Little Fix

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

Apr 17, 2002 at 4:00 am
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.

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.

The hotel would be one of her biggest.

The project, near America's Center, involves renovating the Gateway and building an adjoining tower. The two structures will be managed by Marriott Corp. as a Renaissance Hotel. Another part of the hotel complex, the Lennox, has already been renovated and is now open as a Marriott Renaissance Suites hotel.

The hotel deal was completed while Clarence Harmon was mayor; it was his administration that picked HRI, the hotel developer. The project also had strong support from Francis Slay, aldermanic president at the time and now St. Louis mayor. To pay for it, a complicated financing package involving millions of city dollars, empowerment-zone bonds and state and federal tax credits was cobbled together [C.D. Stelzer, "The Big Fix," Nov. 10, 1999].

The public trough was flush with money, and area contractors jockeyed for the best feeding spot.

Not to be left out, Hasan says he worked with Jones to identify minority contractors for the job. Hasan's organization, MoKan, receives most its funding, $150,000, from the city through the Community Development Agency. Minority- and women-owned firms pay annual membership dues, $300 a pop. MoKan also receives private donations.

Hasan invited DKW to bid on the Gateway project. City Design was added because the firm had a license to handle asbestos -- something DKW lacked. H&H Development, a respected minority firm whose jobs included preparing the Arch site for construction back in the '60s, also was asked to participate.

Wise and her team were the only minority contractors to bid on the job. But Hasan and Wise claim that they were told by Clark Construction, then the project's general contractor, that the nonminority asbestos-abatement firm NSC Corp. also had to be included in the deal for it to go through.

But after DKW got the contract, it ran into trouble. "The job was just a lot tougher than everybody anticipated," Wise says. She says the problems started with NSC and Clark -- NSC filed for bankruptcy, then Clark left the job. And then one of DKW's subs, City Design, fumbled, failing to get its work completed. Wise says she was forced to fire City Design in September 2001, six months into the work. To replace City Design, Wise hired Envirotech, a nonminority firm.

Wise also says she started complaining to the city about the project's scope and wanted more money. Several meetings were held during the fall of 2000. Hasan confirms that he and Jones attended many of the meetings, and Hasan says he advocated for more money on her behalf. Silverman and Terry Pursley, Alberici's project manager, were also present. Hasan and Wise can't remember exactly who represented the city in the negotiations.

Pursley says he merely brought the parties together to talk and that the real force behind obtaining the money was Silverman. Silverman will only say, "There's a lot of misinformation, and I'm going to refer you to my attorney."

Also interested in the meetings and the $800,000 is John Davidson, a lawyer who represents Envirotech. The company has sued DKW, the city, HRI and others, alleging that DKW overstated its contract award. The lawsuit was quickly forced into arbitration.

But Envirotech also sued Gateway Hotel Partners LLC in St. Louis County Circuit Court for money it says is still due. Envirotech filed a mechanic's lien on the project. Other lawsuits are pending, filed by subcontractors against DKW, City Design and HRI.

Envirotech's suit involves two contracts with DKW. The company claims to have performed the work required by the contracts but was fired from the job in late March or early April.

One of Envirotech's jobs was to remove the lead-paint hazard. After it was taken off the job, Envirotech received a fax with a header identifying it as coming from Alberici/Gateway Field. The fax directs Envirotech to send latex-paint information to Doug Rothweiler at Thomas Industrial Coatings, a nonminority firm. On April 6, Envirotech received a phone call from Rothweiler, who claimed to be an employee of DKW and asked for latex-paint information. Envirotech shot a letter off to DKW that same day, informing them of the phone call and supplying the paint information.

Thomas Industrial Coatings wasn't involved in the hotel project, both Wise and Pursley stress. Wise says Thomas may have contemplated bidding on the project but ultimately was never part of the job.

Thomas Industrial Coatings may have been interested in working on the hotel because, at the same time, the company was working for DKW on the highway project that's the subject of the federal inquiry. MoDOT claims that Thomas employees were masquerading as DKW workers.

Don Thomas, president of Thomas Industrial Coatings, referred questions to his attorney.

Thomas Industrial Coatings figures prominently in DKW's woes on the I-64 construction project.

Three general contractors bid on the MoDOT project in the city: St. Louis Bridge Construction Co., Kozeny-Wagner and Fred Weber Inc. The contract called for at least 16 percent minority participation. Each of the three white-owned firms named DKW as its 16 percent minority partner.

St. Louis Bridge Construction won the bid, for about $5.3 million. DKW was to begin work on the project on July 19, 2000. But someone told the state that DKW wasn't actually doing the work.

MoDOT asked the construction inspector to document the project activity. Payroll records were scrutinized, workers interviewed, videotapes made and pictures taken. MoDOT concluded that Thomas Industrial Coatings was performing DKW's work and fined St. Louis Bridge, the general contractor, 16 percent of the contract price -- $862,643 -- in December 2001.

St. Louis Bridge disputed the findings and appealed the decision. However, Richard Hardcastle, the contractor's lawyer, asked MoDOT to wait until a "federal inquiry has run its course" before taking up the appeal.

The state appeals process hasn't started up again, the federal inquiry hasn't run its course and, sources say, the investigation has broadened to include questions concerning DKW's work on the convention-center hotel. Wise, Hasan and Pursley say they haven't been interviewed by the FBI about the hotel project, but Wise acknowledges the federal probe into the highway project.

But, Wise says, she's got more pressing concerns.

Since finally completing the project in April 2001, she claims, she's still owed about $350,000.

Working to help her recover the money are Hasan and Eric Vickers, a disbarred lawyer and community activist.

Both men joined Wise when she was interviewed for this story. Vickers said he was there to offer support; Hasan answered many of the questions directed to Wise about DKW.

When asked about the $800,000 contract increase, it isn't Wise who seemed to become unnerved -- it was Hasan.

Shown the settlement agreement and other records documenting the change, he demanded to know whether the information would be published.

"I'm not gonna have to picket the Riverfront Times, am I?" he asked.