Opinion ID: 3049934
Heading Depth: 2
Heading Rank: 1

Heading: McNair Helps Contractor-Defendants

Text: Jefferson County was governed by five elected Commissioners, each of whom had a different area of responsibility. Defendant McNair held office as a County Commissioner from 1996 until his retirement in March 2001. McNair was responsible for overseeing the JCESD, which included the sewer systems. McNair had authority to approve pay requests from the sewer construction contractors, to approve change orders7 increasing the contract price paid to those contractors, to approve change orders modifying the contract terms in favor of those contractors, to approve emergency payments to contractors, to select consulting engineers 7 Change orders are contract modifications in the Jefferson County Commission’s Agenda items. 11 through a no-bid process, and to approve the engineers’ contracts and payments. Although final approval required the vote of the entire Commission, there was no evidence that the Commission questioned or disapproved of any pay request or change order approved by McNair or any selection or award of a contract recommended by McNair. McNair’s nickname among the contractors was “Big Man.” McNair approved payments (in the hundreds of millions of dollars) to the Pugh, Rast, and Dougherty defendants (the “contractor-defendants”), approved change orders (in the millions of dollars) benefitting PUGH and RAST, and approved no-bid engineering contracts (in the millions of dollars) to FWDE, all while these defendants were paying for materials and labor to expand and renovate McNair’s photography studio. Each item requiring Commission approval, such as contract awards or modifications, needed McNair to approve it first and then to put it on the Commission’s agenda for further approval.8 The sewer construction contracts were awarded through a sealed bid process and would go to the lowest 8 For example, the December 1999 Commission Agenda shows a modification adding $1,081,621 (about 28% of the contract value) to a PUGH contract, and a $112,600 contract award to FWDE. The January 2000 Agenda indicates a modification adding $489,133 to a PUGH contract. The February 2000 Agendas indicate a modification adding $400,724 to a RAST contract, a $721,132 contract award to FWDE, and a modification adding $1,377,267 to a PUGH contract. The March 2000 Agenda indicates a $5,289,002 contract award to PUGH. The April 2000 Agenda indicates contract awards of $994,640 and $348,103 to FWDE, a modification adding $439,722 to a RAST contract, and a modification adding $850,264 to a PUGH contract. 12 bidder. But the prospective contractors had to satisfy technical standards set by the PRC before they would be eligible to bid. Once a new contract was awarded and in place, Chandler and other supervisors, such as Ellis, could approve changed or additional work as “field directives.” If a requested change exceeded the original contract amount, Chandler and Ellis could recommend “change orders” (requests for additional funds), which McNair would then approve and place on the Commission’s agenda, without further competitive bidding. The JCESD also could award “emergency” work to construction contractors without competitive bidding. For emergency jobs, Barber typically selected the contractor, negotiated the price, and then sent the pay requests to McNair, Swann, and Chandler for approval. Together, McNair, Swann, and Chandler approved a variety of contracts for the sewer project.9 The construction contractors’ work was supervised by independent consulting engineers, whose jobs were to make sure the contractors performed according to specifications and to sign off on payments and requests for change orders. This supervision was provided by engineering firms such as FWDE, USI, 9 For example, Chandler, Swann, and McNair approved a $1,168,788.02 payment to PUGH for work done in January 2001. Chandler, Swann, and McNair approved a $2,652,820 payment to PUGH for work done in June 2000. Chandler, Swann, and McNair approved a $1,000,000 payment to RAST in October 2000. Swann and McNair approved — in one day on an emergency basis without Chandler’s or the County engineer’s usual approval — a $1,152,888 payment to RAST for work done in October 2000. 13 and Dawson Engineering. The engineering consultant contracts were awarded without bidding. Swann and Chandler selected engineering firms, negotiated their contracts, and recommended them to McNair for final approval. The County’s PRC initially decided to qualify only three contractors to do “cured-in-place” work: W.L. Hailey (“Hailey”), Insituform, and Reynolds. Because the traditional “dig-and-replace” work was grouped with “cured-in-place” work for all the major construction contracts, this PRC decision effectively limited the “big jobs” to only three bidders: a RAST-Hailey joint venture, a PUGH-Insituform joint venture, and Reynolds, which did its own dig-and-replace work. In late 1999, the PRC changed the criteria, making it more difficult for other contractors to pre-qualify for “cured-in-place” work, and potentially delaying by two years the qualification of otherwise qualified contractors.10 Contractor PUGH’s CEO Grady Pugh admitted to receiving a “general benefit” from giving McNair “envelopes of cash,” in that “Jefferson County treated us real well. We had an opportunity to do a tremendous amount of work there. The work that we did there generated huge profits . . . [I]t took our company [PUGH] from a normal struggling contracting company in [the] mid to late ‘90s, to a thriving, wealthy, strong construction company.” 10 The PRC and its requirements are discussed more later in the Wilson trial section. 14 During the relevant period, PUGH dedicated about 70% of its work to the Jefferson County sewer rehabilitation and received tens of millions of dollars in revenue from that sewer work. In 1996 and 1997, at the sewer rehabilitation’s outset, PUGH made gross profits of 10%, and as the project continued and payments were made to JCESD officials, the company’s sewer rehabilitation profits increased to 50% in 1999, 40% in 2000, and 45% in 2001, making PUGH tens of millions of dollars each of these years. RAST also received tens of millions of dollars in revenue per year from its Jefferson County sewer work. And the engineering firms, including FWDE, received revenue in millions of dollars per year from their work on the sewer rehabilitation. McNair made the decision every time FWDE or Dawson Engineering was selected as the outside consulting engineer and awarded a professional service contract. After electrical contractor Gus Henson did some work for McNair without charge, McNair had Swann arrange a County contract for him, even though the County did not normally hire electrical engineers for sewer work. In total, from August 1999 to January 2002, Jefferson County paid $178 million to PUGH, $100 million to RAST, $11.4 million to FWDE, and $8 million to Dawson Engineering. 15