Little Fix

How a contractor on the hotel project screwed up but got paid extra

Not every business gets rewarded after falling months behind on a job, failing to pay subcontractors and ultimately pushing back the completion date on a massive public project.

But DKW Construction Co. can -- and did -- after it foundered on its $3.05 million piece of the downtown convention-center hotel.

Then again, not all contractors have Eddie Hasan and Virvus Jones pulling strings behind the scenes. Hasan heads up MoKan, a city-funded trade group that helps minority businesses. Jones is a former St. Louis comptroller who now works as the point man on the hotel project for Roberts & Roberts.

The Gateway Hotel, part of the downtown convention-center hotel
Jennifer Silverberg
The Gateway Hotel, part of the downtown convention-center hotel

It was Hasan and Jones who helped lead efforts to make sure minority firms got a slice of the $276 million hotel. Those efforts won DKW the key job of gutting the fire-damaged Gateway Hotel on Washington Avenue even though company president Dorrie K. Wise acknowledges the firm doesn't have much demolition or asbestos-abatement experience.

But inexperience wasn't an obstacle. Wise, who says she got the job primarily because DKW "could meet bonding requirements," took on the role of general contractor on the demolition job and hired its own subcontractors. The minority package that included DKW, City Design Group and H&H Development was put together and presented by Hasan and Jones to the city and Historic Restoration Inc., the hotel developer.

DKW began work in March 2000. The contract the company signed required it to finish within four months, but nine months into the job, the demolition-and-abatement work was nowhere near completion -- and DKW was running into serious problems with its subs and delaying the overall project.

Instead of being kicked off the job, replaced by another contractor and hit with a claim against the company's bond, DKW was offered an extra $800,000 to stay on the job. According to a document prepared in December 2000 by Alberici Construction, the general contractor on the Gateway rehabilitation, and DKW's Wise, the money is listed as a "claim amount offered by the city." The next month, Alberici, DKW and HRI inked a settlement agreement indicating that DKW would get a change order to "do the work originally contracted for" in return for an additional $800,000. The agreement doesn't list any additional work to be performed by DKW: It just increases the original contract amount. And the settlement states that DKW will release not only HRI and Alberici but also the city and its agencies from "any and all claims."

In a March 14, 2001, payment application prepared for DKW and submitted to HRI, the $800,000 payment is identified as an "inefficiency claim." In an industry ruled by terms of art and custom, the term "inefficiency claim" is so unfamiliar it sticks out like John Ashcroft at Pridefest. The payment application also shows that at least $510,587 had been drawn against the claim.

It's unclear whether anybody in City Hall actually authorized the additional $800,000 even though the bulk of the financing for the hotel comes from government sources channeled through the city.

HRI vice president Ron Silverman, who was involved in the negotiations, calls the paperwork referring to the claim nothing more than an "inartfully drafted" change order. And when asked point-blank about the city's involvement, Silverman says that "nobody from the city ever offered them anything."

Wise and Hasan also say the $800,000 is simply a change order. But when presented with the payment application, which also lists change order items and clearly treats the $800,000 differently, Hasan offers another explanation: He says the city had originally reserved $5 million for the demolition-and-abatement work. When DKW bid the job at $3.05 million, $1.5 million was put into a "contingency pot." Hasan thinks that the $800,000 was supposed to come out of the contingency fund, but the money had already disappeared.

"That money was moved over to ConnectCare," the city's health program for the poor, Hasan claims. "So I'm thinking that somebody had to make some justification for some extra money to be put into the project."

Ivie Clay, spokeswoman for St. Louis Development Corp., says she's never heard of "inefficiency claims." Laura Zacher, the SLDC special-projects manager overseeing the hotel project, says she didn't know anything about the claim, either, but notes that payment applications must be approved by architects Atkins Benham Inc. and Kwame Building Group.

Jim Moler, project manager for Atkins Benham and the person identified as responsible for signing off on applications, didn't return messages. Nor is Brian Krippner, a vice president with United Missouri Bank Trust, talking. UMB is the trustee for city, state and federal money for the hotel project. Krippner, who's in charge of the account, says questions about the payment of claims "need to be addressed to the developer."

According to sources, the additional payment has drawn interest from the FBI, but it's not the only DKW-related project that's gotten the feds' attention. DKW is also being investigated for its work on an unrelated highway project.

Dorrie K. Wise, 46, founded DKW Construction in 1987. The firm, which is certified by city, state and federal agencies as a qualified disadvantaged business enterprise, started out specializing in steel construction. Many of the company's major jobs were for government agencies, including the Missouri Department of Transportation, the U.S. Army Corps of Engineers and Lambert Airport.

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