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News Analysis: Disgraced I-84 Contractor Still Working on State Roads

by Christine Stuart | Mar 23, 2007 9:01pm
(1) Comment | Commenting has expired
Posted to: State Capitol

Christine Stuart photo
While the state’s $17.5 million settlement for the shoddy drainage work on a three-mile stretch of I-84 may have sounded like great news for taxpayers, the picture isn’t as rosy as it seems.

On Thursday Gov. M. Jodi Rell in collaboration with the Department of Transportation and Attorney General Richard Blumenthal, issued a press release praising the $17.5 million settlement the state received from the contractor’s performance bond company, United States Fidelity and Guaranty.

“I said we would protect the interest of the State and our taxpayers and that the responsible parties must be held accountable,” Rell said in the press release.

While the state retains the right to sue the contractor, L.G. DeFelice of North Haven, for additional funds, it highlights the need for some type of state contract reform because what the press release didn’t say was that the contractor re-formed and re-organized as Hallberg Construction Corporation and is currently working on two other state road projects.

DOT spokesman Kevin Nursick said Friday that the state doesn’t currently hold any contracts with Hallberg, but it holds contracts with another performance bond company called XL Specialty Insurance and XL Specialty Reinsurance Company. It’s the performance bond company that re-hired Hallberg to finish the job, Nursick said.

He said this traditionally happens because a company has already started a project and it may be easier for the bond company to hire the contractor that started the work because it has all its equipment on site.

State Rep. Christopher Caruso, D-Bridgeport, said he’s outraged over the situation, but he’s not surprised. He said this just “underscores the problem” and the need for the state to pass a clean contracting bill.

Rell vetoed a contracting standards bill three times because it included what her spokesman called “pro-union” language. In a press release from January 2006 Rell said she was forced to veto the legislation because it contained “unacceptable language that would have hurt non-profits, small businesses and minority-owned businesses.”

“Those entities would have been forced to pay state-employee wage levels,” Rell said.

Rell’s spokesman, Chris Cooper, said Friday that the governor was particularly disturbed when she heard the news that the same contractor would be hired to complete the widening of Route 7 and the Q-Bridge project. Cooper said that Rell placed a call to the performance bond company and begged them not to hire Hallberg, but with no success.

Nursick said at that point it’s a private company hiring another private company. In regards to the Route 7 widening project, he said, the good news is that there have been few problems and nowhere near the amount of problems the company had widening I-84 from Cheshire to Waterbury.

L.G. DeFelice, the contractor hired to widen I-84, and which has been cited as the source of the substandard drainages, walked away from the project almost two years ago. While it was on the cusp of insolvency and after the screw up that will cost the state up to $26 million, it decided it was more important to pay off luxury vehicles than to make the construction company solvent, according to a lawsuit filed by USF&G. Click here to read our previous report on the lawsuit.

The lawsuit alleges the contractor engaged in a number of financial transactions that were done for the benefit of the individuals in the company. For example, the lawsuit claims the company paid-off loans on a 2004 Mercedes Benz E320 owned by Kathleen Hallberg, a 2003 BMW 745LI owned by William McGee, and a 2003 Mercedes Benz s500 owned by Victor Hallberg.

Victor Hallberg also donated $500 to Jodi Rell 06, according to state campaign finance documents.

Caruso said the clean contracting legislation Rell has repeatedly vetoed would have had the ability to correct problems like this. He said the DOT needs to be reigned in and the legislature needs to pass a clean contracting bill this year.

But for now the damage has been done.

The repairs on the I-84 project are estimated at between $19 million and $26 million.

Nursick said the state had yet to pay the contractor $1.5 million which brings the amount available for the project up to about $19 million.

Attorney General Richard Blumenthal said Thursday that the state still has the right to sue the contractor and anyone else involved in the project for more money, but the DOT and the governor “felt this amount was fair in light of the time and expense it would cost the state to litigate.”

Why would the state think the bond company, United States Fidelity and Guaranty, has more money?

The lawsuit filed by USF&G revealed it had $27 million set aside and reserved for payment of performance bond claims against the contractor.

So why didn’t the state ask for more?

Blumenthal said that was a “business decision” made by the DOT and Governor Rell.

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Comment

posted by: Steven G. Erickson | March 24, 2007  2:18pm

If I understand the system correctly, taxpayers pay off bonds after a project is complete.

If the bond system in Connecticut is honest, why would an 8 million dollar condo project be used in Naugatuck to build condos. How much interest and payments will the nearly 35,000 residents have to pay back with interest?

Are Connecticut Judges the main bond holders on some projects where 12% is paid out?

Are contractors paid their money up front for a project they are to do after?

How the system works and doesn’t work in Connecticut is disgusting.