Construction giant Tutor-Saliba Corp. was ordered Wednesday to pay more than $29.5
million for assorted acts of business misconduct related to Los Angeles' long-troubled
subway system, a damage award that could hamper the firm's ability to land future public
Although less than the $41 million sought by the Metropolitan Transportation Authority, the hefty amount awarded by a Los Angeles Superior Court jury is still a bitter disappointment for officials at Tutor-Saliba, one of the largest contractors in the state. The verdict blemishes the reputation of the well-known contractor and could make it more difficult for the company to land contracts for the massive airport, rail and other public projects that are its hallmark.
Jurors awarded the large sum on the eighth day of deliberations. Afterward, several said they based the verdict on evidence presented by the MTA that the contractor submitted false claims for payment, used fronts posing as minority subcontractors and committed more than 1,000 acts of other unfair business practices.
David Casselman, the MTA's lead attorney on the case, said Tutor-Saliba shifted the costs of one subway project to another to misrepresent the company's revenue. The firm also stopped quality inspection because of a contract dispute, he said, risking the safety of the project.
Although Tutor-Saliba officials said they would appeal, MTA officials expressed relief at the conclusion of the six-year, multimillion-dollar case that grew increasingly bitter as it dragged on. By the trial's end, a lawyer for the MTA had compared Tutor-Saliba to a shark, and the company's chief executive had vowed never to work with Los Angeles' transit agency again.
On Wednesday, MTA officials said they hoped the verdict would dissuade other contractors from attempting to defraud public agencies.
"This is not just about the money that we lost or the damages that have been assessed, but is an important message to the contracting community in general," said MTA Chief Executive Julian Burke, adding that he believed Tutor-Saliba's actions were atypical among contractors that work for the agency.
The award represents a major court victory for the MTA and comes after a protracted legal battle that severed its relationship with its largest contractor. No matter what the outcome of the appeal, that relationship is now dead.
"I wouldn't work for them if they were the last owner on the face of the Earth," said a furious Ron Tutor, president of the company, after the verdict.
He declared himself "outraged" and "flabbergasted" by the outcome of the trial and said Judge Joseph Kalin prevented the company from fully presenting its case.
"There is no question in my mind that this is a terrible injustice," Tutor said. "Had we been given the opportunity to put on our witnesses, there's no question in my mind the verdict would have been different. I never had a trial."
Tutor-Saliba plans to appeal immediately. The company's attorneys argued in May that Kalin was biased and was acting as an advocate for the transit agency.
But the award to the MTA could damage Tutor's carefully cultivated political standing. The company is a major supporter of Mayor James K. Hahn, Gov. Gray Davis and U.S. Sen. Dianne Feinstein (D-Calif.). The senator's husband, Richard Blum, and his investment firms are major shareholders in a construction company that partnered with Tutor-Saliba on the subway project.
Most ominous for the company is the possibility of the Federal Transit Administration following up on the verdict by moving to temporarily bar the Sylmar-based firm from bidding on federally funded public works projects. States are often wary of contractors that are blocked from federal projects, and subcontractors also face limitations in doing work with such companies.
A spokeswoman for the federal agency said officials were considering the issue and would decide whether to hold a hearing.
Public works projects are the lifeblood of Tutor-Saliba, which has constructed more than $5 billion worth of projects in California, including public buildings, highways, bridges, airports and rail systems. The company received $945 million for its work on the $4.7-billion Los Angeles subway system, making it the largest contractor on that project.
Tutor-Saliba attorney Nomi Castle acknowledged that the case was not good for the company's reputation but insisted that, "in the long run, it won't have a lasting effect."
The lawsuit was the latest in a series of controversies that have dogged the subway project, including three workers' deaths, thin walls, misaligned tunnels and cost overruns.
In pursuing Tutor-Saliba through the courts, the MTA was forced to spend about $19 million in legal fees--money that officials said they expect the judge to order the company to pay.
County Supervisor Zev Yaroslavsky, a MTA board member, said the agency was right to pursue the litigation even in the face of such staggering costs.
"If we walked away from this case," he said, "we would be inviting fraud to be a daily way of life in doing business in Los Angeles County, city and every jurisdiction, public and private, in this town."
MTA attorney Casselman said that although jurors awarded the agency less than it requested, he was satisfied because as part of the damages, Tutor-Saliba was ordered to return more than $11 million of its profits to prevent future misconduct.
The verdict issued Wednesday morning by the three-man, nine-woman jury brought to a close a complicated case that produced 3,000 boxes of documents. It was initiated by Tutor-Saliba, which sued the MTA in 1995, seeking about $16 million that the agency allegedly failed to pay the company.
The MTA countersued Tutor-Saliba Corp. and Perini Corp., its joint venture partner on the subway project, four years later. (Feinstein's husband Blum and his investment companies are major shareholders in Perini, which is now controlled by Tutor.)
The MTA's cross-complaint alleged that the company committed unfair business practices and minority contracting violations, made false claims of payment and engaged in other misconduct. After wending its way through the courts for six years, the case took an unusual turn last month.
Nine weeks into the trial, Kalin ruled that Tutor-Saliba had intentionally withheld and destroyed documents, and he terminated the contractor's lawsuit against the MTA, effectively handing the agency victory.
In his instructions to the jury the next week, Kalin said he had found Tutor-Saliba liable for 1,048 acts of business misconduct. All that was left for the jury to do was determine the amount of damages.
Tutor-Saliba attorneys vigorously protested the judge's ruling, saying they did not destroy any evidence and objecting to his finding that misconduct occurred.
Hoping to lay the groundwork for an appeal, they wrote in papers filed with the court that the judge's decision to terminate their case without it going to the jury and his refusal to allow them to present all of their witnesses was a violation of their due process rights.
"From our perspective, we've been deprived of an opportunity to present a defense, to present our case and to have a fair and balanced trial," Castle said. "It's just mind-boggling, the unfairness of it."
In other papers filed in May, lawyers for Tutor-Saliba accused Kalin of creating a hostile environment in the courtroom.
"Not only has the court demonstrated its bias by words and actions, but the court's tone, expression, gestures and body language have sent a forceful message to the jury that the court is on the side of the MTA and is biased against plaintiff's counsel and plaintiff," the papers stated.
But several jurors said they were convinced of Tutor-Saliba's misconduct by the evidence the MTA presented.
"They not only told us things," said juror Shirley Thompson. "They showed us things and backed it up."
Jurors said they agonized over their decision, immersing themselves in contract law and arguing the finer points of such complicated issues as quality control violations. Some said they lost sleep as they wrestled with how much money to award the MTA, and a few felt the agency was asking for too much.
"We were confused at first, because a lot of stuff was taken away [from us]," said juror Darlene Cross. "But I feel that anybody that breaks the law has to pay."
Added juror Irma Howard: "I felt that if [Ron Tutor] was being dishonest, it had to be stopped now, or else it would never be stopped."
During the two days of closing arguments in mid-July, the attorneys for MTA and Tutor-Saliba offered the jury conflicting versions of what happened during construction.
Casselman, outside counsel for the MTA, called Tutor-Saliba a "great white shark."
"They don't just know about the laws, they know how to manipulate them," he told the jury. "You have to give them credit for being so creative."
Ron Tutor sat in the courtroom throughout the closing arguments, sighing loudly and shifting in his chair as Casselman accused him of arrogance, defiance and lying.
Tutor-Saliba attorney Castle, meanwhile, accused the MTA of retaliating against the firm for filing the lawsuit by trying to put the company out of business.
"I submit to you that the infection here is a group of lawyers and paid experts that have created an entire story from selected bits and pieces," said Castle, who is also one of three people on the company's board of directors.
Castle attempted to undercut the MTA's case by showing documents to contradict the agency's evidence, and questioning the lack of testimony from MTA employees. She reminded the jurors of Tutor-Saliba's respected position in the construction industry. And she said there was no evidence of the individual 1,048 acts of misconduct for which the company was found liable.
The company "believes with all its heart that it did not commit misconduct," she said.