Justice Department follows growing trail of illicit highway contracts; many states consider higher gas taxes as roads seriously deteriorate; Courts levy $7.6 million in fines in highway bid-rigging schemes
An expanding federal probe into misuse of millions of dollars of the gasoline taxes Americans pay at the pumps is having results. Dozens of management personnel in construction companies have been convicted of rigging public highway construction bids.
So far the federal probe has touched six Southeastern states, plus Louisiana, Texas, and Kansas. But "there are indications it may go to other states," says Justice Department spokesman Mark Sheehan.
The department's antitrust probe, now joined by some states and at least one city -- Atlanta -- also focuses on airport construction, something passengers pay for indirectly through the price of tickets.
City attorneys for Atlanta recently filed suit against 50 construction officials and companies alleging bid rigging on the recently opened airport here , which has the world's largest passenger terminal.
As a result of the investigations, several states have tightened their highway bid monitoring procedures. But federal and state highway officials express concern that such improvements may not stop the problem. Often the actual conspiring to rig bids, they say, is done orally.
Such conspiracy is "almost impossible to prove unless you get a canary [ someone involved who is willing to talk]," says Jim Billett, regional counsel here for the Federal Highway Administration.
Apparently Justice Department investigators found a "canary" willing to "sing" about the little-known world of bid rigging. Altogether, some 40 corporations and 67 officials have been indicted on charges of conspiring to rig construction bids for public highways and airports in violation of the federal antitrust law since the federal investigation began in December 1979.
All but one of the 55 cases that have gone to court so far have ended with guilty pleas. The 55th case ended with a "no contest" plea. And $7.6 million in fines has been levied.
Although some top construction officials now are in jail, others and their companies have been given lighter penalties in return for information on additional bid-rigging. As a result, the investigation is "snowballing," says Mr. Billett.
Federal Highway Administration officials contacted here and in Washington could think of no additional steps they might take to improve the quality of their surveillance of how states spend federal highway money.
The bid-rigging "ranges from actual dollar exchanges -- payoffs -- to a territorial agreement," says Rex Leathers, regional Federal Highway Administration official here. Crooked bidders sometimes pay off other potential bidders so they won't bid, he said. Or bidders divide up jobs, deciding who will be the low bidder in each case. It is not uncommon, officials say, to have only two bidders.
Most of the bid-rigging detected so far has been in asphalt paving. The price of asphalt is tied to the rapidly fluctuating price of crude oil, making it hard for state officials to determine what is a fair price.
One of the guilty pleas came from officials at the Richmond, Va., division of Ashland-Warren, a subsidiary of Ashland Oil Inc., one of the nation's largest independent refinery companies. A spokesman for Ashland Oil says the company has taken a "more aggressive attitude" toward educating employees about antitrust laws. No company officials have been dismissed since the guilty pleas were made.