-Caveat Lector- (I don't trust companies (like ABB and International Paper) that use children in their ads to improve their negative images. --SW) April 13, 2001 Global Conspiracy on Construction Bids Defrauded U.S. By KURT EICHENWALD The New York Times group of international construction companies defrauded the American government out of tens of millions of dollars earmarked for Egyptian water projects undertaken as part of the Camp David peace accords, according to government officials and court documents. One participant in the wide-ranging conspiracy, a unit of ABB Ltd., the Swiss engineering giant, pleaded guilty yesterday to its role in the scheme, agreeing to pay $63 million in fines and restitution. The conspiracy, which lasted more than seven years, involved the rigging of contract bids submitted in the late 1980's and early 1990's to the United States Agency for International Development, which was financing Egyptian water projects that resulted from the Middle East peace accords reached during the Carter administration. Contracts were supposed to be awarded through competitive bidding. But the construction companies subverted the process through payments of bribes and kickbacks to other possible bidders, fraudulent billings to the government and the laundering of cash through Swiss bank accounts, court records in related cases show. The conspirators included at least six international construction companies, which collectively referred to themselves as the Frankfurt Group, according to people briefed on the case. At the time of the bidding, the companies were either American or American subsidiaries of European concerns. The name of the group came from the fact that some of the largest companies were based in Frankfurt. The investigation of the conspiracy began almost six years ago, after a top financial officer at one company noticed a series of improper wire transfers and other transactions. That executive then brought those matters to the attention of the Justice Department, which has been investigating ever since. According to court records, companies involved in the conspiracy were able to obtain profits of as much as 60 percent on the Egyptian water projects — a return that would be almost certainly impossible to obtain under competitive bidding. Indeed, some of the companies went to great lengths to hide their profits, charging fictitious expenses from related companies to decrease the returns shown on their books. All told, about a dozen contracts have been awarded under the program, totaling more than $1 billion. To date, three contracts have been found to involve fraud, and the others remain under investigation. The investigation has already resulted in two other guilty pleas, entered last fall by other construction companies. But until yesterday the full scope and implications of the criminal investigation were not publicly known. In the plea entered yesterday in Federal District Court in Birmingham, Ala., ABB Middle East and Africa Participations A.G., a Milan- based subsidiary of the engineering company, admitted to taking part in a conspiracy to rig the bid for a project known as Contract 29. The original participant in the conspiracy was SAE Sadelmi USA, another ABB subsidiary, which was based in North Brunswick, N.J., and later became part of the Milan subsidiary. Under the terms of the illegal agreement, the ABB unit met with other potential bidders on Contract 29 and agreed to pay them $3.4 million to submit inflated bids for the project. The ABB unit was then able to inflate its own bid on the project, knowing the offer would still beat other submissions. The value of the awarded contract, which was to pay for building a wastewater treatment plant in Abu Rawash, Egypt, was about $135 million. "Although the construction work that is the subject of this case was performed on foreign shores, the U.S. government paid the bill and the U.S. taxpayers were the victims of the scheme," John M. Nannes, acting assistant attorney general in charge of the Justice Department's Antitrust Division, said in a statement. An ABB spokesman, William Kelly, said the company had been cooperating with investigators since 1996, and first learned that it was a target of the inquiry last fall. He said the crimes were conducted by a small group of employees, all of whom have since left the company for reasons unrelated to the case. "We deplore and deeply regret the behavior that led to these charges," Mr. Kelly said. "It stands in sharp contrast to the high standard of business ethics practiced by the great majority of ABB employees." He added that in the year since the bid rigging occurred, ABB has expanded internal compliance programs "to let employees at all levels know that ABB has zero tolerance for illegal or unethical business behavior." According to court records in related civil cases, the $3.4 million payment was made to an unincorporated joint venture formed by Bill Harbert International Construction, based in Birmingham, and the J. A. Jones Construction Company, a Charlotte, N.C., subsidiary of Philipp Holzman A.G. of Frankfurt. Philipp Holzman pleaded guilty to a criminal complaint filed under seal last August. A spokesman for Harbert did not return a telephone call. According to court filings by the government in related cases, the Jones- Harbert venture was at the center of other bid-rigging efforts involving the Egyptian water projects. For example, American International Contractors Inc., a construction company based in Arlington, Va., and owned by the Archirodon Group of Geneva, pleaded guilty last September to accepting payments in exchange for a commitment not to bid on a project known as Contract 20A. That contract was awarded to the Jones-Harbert joint venture, court records show. Indeed, irregularities in Contract 20A led to the discovery of the broader bid-rigging scheme. The irregularities were first discovered by Richard F. Miller, who worked first as a controller and then as treasurer of Jones from 1986 though 1996. During the course of his work, Mr. Miller discovered a series of improper transactions involving the joint venture with Harbert, and pieced together that a bid-rigging scheme had been used in Contract 20A, a $107 million sewer project in Cairo. Among the evidence eventually discovered by Mr. Miller, according to court records from a federal whistle-blower suit he filed, were wire transfers for $3.35 million from the joint venture to a related company for fictitious "preconstruction costs." The most complex transaction, according to the court records, was a bogus "sale-leaseback" arrangement involving a Jones-related company called Sabbia. Under the terms of the deal, Sabbia was to purchase the construction equipment for the project, then lease it back to the joint venture. Yet while $14.4 million in lease payments were sent to Sabbia, the $4 million to purchase the equipment was never paid by that company. Instead, according to court records and lawyers involved in the case, that money remained in a Swiss bank account and was used as a fund to disburse payments to other co- conspirators. "This was an example of a transaction that was done to reduce the apparent profitability of Contract 20A," said Robert Bell, a lawyer from Wilmer, Cutler & Pickering who is representing Mr. Miller in his whistle- blower suit. "If you skim almost $15 million off the top, it's easier to make it look like the joint venture wasn't making all that much money." ANOMALOUS IMAGES AND UFO FILES http://www.anomalous-images.com <A HREF="http://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, mis- directions and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRLgives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. 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