Lawmakers, DOT Circumventing Court with Legislation?

September 21, 2015

Investigative Reports

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Lawmakers, DOT Circumventing Court with Legislation?As hundreds of bills slogged their way through the General Assembly earlier this year, one narrowly crafted piece of legislation was quietly put on the fast track and nearly passed – without any public input.

And if passed, the legislation would have thwarted the intent of a judge’s order and settlement of a lawsuit, critics contend.

H. 4056, authored by Rep. Laurie Funderburk, D-Kershaw and an attorney, would have banned the state Department of Transportation from doing business with contractors or subcontractors if those firms were:

  • Owned, “in whole or in part, by a trust that benefits a person or firm who has been disqualified (from) bidding on department contracts, or a disqualified person’s family”; or if
  • The “disqualified person or firm provides financial support or loans to the contractor or contracting firm.”

The primary target of the bill, Funderburk confirmed to The Nerve last week, was a recently formed road-paving company called Lynches River Contracting Inc., based in Pageland, which is owned primarily by two trusts, court records show.

Funderburk said she drafted the legislation – with the help of DOT legal staff – after she was contacted by a constituent who believed that a company owned by the constituent “couldn’t be competitive because of the fraud that Boggs (Paving Inc.) was perpetuating.”

The Nerve in 2013 reported that Boggs Paving Inc. of Monroe, N.C., which had been awarded more than $200 million in contracts for road projects in the Palmetto State since 2008, and a minority subcontractor had been suspended by the Federal Highway Administration from receiving any future contracts for South or North Carolina projects after the two firms and company executives were indicted in what federal authorities described as a 10-year scheme to fraudulently obtain more than $87 million in federal and state contracts.

Carl Andrew “Drew” Boggs III, president and part owner of Boggs Paving, as well as five other defendants, later pleaded guilty to various federal charges, according to the U.S. Attorney’s Office for North Carolina’s Western District.

Drew Boggs is the brother of David C. “Chris” Boggs, who also worked for Boggs Paving and was Lynches’ interim president when it was first formed, but was not charged in the federal case, according to attorneys connected to the case and court records. The “David C. Boggs Family Dynasty Trust” owns 45 percent of Lynches River Contracting Inc., and another 45 percent is owned by the Lynches River Trust, records show.

Former Boggs employees Thad Preslar, now president of Lynches River, and Charles Lee Sanders, Lynches’ vice president, each own 5 percent of Lynches, which was incorporated in South Carolina last September and was licensed by the state in November as a general contractor, court records show.

Preslar and Sanders were not among those charged in the federal case. Still, Funderburk told The Nerveshe was concerned about Lynches’ apparent ties to Boggs Paving when she introduced her bill on April 23 – more than three months after the regular legislative session started and only a week before the annual deadline for bills to pass from one chamber to the other.

“I was in a situation where I was trying to protect taxpayer dollars,” she said. “We don’t want to be defrauding the public. … We don’t want to do business with bad actors.”

‘Just Trying to Work’

But the bill, which has 17 Democratic and Republican co-sponsors, was introduced less than two months after DOT signed a court settlement in which Lynches was allowed to bid on DOT projects as a “prequalified contractor” under state regulations, according a copy of the settlement obtained by The Nerve. The March 4 document noted that Lynches had submitted low bids on eight of 13 projects let in February.

Lynches sued DOT after the agency in January revoked the company’s “primary contractor prequalification,” which had been approved a month earlier, court records show. In a Jan. 8 letter to Preslar, Todd Steagall, DOT’s director of construction, said since the initial approval, “new information has been obtained concerning management discrepancies as well as dual employee issues with a suspended contractor, Boggs Paving,” though he didn’t give specifics.

In its suit, Lynches contended that it would “suffer irreparable harm by virtue of SCDOT’s unlawful process in that it will not be permitted to participate in full and open competition in the February bid letting wherein millions of dollars of SCDOT work will be awarded.” Richland County Circuit Judge DeAndrea Gist Benjamin sided with Lynches, issuing a temporary restraining order on Feb. 10 that allowed the company to participate in the bidding, court records show.

The DOT Commission on April 17 – the week before Funderburk introduced her bill – approved Lynches’ low bids in February for eight projects statewide totaling more than $13.5 million, commission records show.

Funderburk said she wasn’t “trying to meddle with that particular contract” in introducing her bill, which doesn’t mention either Lynches or Boggs Paving by name, though she noted, “I believe what we could do is affect the consideration of DOT going forward related to Lynches River.”

DOT spokesman Pete Poore did not immediately respond to written questions last week from The Nerveseeking comment on his agency’s role in Funderburk’s bill. In an Aug. 20 written response, Poore said state law bans a newly formed company from “being qualified to bid on SCDOT projects if the new company is controlled by a disqualified person.”

“Lynches River is controlled by a trust established by a disqualified person, but not controlled by that person,” Poore said then, adding that since the company was prequalified in December, it was the low bidder on 11 of 33 proposals and was awarded 10 contracts with bids totaling more than $23.1 million.

“We’re here just trying to work, to be honest with you,” Preslar said when contacted last week by The Nerve, though he referred further questions to his Columbia attorneys, Wade Mullins and Hank Wall.

“We do believe that this legislation is being driven by a competitor that is engaging the market and is looking to protect that market,” Mullins told The Nerve. “What this legislation would do is what could be described as a de facto debarment of what is not an affiliate of Boggs Paving.”

Mullins said Lynches has no present ties to Boggs Paving, noting the trust bearing Chris Boggs’ formal name is “governed by an independent trustee who has a fiduciary duty to the trust and is not beholden in any way to any Boggs, either Drew or Chris.”

“This structure has been examined by no less than five different agencies or authorities,” he continued, including both the S.C. and N.C. transportation departments and the federal government. “I don’t believe there was any question that the structure is in compliance with every state and federal law that exists in governing a contractor’s ability to perform work.”

As for Preslar’s and Sanders’ roles with Lynches, “Those guys are highway contractors; they just want to build highways,” Mullins said.

In a written statement last month to The Nerve, Federal Highway Administration spokesman Doug Hecox said Boggs Paving is suspended and “proposed for debarment.” Contacted last week, Columbia attorney Pete Strom, who represented Boggs Paving, told The Nerve the company cannot bid on future projects though it can continue to do work under existing contracts. State comptroller general records show that Boggs Paving received nearly $6.3 million from the state DOT last fiscal year, which ended June 30, plus another approximately $1 million from county transportation funds.

“There were no allegations in Boggs’ case about the quality of work or timing of the work,” said Strom, a former U.S. attorney for South Carolina.

Boggs Paving was accused in a federal indictment of using a North Carolina minority contractor, Styx Cuthbertson Trucking Co. Inc., to illegally obtain millions in federal and state road contracts, though the Styx firm, which also was indicted, allegedly did little actual work and received kickbacks from the Boggs company.

Public Left Out

Just six days after Funderburk’s bill was introduced, it was moved – without any public input  – from the House Labor, Commerce and Industry Committee, chaired by Rep. Bill Sandifer, R-Oconee, to the House floor, where it was given unanimous approval on second reading and sent to the Senate after a routine third reading, legislative records show.

Funderburk said the bill had to be moved quickly out of the House to meet a May 1 “crossover” deadline to get it to the Senate, adding, “The response I got from the House was substantial; a lot of people were familiar with this and interpreted it the same way.”

But Sen. Tom Davis, R-Beaufort, told The Nerve when contacted last week he was “very uncomfortable” that the bill received no subcommittee or committee hearings in the House or Senate, and was “narrowly focused.” After passing the House, the legislation was referred to the Senate Transportation Committee, where it was polled out on May 21 and placed on the Senate calendar for debate by the full Senate.

Davis said Senate Transportation Committee Chairman Larry Grooms, R-Berkeley, informed him the bill was necessary because “DOT felt it (Lynches) wasn’t qualified to be a bidder but needed legislation to allow them to make a determination.” Grooms did not respond Friday to a phone message from The Nerve seeking comment.

The legislation was debated on the Senate floor on June 4 – the last day of the regular session – but it stalled after Davis introduced an amendment, and Senate President Pro Tempore Hugh Leatherman, R-Florence, objected to further consideration of the legislation. Because the General Assembly is on a two-year cycle, the bill can be taken up again when lawmakers reconvene in January.

“My understanding was that if the bill passed, it was going to undo contracts, so the amendment I put up was to be prospective in application,” said Davis, an attorney.

Davis said although he wouldn’t object to making “some amendments” to the state procurement code if the situation with Lynches required it, any changes would have to be done through the normal legislation process – not the way Funderburk’s bill was handled.

“The whole process was skirted,” he said.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.