Cleveland Ignored Red Flags on Airport Project

At first, it looked like a simple turf war between two labor unions fighting over a lucrative piece of the most expensive construction project in Cleveland history.

The electricians union argued it should do the underground electrical work for the $500 million runway expansion at Cleveland Hopkins International Airport. The laborers union argued the work was simply ditch-digging, which was their domain.

But as an electricians union official investigated the $130 million contract awarded to Anthony Allega Cement Contractors six years ago, he discovered something disturbing: Chem Ty Environmental Inc., the company hired by Allega to do the electrical work, had a bogus office address in a Cleveland housing project.

That discovery, some council members argue today, should have prevented a monumental scam: front companies getting paid for doing no work at Hopkins.

But it didn't.

Instead, some council members say today, then-Mayor Michael R. White and his Cabinet ignored the red flags. And then-Council President Mike Polensek, White's bitterest rival, rammed through legislation that allowed the scam to occur.

The unlikely - and perhaps unwitting - alliance between White and Polensek still puzzles people involved in the fight. But the result is unmistakable, said Walter O'Malley, an official with the International Brotherhood of Electrical Workers Local 38.

"This was a scam," O'Malley said last week. "We knew it from day one. We knew damn well that Chem Ty was not doing a thing."

Allega's contract for the Hopkins expansion is under scrutiny because of the release of a city report this month in which leaders of Chem Ty and RMC Construction admit they were paid but did no work.

Chem Ty also kicked money back to Allega and Nate Gray, according to the report. Gray was White's best friend, and now is serving 15 years in federal prison for paying bribes to public officials in exchange for city contracts.

O'Malley said he repeatedly warned members of White's Cabinet that Chem Ty Environmental Inc. was not a legitimate company and was not qualified to work at the airport.

White and then-airport Director Reuben Sheperd ignored O'Malley's warnings about irregularities in Allega's bid, O'Malley said.

Allega's bid was much lower than all of the others because he was the only one calculating it using laborers' pay instead of electricians', who make about $10 more an hour, O'Malley said.

Allega and Sheperd did not respond to phone calls last week seeking comment.

City Council passed a law in March 2001 sponsored by Councilman Michael Dolan that would have forced Allega to calculate the bid using higher wages paid to certified electricians. But just seven weeks later, council did an about-face and rushed through legislation sponsored by Polensek repealing the law. The repeal passed 16-0.

Polensek said the issue in 2001 was a dispute between two unions. No one warned him about Chem Ty, he said.

"They never raised an issue with me that this was a front company," Polensek said earlier this month.

Councilman Bill Patmon, who ran council's powerful Finance Committee, agreed.

"Mike Polensek and everybody else saw this as a union issue," Patmon said. "I don't think you could have gotten 16 people to vote for a front company. That's a stretch."

But O'Malley read a message in the fact that the mayor ignored his warnings and City Council repealed the March 2001 law.

"Obviously someone in the city had an interest in giving it to Allega at any cost," he said.

Union official launches own probe of Chem Ty

One facet of the airport expansion was to build ducts to hold electrical wires. In 2000, O'Malley heard rumors that John Allega, president of Anthony Allega Cement Contractors, planned to bid on the job using lower-paid laborers instead of electricians, who traditionally have built them.

O'Malley complained to Sheperd, and eventually O'Malley, Sheperd, Allega and others met in a room next to the mayor's office. White came into the meeting but only stayed for a moment.

"He said, 'I understand there's a problem. I'm going to leave and let you guys discuss it. You better fix the problem,' " O'Malley recalls White telling the group.

Allega went ahead and bid on the contract using laborers' wages. Allega's bid was at least $10 million lower than the competitors'.

O'Malley became more suspicious when he didn't recognize some of the subcontractors on Allega's bid. Under Cleveland rules, some of the work on major projects using city money must be set aside for companies owned by women and minorities.

O'Malley looked into Chem Ty. He found a thin work record and lots of liens for unpaid taxes. He drove to the company's Cleveland address listed on the bid and found a boarded-up building in the Outhwaite housing project.

O'Malley took his concern to Councilman Dolan, who chaired the Aviation Committee in 2001.

Dolan said O'Malley's findings immediately disturbed him. At a hearing to discuss the contract in early 2001, Dolan said he held up a Polaroid photo of the building listed as Chem Ty's office to show then-airport Director Sheperd.

"It was clearly nobody's office," Dolan said in an interview.

Dolan and O'Malley also said Chem Ty was not licensed by the city as an electrical contractor. Knowing all of this, Dolan said a squabble over which union should do the work became much more troublesome for him.

"Chem Ty acting as a front company was very clear," Dolan said. "For anyone to say, 'Oh, we didn't know that,' that simply cannot be possible."

Councilman Patmon, who served on the Aviation Committee, said he recalls Dolan voicing concern about the bogus Chem Ty address, but not claiming that the business was a front company. The debate, Patmon said, strictly focused on which union should get to do the work.

The administration awarded the contract to Allega soon after the hearing, in February 2001.

Council does an about-face

In March, Dolan introduced legislation requiring the runway project to use a licensed, registered electrical contractor that paid electrician-union wages. Its passage would mean the Allega bid, which used Chem Ty as a subcontractor, would have to be thrown out.

Council passed the law, 20-0. But the issue wasn't closed.

Shortly after the vote, Dolan said he saw John Allega in a meeting in Council President Polensek's office.

Polensek said he might have met with Allega, but does not recall. He does have a record of a meeting with a former Allega executive.

Less than two months later, Polensek introduced his legislation to repeal Dolan's.

Before council voted to adopt Polensek's law, several council members gathered behind closed doors for more than an hour to debate the issue. Later that evening at the public council meeting, Polensek's key supporters on council who helped elect him president - Dolan, Ed Rybka, Tim Melena and Mike O'Malley, Walter O'Malley's brother - walked out in disgust.

Polensek said at the time that most members believed the unions representing electricians and laborers should settle the issue without council picking sides.

Walter O'Malley said Polensek's turnaround was shocking.

"Polensek has always been tight with John Allega and Local 860 [the laborers union]," O'Malley said.

"I don't know who told Polensek to repeal it, but obviously it was someone with enough influence out there to make sure it went the way it did."

In an interview, Polensek said Allega never pressured him to repeal Dolan's legislation. And he said neither the electricians union nor fellow council members presented any suspicions to him about Chem Ty.

Polensek said that as the runway construction project got under way, he heard rumors of payoffs and illegal deals.

Council tried to examine each contract thoroughly at public hearings, but "we're not the FBI," he said.

"I think we did a yeoman's job of looking at the contracts," Polensek said.

"Maybe had we pushed the envelope a little more. Maybe had we held investigative hearings. But all we had was rumors."

White, reached at home last week, said he knows nothing about Chem Ty.

"Don't know 'em, don't know anything about 'em, don't have anything to say," White said.

Dolan said he's not surprised by the city's recent finding that Chem Ty served as a front company for Allega. White, Sheperd and other top officials involved in the airport runway project shouldn't be surprised either, he said.

"They knew everything going on - or they should have known - because the issues were raised," Dolan said. "They ignored it."



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