In February 2014 as contractor Elvin “E.R.” Mitchell Jr. paid $188,000 in bribes for Atlanta contracts, city officials awarded his company emergency work totaling $5.2 million for a devastating ice storm that month, an Atlanta Journal-Constitution and Channel 2 Action News investigation has found.
Mitchell’s Cascade Building Systems captured 65 percent of the city’s business even though it was only one of five companies hired to clear roads, haul salt and remove debris.
Cascade’s prices sometimes far exceeded other companies’ cost estimates or those paid by the Georgia Department of Transportation, according to documents reviewed by the AJC and Channel 2.
In one case, Cascade charged city taxpayers an overtime rate of $442 an hour for each of 20 plows with front-end loaders — about $200 an hour more than price quotes provided by three other companies that performed work for the city during the storm. Cascade billed the city for more than 1,000 hours of overtime with that equipment.
Additionally, Cascade’s straight-time rate of $295 an hour for the plows also exceeded prices quoted by other contractors by about $120 an hour. The company billed the city for 878 hours of straight-time.
In all, Mitchell’s company received more than $700,000 just for the plows. The city would have paid about $353,000 to the company providing the lowest cost estimate for that equipment.
Beyond the cost to taxpayers, the amounts Mitchell charged the city could be significant if U.S. District Court Judge Steve Jones orders Mitchell to pay restitution as part of his sentence for conspiracy to commit bribery.
Mitchell and Lithonia contractor Charles P. Richards Jr. have both pleaded guilty to bribery charges, and are scheduled for sentencing April 28. Jones told them that part of their sentences could include paying restitution back to the city.
Zahra S. Karinshak, a partner at the law firm Krevolin & Horst and a former federal prosecutor in Atlanta, said the law allows for restitution in cases of price gouging.
“In general, when restitution is required, the court gives credit for what a contractor should have been paid if they had been awarded the job properly,” Karinshak said. “They get some credit for providing the service.”
Jenna Garland, a spokeswoman for Mayor Kasim Reed, said the city established a competitive procurement process in 2012 for emergency on-call services, but back-to-back storms in January and February 2014 strained the resources of on-call contractors, drove up prices and forced the city to seek emergency work from other companies.
“The State of Georgia and more than 20 local governments in the metropolitan area were all competing for resources, calling on the same companies and contractors to provide emergency supplies and services,” she wrote in response to AJC questions. “Costs went up as supplies were exhausted.”
Some prices higher than what state paid
The AJC and Channel 2 had previously reported that the city paid Cascade approximately $7.3 million in emergency contracts during the two 2014 winter storms, and another in 2011.
All of that work came at a time when Mitchell has admitted to making more than $1 million in payments to facilitate what the U.S. Attorney’s Office has described as a pay-to-play bribery scheme at City Hall that stretches back to at least 2010.
But a trove of documents released by Reed’s administration two weeks ago reveal new details about Cascade’s emergency contract work that were previously unavailable to the public. The AJC and Channel 2 retained a law firm and fought for the release of those documents after the city’s legal department initially rejected the requests, citing the ongoing criminal investigation.
In addition to the high cost of plows, Cascade collected nearly $690,000 for hauling salt and stone during the February 2014 storm, also at rates that seem extraordinarily high when compared to those paid by the state.
On two of four invoices submitted by the company, Cascade charged $195 per ton and $234 per ton for the service. The state paid rates of between $93 and $114 per ton during the storm, according to documents obtained from the Georgia Department of Transportation.
The other two invoices submitted by Cascade related to hauling stone or salt are more in line with the rates paid by the state, at $114 per ton. The company’s work spanned 12 days, from Feb. 10 to 22.
The city’s overall cost in responding to the February storm was $8.1 million, according to documents reviewed by the AJC and Channel 2. That compares to $9.6 million spent by the state in responding to storms throughout all of North Georgia in 2014, according to DOT documents.
Mitchell’s attorney, Craig Gillen, has declined to answer any questions related to the case against his client.
Department head picks contractors
Mayor Reed said during a Feb. 9 press conference that he has no direct role in awarding emergency contracts, but then added that “at the end of the day, everything comes to my desk in one form or another.”
Reed also pushed back on the suggestion that the city’s emergency storm work was awarded without competitive bidding.
“There’s a gray area between no-bid and hard-bid process,” Reed said. “It wasn’t no-bid. It’s not as if somebody just picked up the phone and starts selecting individuals. There are situations when the city is on an emergency footing, and I think the snow events … count as such, that you have a more rapid fashion for procurements.”
Under city statute, department heads can only choose emergency contractors after the city’s chief procurement officer has declared an emergency, thus allowing contract awards without going through an advertised, competitive-bidding process.
Garland, the mayor’s spokeswoman, said Public Works Director Richard Mendoza selected the contractors in the two 2014 winter storms. Mendoza was also the public works director responsible for picking contractors during the 2011 winter storm, during which Mitchell’s company received at least $1.1 million in emergency work.
Mendoza was hired as the city’s Public Works Commissioner in 2010. He left in December for the same position with the city of Austin, Tex., and has not been identified as a suspect in the case.
Mendoza did not respond to a series of questions emailed to him by the AJC, including: whether he chose the emergency contractors, including Cascade, during the winter storms; what process was used to select one company over another; what role did Reed’s office play in selecting contractors; and if he or any of his staff has been interviewed by federal agents?
Austin spokeswoman Alicia Dean said Mendoza declined to comment because of the ongoing federal investigation.
Adam Smith had been Atlanta’s chief of procurement since 2003, until Tuesday when Reed fired him as FBI agents seized a computer and telephone from his office under subpoena. Reed’s office has refused to answer questions about why Smith was fired.
Like Mendoza, Smith has not been identified as a suspect. He did not answer his door Tuesday night when reporters rang the door bell.
Ice storm hit weeks after Snowjam
The city’s response to the February 2014 storm came in the context of the disastrous Snowjam storm just two weeks earlier.
That storm in January 2014 caught the city and state flatfooted, and left motorists stranded on interstates and roadways for hours during their evening commutes. Thousands of vehicles were abandoned on the interstate, giving the region an apocalyptic look in video footage that was shown around the world.
Reed and state officials were heavily criticized for the government’s response, and city became a national laughing stock for being paralyzed in a two-inch snowstorm.
Cascade received $322,000 for helping with the Snowjam storm in January, providing the same three types of equipment it would provide during the February ice storm — plows with loaders, dump trucks and service vehicles.
The company charged the same rates in both storms, but their equipment was utilized for far fewer hours.
Cascade also seemed to get a premium rate for the dump trucks in both storms, charging $145 per regular hour and $217.50 an hour in overtime. The straight-time rate was 51-percent higher than the lowest cost estimate; the overtime rate was 58-percent higher.
William Sims Curry, an expert in government purchasing and author on the subject, said governments often need to go outside their normal buying processes in emergencies, but cities should still seek competitive bids scored based on price, quality and the speed with which services and products can be delivered.
In an emergency, speed is often weighted above price. And in a crunch for time and under pressure to deliver needed services, many cities will go with the recommendation of a department head rather than opting for competition.
“The philosophy is that ‘we’re allowed to do this so just go for it,’” said Curry, president of WSC Consulting in Chico, Calif. “Unfortunately you get some situations … where you can end up with people getting (contractors) who they have relationships with.”
Reed said public safety, and not cost, was the issue on which his administration focused on during the storms.
“We were trying to get the city back moving again,” Reed said. “I wasn’t thinking about anyone engaging in fraud, theft or stealing.”
Channel 2 Action News investigative reporter Richard Belcher contributed to this report.
Snapshot of storm costs
Atlanta hired five companies to help respond to the February 2014 winter storm. A majority of the work went to Cascade Building Systems, at a time when federal prosecutors say company owner Elvin “E.R.” Mitchell Jr. was making bribe payments in exchange for city contracts. Here’s a look at how the storm costs were distributed:
Cascade Building Systems: $5.2 million
CTC Construction LLC: $1.5 million
Thrasher Contracting LLC: $1.2 million
AshBritt, Inc.: $41,681
Georgia Project Management & Design: $40,500
Source: City of Atlanta