Sunday, April 01, 2001

Paving bids under scrutiny

Newspaper: Federal grand jury investigating state contracts

The Associated Press

        FRANKFORT — A lack of competition for state paving contracts in parts of Kentucky has apparently come under investigation by a federal grand jury, the Courier-Journal reported Saturday.

        “The antitrust division of the United States Department of Justice, Cleveland division, is conducting an investigation,” attorney William E. Johnson of Frankfort told the newspaper Friday. “They come in about once a month. They have been issuing subpoenas to various individuals who are now or have been associ ated with primarily the ... asphalt people.”

        Mr. Johnson, a prominent defense lawyer, said he has a client who appeared before the grand jury. He said he believes the investigation has been under way for about a year, with witnesses being brought before the regular federal grand jury in recent months. He said investigators appear to be examining a lack of competition in parts of the state for state asphalt paving contracts.

        “But from what I know, it appears to be sort of a shotgun approach. They don't seem to be focusing on any particular individual or company. It's a little hard to figure out what's driving the investigation,” Mr. Johnson said.

        Joseph Famularo, U.S. attorney for the Eastern District of Kentucky, confirmed that antitrust division prosecutors are conducting an investigation, but he declined further comment.

        Donald Lyon, a trial attorney with the division's Cleveland office, declined to comment.

        An analysis by the Courier-Journal in the mid-1990s showed that 58 percent of resurfacing contracts awarded by state government between 1988 and 1994 went to the only company that submitted a bid.

        The newspaper also reported that some contractors held an effective monopoly in a group of counties that often was immediately adjacent to a group of counties where another contractor rarely faced a competitive bid.

        Mr. Johnson said investigators appear to be checking for violations of the Sherman Antitrust Act “which says you will not combine and conspire for the purpose of fixing prices.”

        But Mr. Johnson said the lack of competition for state resurfacing contracts in some areas is the natural result of various economic and geographic factors — not because of any agreements among contractors.

        “With the hilltops and valleys, you can only haul asphalt so far. And a lot depends on where you have your asphalt plant located,” he said.


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