Texas road building giant uses front companies to circumvent federal law
Road builder fined for using minority fronts
Giant contractor Williams Brothers to pay $3 million
Dec. 24, 2005
By DAN FELDSTEIN
Houston Chronicle
Copyright 2005
Williams Brothers Construction Co., one of the largest road builders in Texas and the United States, has agreed to pay a $3 million penalty for using puppet companies to meet affirmative action goals.
The Federal Highway Administration has pursued the Houston-based company off and on for more than 20 years for the way it arranged small firms to supply it with concrete.
The allegation was that the firms were not independent of Williams Brothers and couldn't survive without its patronage.
In 2002, major cement suppliers sued Williams Brothers for the bad debt of one of the companies, using the same rationale. It said the firm was Williams Brothers' "alter-ego."
Attorneys for one of those suppliers, TXI of Dallas, wrote, "Instead of serving the community as the program was meant to do by forcing contractors to subcontract a certain percent of their work to firms owned by minorities and women, (the subcontractor) was used as a front for Williams Brothers to avoid increased costs and loss of control by subcontracting to a more independent third-party subcontractor."
That case still is pending in a Montgomery County district court. Richard Schellhammer, an attorney for TXI, said Friday he had no idea the federal government had been pursuing Williams Brothers recently on the same grounds.
Federal officials were not available Friday to elaborate on when they restarted their investigation of Williams Brothers or what triggered it.
Williams Brothers and its owner and chief executive, James D. "Doug" Pitcock Jr., are Texas construction legends. Formed 50 years ago to take advantage of the new Interstate Highway Act, the company has built and rebuilt virtually every freeway in Houston and had more than $400 million in revenues in 2004, virtually all from the Texas Department of Transportation.
The state transportation department started its program for "historically underutilized businesses" in 1983.
Anyone receiving federal highway dollars would have to make sure a percentage was subcontracted to women and minorities, later changed by court cases to anyone who could prove a disadvantaged background.
According to FHWA case files and depositions, Pitcock asked two of his Hispanic workers if they would like to become a company.
Williams Brothers sold the men equipment it had been using to mix concrete, loaned them part of the money for the purchase and co-signed on loans for the rest. The men did business exclusively with Williams Brothers.
The FHWA and state transportation department both argued the subcontractor wasn't independent enough, and the state eventually decided to "graduate" it from the affirmative action program for exceeding the program's cap of annual business.
The company folded soon thereafter.
The federal penalty concerns a second and third subcontractor.
Williams Brothers sold the equipment from the defunct subcontractor to a man who in turn leased it to his wife. She sold concrete back to Williams Brothers.
In a 2002 interview with the Houston Chronicle, the couple said Williams Brothers got them prices on cement and limestone and then faxed the information for them to "bid."
When that subcontractor got into financial trouble, Williams Brothers again took back the equipment and a third company was formed by a female and Hispanic employee of the second company.
Pitcock declined comment this week through a spokesman but in the past said he saw no problem with helping people get set up in business.
He felt especially burned by what he considered poor business practices of the second firm.
The U.S. Department of Justice and the FHWA said in a statement that Williams Brothers has resolved administrative claims that it "knowingly violated" the rules of the disadvantaged business program concerning the second and third companies, DDS Aggregates and ANT Enterprises.
It also agreed to hire a "compliance monitor" for disadvantaged business contracts and volunteer to assist the state disadvantaged business program.
"Contractors are not free to ignore their obligations," said Chuck Rosenberg, U.S. attorney for the Southern District of Texas, in a written statement.
dan.feldstein@chron.com
© 2005 Houston Chronicle: www.chron.com
Giant contractor Williams Brothers to pay $3 million
Dec. 24, 2005
By DAN FELDSTEIN
Houston Chronicle
Copyright 2005
Williams Brothers Construction Co., one of the largest road builders in Texas and the United States, has agreed to pay a $3 million penalty for using puppet companies to meet affirmative action goals.
The Federal Highway Administration has pursued the Houston-based company off and on for more than 20 years for the way it arranged small firms to supply it with concrete.
The allegation was that the firms were not independent of Williams Brothers and couldn't survive without its patronage.
In 2002, major cement suppliers sued Williams Brothers for the bad debt of one of the companies, using the same rationale. It said the firm was Williams Brothers' "alter-ego."
Attorneys for one of those suppliers, TXI of Dallas, wrote, "Instead of serving the community as the program was meant to do by forcing contractors to subcontract a certain percent of their work to firms owned by minorities and women, (the subcontractor) was used as a front for Williams Brothers to avoid increased costs and loss of control by subcontracting to a more independent third-party subcontractor."
That case still is pending in a Montgomery County district court. Richard Schellhammer, an attorney for TXI, said Friday he had no idea the federal government had been pursuing Williams Brothers recently on the same grounds.
Federal officials were not available Friday to elaborate on when they restarted their investigation of Williams Brothers or what triggered it.
Williams Brothers and its owner and chief executive, James D. "Doug" Pitcock Jr., are Texas construction legends. Formed 50 years ago to take advantage of the new Interstate Highway Act, the company has built and rebuilt virtually every freeway in Houston and had more than $400 million in revenues in 2004, virtually all from the Texas Department of Transportation.
The state transportation department started its program for "historically underutilized businesses" in 1983.
Anyone receiving federal highway dollars would have to make sure a percentage was subcontracted to women and minorities, later changed by court cases to anyone who could prove a disadvantaged background.
According to FHWA case files and depositions, Pitcock asked two of his Hispanic workers if they would like to become a company.
Williams Brothers sold the men equipment it had been using to mix concrete, loaned them part of the money for the purchase and co-signed on loans for the rest. The men did business exclusively with Williams Brothers.
The FHWA and state transportation department both argued the subcontractor wasn't independent enough, and the state eventually decided to "graduate" it from the affirmative action program for exceeding the program's cap of annual business.
The company folded soon thereafter.
The federal penalty concerns a second and third subcontractor.
Williams Brothers sold the equipment from the defunct subcontractor to a man who in turn leased it to his wife. She sold concrete back to Williams Brothers.
In a 2002 interview with the Houston Chronicle, the couple said Williams Brothers got them prices on cement and limestone and then faxed the information for them to "bid."
When that subcontractor got into financial trouble, Williams Brothers again took back the equipment and a third company was formed by a female and Hispanic employee of the second company.
Pitcock declined comment this week through a spokesman but in the past said he saw no problem with helping people get set up in business.
He felt especially burned by what he considered poor business practices of the second firm.
The U.S. Department of Justice and the FHWA said in a statement that Williams Brothers has resolved administrative claims that it "knowingly violated" the rules of the disadvantaged business program concerning the second and third companies, DDS Aggregates and ANT Enterprises.
It also agreed to hire a "compliance monitor" for disadvantaged business contracts and volunteer to assist the state disadvantaged business program.
"Contractors are not free to ignore their obligations," said Chuck Rosenberg, U.S. attorney for the Southern District of Texas, in a written statement.
dan.feldstein@chron.com
© 2005 Houston Chronicle:
posted by Porkus Maximus Tex: at Sunday, December 25, 2005
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