The $7.7 million contract called for excavation, rock clearing and grubbing – pretty mundane stuff in the construction world. But DeKalb County CEO Burrell Ellis called it “historic.”
The project at the Snapfinger Creek Advanced Wastewater Treatment Facility was the first major contract to be awarded in a $1.35 billion overhaul of the county’s aging sewer and water system. The sweeping plan would benefit future generations, Ellis said, and be a stimulus program bringing thousands of jobs to DeKalb. Local contractors, consultants and political insiders knew something else: There was a deep pool of money to be tapped.
A May 2012 press release announced work would soon begin, but there was trouble from the start. The contractor, a small, minority-owned Tucker company called Desmear Systems, couldn’t get a performance bond to guarantee its work as mandated in the bidding process. It is unclear whether it was because Desmear had money problems — it had just paid off a large garnishment — or because an insurance company was suing it for non-payment.
Nevertheless, Desmear slid through the process by bringing in another company nearly two months later to get the bonding, against county rules, which say the bond must be obtained in 10 days. The work finally started in August 2012.
According to a special-purpose grand jury that spent a year boring into allegations of corruption in DeKalb, Desmear had an advantage: Its president, Omotayo Idowu, had donated $2,500 to Ellis, who was running for re-election.
In June, Ellis was indicted on extortion and theft charges alleging he used vendor lists to strong-arm businesses into contributing to him. He denies the charges.
On Friday county officials shut down the Snapfinger job, citing shoddy work including: a structurally unsound retaining wall meant to protect the plant expansion, unreported water quality violations and construction-related accidents.
County officials are investigating how Desmear won its contract and how DeKalb failed to oversee work at the site. They are also reviewing options on how to proceed. They could allow Desmear to return and make fixes, move on to the next-lowest bidder or, more likely, roll the remaining work into the project’s next phase.
“We are still trying to figure out just what we don’t know,” said interim CEO Lee May. “We only know we did not have the scrutiny you would want on this work, or any project. That has to change.”
The grand jury report suggested Desmear getting the Snapfinger contract was a ripple effect of Idowu’s generosity. In 2011, his company was awarded a contract to repair sidewalks but county officials dragged their feet on approving an order to proceed. An insistent Idowu kept calling DeKalb to find out why the delay but got no answer. Finally, the grand jury said, Ellis called Idowu on Feb. 8, 2012 to ask for the maximum legal contribution, the businessman agreed to pay, and a day later got the go-ahead.
Election records show Ellis’s campaign received Idowu’s check Feb 29, 2012, two weeks before the bids for the coveted Snapfinger project were opened.
When Ellis allegedly called Idowu, a special grand jury had barely started investigating alleged fraud in the watershed department. The probe’s focus later shifted to Ellis and DeKalb’s selection of contracts in other departments.
The grand jury report noted a politically connected business consultant, Jeffrey Walker, who did work with several companies connected to the county, had an office at Desmear. The report said Walker, along with his late brother, John, a watershed deputy director and an appointee of former CEO Vernon Jones, were also Jones’ close friends. Jeffrey Walker, witnesses testified, wrote an incriminating memo titled “Things to Know.” The note made several allegations including that Ellis withheld his signature from contracts unless vendors contributed the maximum contribution. He alleged that happened with Desmear.
The grand jury worried about how $1.35 billion of contracts would be bid. In 2010, the county signed a consent order with the federal government and agreed to make $700 million in repairs to the water and sewer system. Another $650 million in projects were added, officials said, to prepare the system for future use. Grand jurors concluded those projects could not be administered fairly through the current bidding process, “particularly in light of the ongoing and improper influence of CEO Burrell Ellis and others on those practices.”
A similar opinion was expressed in a lawsuit filed in April — four months before the grand jury report was released — by the company that came in to help Desmear salvage its contract.
The lawsuit claims “agents of DeKalb County are either in collusion with agents of Desmear … or are recklessly negligent in commission of their duties.”
The suit, filed by Universal Construction Co., alleges DeKalb held up the contract, rather than award it to the next low bidder, to buy time for Desmear to get bonding. In late June 2012 a Desmear representative approached Universal’s owner, Larry Hanes, seeking help. Hanes said he got the bonding for the project and an agreement to split the job 50-50.
The performance bond, dated July 10, 2012, is listed as being for Universal Construction (doing business as) Desmear Construction. Three days later, Ellis, Idowu and Hanes signed a form allowing work to proceed. Weeks later, representatives from the two companies met with county officials to discuss the job. Hanes supplied $45,000 in rental equipment, established the utilities at the job site, bought furniture for the work trailer and provided cash reserves, the lawsuit said.
“These guys couldn’t even afford to get their Internet turned on at the site,” Odis Williams, Universal’s attorney, said in an interview. “These guys were, by all accounts, dependent on Larry Hanes. The county should have said, ‘You guys can’t afford this contract.’ “
But no one in the county questioned how Desmear would manage work for $4.8 million less than the $12.5 million that county engineers estimated it would cost.
Desmear’s plan, Williams said, was to use Universal to get the bond, get some money rolling in and then cut them out. The charges and countercharges in the lawsuit show an erratic, if not bizarre, atmosphere.
According to the suit: Desmear tried to switch the name of the contract to Desmear II in August and later tried to replace the Universal bond with one in its name. That bond, however, turned out to be fraudulent. Desmear, in a court filing, said it did not try to pass a bad bond. Instead, the company said it was cheated out of $326,000 by an unscrupulous insurance agent. Though that alleged theft occurred in October, Desmear waited to file a police report until mid-December.
Also, Hanes, who said the profit was to be $3 million and split with Desmear, complained that Desmear refused to pay him, ignored his calls and causing him to lose hundreds of thousands of dollars.
“I’ve never seen it done so stupidly and so sloppily,” attorney Williams said. “They don’t have the ability but they do have the influence.”
Idowu did not respond to requests to be interviewed. In court pleadings, Desmear said the Universal bond was not U.S. Treasury listed, as was necessary, and wrote a letter to Hanes saying, “we could no longer trust your assurance.” Desmear said there was never a deal to split the job with Universal, that Hanes was padding his bills and his claims were “frivolous.”
Another lawsuit in DeKalb alleges Desmear had no business getting the job. The suit filed by Atlanta Grading and Utilities said Desmear brought it in “because it had no previous experience of its own performing the required work.”Atlanta Grading said Desmear “hijacked” its references to get credibility and win the bid, but weeks after getting the bid, Desmear fired the company.
Desmear denied the allegation, saying Atlanta Grading’s bid information was inaccurate and never used.
County Commissioner Elaine Boyer, who with fellow commissioners approved the contract, said the uncertainty reinforced her belief that DeKalb should switch to a county manager running daily operations to professionalize the contracting process.
“The commission functions in the dark and now that we know we have problems, no one is sure who is responsible,” Boyer said. “If we really had no internal oversight on this, we probably will have to hire counsel to look into it. That makes all of us liable in a lawsuit.”
A Troubled History
DeKalb County agreed to pay the lowest bidder, Desmear Systems of Tucker, $7.7 million, to blast and clear away granite at the site of an expansion of the Snapfinger wastewater treatment plant, in 2012. Work was to begin on July 30, 2012 and be completed in nine months. But problems emerged almost from the start. Some key moments:
December 2012: DeKalb determines the construction bond on the project is fraudulent and orders work to stop at the site.
March: Work begins again, under a new bond. The county grants Desmear an extension because of the delay, for work to be completed by June 30. Desmear requests a second delay, through August 2013, citing rain and weather. DeKalb refuses. The county also notifies the company that it will enforce a penalty of $1,000 per day if the June 30 deadline is not met.
Aug. 26: A representative from Desmear notifies the county that the project will not be completed until February 2014.
Aug. 27: County officials meet with residents from neighborhoods surrounding the Snapfinger expansion, to address concerns about blasting noise.
Sept. 4: County inspectors visit the construction site and notice problems with the retaining wall being built. An internal review begins, to be done in conjunction with a review of all companies named in the special grand jury’s report into allegations of corruption in DeKalb contracts.
Week of Sept. 16: The Atlanta Journal-Constitution begins asking about the awarding of the contract to Desmear, after revealing discrepancies in the company’s financial information.
Sept. 19: In response to AJC questions, DeKalb County officials confirm several instances of poor work and lax oversight at the Desmear construction site and uncertainty about oversight on the project.
Sept. 20: DeKalb County orders all work to halt at the Desmear site, as an internal investigation continues.
About Desmear Systems, Inc.
President: Omatayo Idowu
Services provided: Bills itself as a “full-service design and engineering firm with additional expertise in planning and program, construction and facility management.”
Major projects: Construction manager on the Candler Road MARTA station; Resident engineer for $300 million Grady Hospital expansion; oversaw Perry Boulevard MARTA bus facility
How we got the story
The Atlanta Journal-Constitution is digging into how contracts are awarded in DeKalb County, especially its water and sewer department. A special-purpose grand jury last month released a yearlong investigation that found evidence of widespread corruption in DeKalb contracting. Reporters April Hunt and Bill Torpy are among the AJC reporters who are reviewing DeKalb contracts to find out if they are awarded fairly and to find out if taxpayers are getting quality work for their money.