A Michigan-based water driller has brought a $2.4 million federal racketeering suit against the City of Chicago’s Public Building Commission and contractors the CPBC used to build a new police station in Chicago’s University Village neighborhood, claiming the CPBC and contractors routinely conspire to hold down the city’s costs on public building projects, while maximizing profits for the lead contractors, by withholding payments due subcontractors, driving many, like the well driller, out of business.
On Dec. 14, DT Boring Inc., a small drilling business, of Portland, Mich., filed its complaint in Chicago federal court against the CPBC and a group of defendants, including Harbour Contractors, of Plainfield, and Environmental Design International, of Chicago, alleging violations of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, fraud and tortious interference against the named defendants.
The complaint arises out of the CPBC’s project, begun in 2011, to build the city’s new 12th District Police Station in the 1400 block of S. Blue Island Avenue, near the intersection with S. Racine Avenue.
According to the complaint, DT was hired in 2011 by Harbour, the project’s general contractor, to drill borings and perform other work related to the installation of a geothermal heating, ventilation and air conditioning (HVAC) system for the new police station.
However, the complaint alleged, after DT began work in May, its drilling crews encountered underground structures left over from a demolished Chicago Housing Authority building that had previously stood on the site. According to the complaint, the structures were made of steel rebar-reinforced concrete, making them impossible for the drilling rigs to penetrate, and also included old steam heating lines wrapped in asbestos coverings.
DT alleged in its complaint the existence of those structures were not disclosed in bid documents and other plans for the construction project, even though the city and its lead contractors allegedly knew they were there.
Working around the structures and dealing with the asbestos on site severely delayed the work, quickly enlarging the scope of the work and escalating the cost, the complaint said.
However, throughout the delays, DT said in its complaint the CPBC and Harbour representatives strung DT along, coaxing them to continue work with what DT alleged were fraudulent assent by the city and its general contractors to project alterations suggested by DT and fraudulent promises to ultimately pay DT.
In its complaint, DT alleged this was all part of a regular pattern of operations by both the CPBC and a small number of general contractors the city regularly uses when constructing new public buildings.
While those general contractors appear to submit bids well below those of their competitors, the complaint alleged those lesser bids are actually predicated on the general contractors’ expectations that it will be able to make up the difference and hit its desired profit margins at the expense of its subcontractors. This, DT’s complaint alleged, is allowed by the CPBC because it holds down the city’s costs.
According to the complaint, when it comes time to pay the subcontractors, the general contractors or CPBC engage in game of “good cop/bad cop,” with one party saying it is trying to get the subcontractors paid, and the other side concocting excuses to repeatedly delay payments or deny them outright, for a host of reasons.
In its complaint, DT said the pattern was documented in an investigation published in Crain’s Chicago Business in 2012.
DT was removed from the 12th District Police Station project in November 2011. The company later went out of business, and, in 2013, its owners filed suit in federal and state court, seeking the money from the city and Harbour it said it was due.
The initial federal action was dismissed, as Harbour argued the action was premature until DT exhausted its state remedies. After months of alleged delay and legal gamesmanship by defendants in the state law case, DT settled with Harbour’s bond insurer for a portion of what it believes it is due.
In the meantime, DT’s complaint said Harbour has itself sued the CPBC to recover for itself the money DT insists it is owed.
With its state case settled, DT has reintroduced its federal action, again leveling its RICO and fraud allegations against the CPBC and Harbour.
DT is seeking damages of at least $400,000 in compensation, plus at least $2 million in punitive damages from the CPBC and the other defendants in the case.
DT Is represented in the action by attorney Bruce Rose, of Westchester.