ernie was his leg man," says Miller, who inherited the company along with its problems. Czarnecki acknowledges he traveled to Richmond with the senior Miller's bidding position, traded last-minute information with the company's ostensible competitors and submitted the company's sealed bids in a bid box that the highway department placed in the lobby of the Richmond Hyatt House on the morning of the bid openings.
The bid-box arrangement, featured in earlier accounts of bid-rigging scandals in the state's Tidewater and Richmond areas, was only "sizzle" to the Northern Virginians, Czarnecki says. "Everything was decided beforehand in Nick's living room or his office."
Neither Miller nor Czarnecki says he knows whether state officials were aware of the bid-rigging arrangement. "I can't believe they weren't," says Czarnecki. In two years of grand jury investigations, no Virginia official has been charged in connection with the cases. Federal attorneys refuse to comment on whether they are interested in officials' conduct in the letting of the contracts.
Meanwhile, Czarnecki partially defends bid rigging, contending the conspiracy added nothing to the state's highway costs. "I can only think of one time when our bid exceeded the state's own estimate of what a job should cost," he says.
Federal and state officials disagree. Assistant Virginia Attorney General Bert Long said his office -- after a bid-rigging study and consultation with industry experts -- believes there were overcharges. He said dollar figures were unavailable, but that a study of prices about the time of the first grand jury probe in Virginia showed a "fairly substantial" increase for comparable jobs.
Long said many states where bid rigging occurred have estimated that the bid rigging added 10 percent to the costs of their projects. "But that's not a maximum," Long said. "I'd say it's more like the minimum."
According to Czarnecki, state road projects in Northern Virginia over the past five years typically called for a total of 150,000 tons of asphalt annually. At a roughly average price of $25 per ton, paving contractors allegedly were carving up business worth about $3.75 million each year.
Czarnecki, who now is Newton's chief bid estimator, won a delay of his sentence through the summer paving season on grounds he is indispensable to the company. In October, he will be required to surrender to U.S. marshals to begin his prison term.
Meanwhile, Newton, which previously depended on state contracts for one-fourth of its business, has been barred from the highway department's bidder list. The company still can sell asphalt to other state contractors and to the state itself for work done by state crews.
The state attorney general's office, however, recently invited Newton executives to Richmond to discuss a financial settlement. If Newton pays, it could be back on the bidder list immediately. That would enable the company to bid on two Fairfax County road projects worth $1 million up for consideration next Tuesday, says Czarnecki. And he adds, "We'd be back at the Hyatt House again." Graphic:Picture;Ernest C. Czarnecki