By Maggie Mulvihill, Joe Bergantino and Sydney Lupkin

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The Massachusetts Highway Division has handed out millions in federal stimulus dollars for roadway construction to companies that have defrauded taxpayers, polluted the environment and have paid tens of thousands of dollars in fines for violating workplace safety laws, an investigation by the New England Center for Investigative Reporting at Boston University has found.

Some of the firms failed to disclose their history of trouble to the state even though they’re required to on “prequalification applications” state officials use to determine if companies are qualified to bid on contracts. The applications are signed under the pains and penalties of perjury

“They are making legal statements there and we can take legal action, but it does not appear that has been enough of a deterrent for some contractors,” said Highway Division Administrator Luisa Paiewonsky. “The integrity of the contractor is something we rely on everyday to get our work done.”

Thirteen of the 21 companies that had been awarded transportation stimulus contracts in Massachusetts as of September 30th have a history of law breaking. Together, they have received about $54 million federal stimulus dollars, state contract records show.

The two companies with the most serious record of problems are P.A. Landers Inc. of Hanover and Aggregate Industries Northeast Inc. based in Saugus.

In 2007, P.A. Landers and two of its top officers, including company president Preston A. Landers, were convicted of defrauding the government of $332,686 by over-billing for asphalt the company supplied on several road projects.

The company still owes $1 million of a $3 million dollar fine levied in the case, federal court records show.

Landers, however, did fill out the state’s prequalification form correctly, reporting over $42,000 in environmental fines levied by the state Department of Environmental Protection since 2006, Paeiwonsky said.

Also in 2007, Aggregate Industries was convicted of defrauding taxpayers by supplying thousands of truckloads of sub-standard concrete to the Big Dig project. The firm agreed to pay $50 million in civil and criminal fines. This past summer, six of the company’s former managers pleaded guilty or were convicted of defrauding the government in the same case. Aggregate still owes $16 million of the $50 million in fines, federal officials confirmed.

According to a spokesperson for the U.S. Attorney’s office in Boston, both Landers and Aggregate can use the tax dollars they earn from their stimulus contracts to pay their fines. Landers has $4.4 million in contracts including one for repaving the Bourne Scenic Highway that runs along the Cape Cod Canal; Aggregate has $8.9 million in contracts for road work in Harvard, Littleton, Avon and Stoughton, state contract records show.

The state highway division did suspend both companies from bidding on state contracts for a period of time, P.A. Landers for two and a half years; Aggregate for just under four months. Paiewonsky said she wanted to permanently bar both companies from doing business with the state, but says her agency’s attorneys decided to do so would be unconstitutional.

“I wanted in the worst way to find the maximum punishment for them not only to send a message to them, but to the entire construction industry,” Paiewonsky said. “When the length of the suspension was served, we had no other legal means of punishing them.”

Landers officials declined repeated requests for an interview as did former company president, Preston Landers, who is still serving a prison term.

State Inspector General Gregory Sullivan said a company like Landers should have faced a stiffer punishment.

“If it were up to me, if a company is caught red-handed with their hands in the till, ripping off taxpayers. I wouldn’t let them do business again,” Sullivan said.

Unlike Landers, Aggregate did not disclose $600,000 in environmental fines levied by the state since October, 2006, as well as $6300 in fines issued in July, 2006 by the U.S. Occupational, Safety & Health Administration for a Dorchester worksite, federal and state records show.

“It does appear that they were not truthful and they signed this contract under the pains and penalty of perjury,” said Paiewonsky of Aggregate.

The question on the prequalification form requires contractors to report any “civil, criminal or administrative proceedings involving public contracts, safety, environmental laws, or regulations” in the past three years. These apply to federal and state agencies and would include workplace safety and environmental violations, Paiewonsky said.

The division uses the information supplied on the application to determine whether firms are qualified to bid on contracts.

“Any violation of law or state regulation is something we take seriously,” Paiewonsky said.

In a statement, Aggregate said there was “confusion” about what it had to report, and that the company now has “new owners, new top management and a stringent compliance program.”

Aggregate is one of at least seven road construction companies with a history of polluting the environment that have received stimulus contracts.

P.J. Keating Inc. of Lunenberg, didn’t disclose $22,750 in fines levied by the state since February, 2007 for air and water pollution in Acushnet and Shirley, highway division records show.

Keating has $11.8 million in stimulus contracts. A company official said it didn’t know it had to report the information.

D & R General Contracting of Stoneham, with $3.4 million in stimulus contracts, did not report an April, 2008 fine of $17,500 for waste site cleanup violations, the state highway division said. The company said its failure to report was an honest mistake.

“It does appear very troubling to me,” Paiewonsky said, referring to the companies’ failure to report their records of violations.

An attorney with the environmental advocacy group, the Conservation Law Foundation, said state agencies, in awarding stimulus dollars, should give preference to companies with impeccable environmental records.

“We believe that stimulus funds can be a powerful motivational tool that can reward companies with extraordinary environmental records and who are going beyond compliance,” Cynthia Liebman said.

At least ten companies with a prior record of workplace safety violations also have received stimulus contracts, the NECIR-BU investigation found. One of them is Liddell Brothers Inc. of Halifax, Mass.

Liddell has a $2.6 million stimulus contract.

OSHA cited the company four separate times for failing to provide cave-in protection for workers in trenches. Liddell has paid $46,580 fines for those and other OSHA violations, federal records show.

In a statement announcing one of the fines, OSHA area director Brenda Gordon said: “The potential for death or serious injury at this jobsite was real and present.”

Liddell officials declined comment.

Former OSHA Commissioner Charles Jeffress said companies with repeat or “willful” safety violations should not get state contracts. OSHA defines a willful violation as one in which the employer shows “plain indifference to or intentional disregard” for employee safety or health.

“There is no excuse whatsoever for not protecting an employee in a trench. It is 100 percent preventable,” he said.

Liddell did not report the workplace safety violations on its pre-qualification application, according to the state highway division.

Liddell attorney Robert V. Lizza said in an email Liddell thought it only had to disclose “proceedings” the company was involved in with government agencies within the three years preceding its prequalification application.

Liddell immediately abated the safety hazards, paid its fines and the issue did not progress to a formal “proceeding,” Lizza said in the email.

Paiewonsky said Liddell should have reported the fines.

“We need to have that information when we are making our decisions,” Paiewonsky said.

Paiewonsky said the division does not verify the accuracy of the information provided by contractors, partly because of staffing, but planned to start.

“If we don’t have enough staff doing it now, then we need to add staff to do it because the integrity of the construction process is paramount to us,” she said.

The highway division has ordered each of the companies that failed to report their record of violations to submit a written explanation. Highway officials said they then will decide what action, if any, to take.

The industry trade group, Construction Industries of Massachusetts Inc., claims the question on the form is confusing. It stated in a Nov. 16 letter to Paiewonsky that “no one person has the same interpretation or understanding as to what information must be submitted.”

CIM has asked for immediate clarification on the question, while some contractors said they will file amended prequalification applications with the state.

Jim Reger, president of P.J. Keating Inc., said his company omitted its recent environmental fines from its prequalification application because they occurred in the company’s stone and quarry division, which did not bid on roadway contracts.

Reger said no one from the Highway Division has ever questioned P.J. Keating about any information contained in that section of the prequalification form.

“For the past 10 ½ years we have filled out our forms the same way,” he said.

Paiewonsky said contractors know what they need to report.

“We are comfortable that the form is clear about the disclosure required,” she said through a spokesman.

This story was written and reported by members of the New England Center for Investigative Reporting at Boston University, an investigative reporting collaborative that includes the Boston Globe, WBUR-FM, and New England Cable News, New England Ethnic News, The Warren Group and The Lawrence Eagle Tribune.

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