Saving Face

Can Wisconsin's construction industry salvage its squeaky-clean image?

By Jeremy Harrell

Four years ago, former Gov. Tommy Thompson opened his keynote address at the annual meeting of the Transportation Development Association of Wisconsin with a version of the following joke:

Three contractors were visiting a tourist attraction on the same day. One was from New York, another from Wisconsin and the third from Minnesota. At the end of the tour, the guard asked what they did for a living. When they all replied that they were contractors, the guard said, "Hey, we need one of the rear fences redone. Why don't you guys take a look at it and give me a bid?" So they all went to the back fence.

The Minnesota contractor took out his tape measure and pencil, did some calculations and said, "Well I figure the job will run about $900: $400 for materials, $400 for my crew and $100 profit for me."

Then the Wisconsin contractor took out his tape measure and pencil, did some quick figuring and said, "Looks like I can do this job for $700: $300 for materials, $300 for my crew and $100 profit for me."

Without so much as moving, the New York contractor said, "$2,700." The guard, incredulous, looked at him and said, "You didn't even measure like the other guys!

How did you come up with such a high figure?"

"Easy," he said. "$1,000 for me, $1,000 for you, and we hire the guy from Wisconsin."

Obviously, the joke works because the New York construction industry's reputation doesn't exactly glitter in the eyes of the country. It's not difficult to find evidence to support this belief. For instance, in 2000, the Manhattan district attorney handed down an indictment against the Lucchese Construction Group, an alleged front for the Lucchese crime family.

According to the allegations, the syndicate rigged bids to land numerous public construction contracts, paid workers less than prevailing-wage scale and used the proceeds to line its own pockets as well as bribe union officials to hire nonunion labor for those and other projects. Additionally, the syndicate allegedly forced its subcontractors to hire "made" members of the Lucchese family as "no show" or "no work" laborers. The racket "systematically siphoned millions of dollars from both public and private construction projects," according to a statement accompanying the indictment.

Replace "New York" with "Chicago" and little changes. Just two months ago, Chicago Mayor Richard M. Daley fired his own cousin for participating in a scheme to defraud the city of $40 million by giving no-bid trucking work to private companies while city vehicles idled.

History is so rife with these kinds of scandals that they typically elicit yawns from most people. Corrupt officials in Chicago and New York taking bribes on bids? Who woulda thunk it?

But in Wisconsin? Part of what makes Thompson's joke funny is that the Wisconsin contractor is the straight man, the unsuspecting dupe caught up in the fraud. A lot has changed in the last few months, however, and the joke isn't quite as funny as it used to be.

First, days after former state Sen. Gary George, D-Milwaukee, lost a recall election in October, federal attorneys issued an indictment claiming that the veteran legislator had taken money from John Bowles, the chief of Central City Construction Inc., Milwaukee, in exchange for state construction contracts. The state government is now trying to recover some of the money it spent to enhance one of the project's energy-efficiency rating, and George has pleaded guilty to one charge and faces three new charges. Bowles cooperated in the investigation and hasn't been charged.

The real bombshell arrived in January, however, when the same federal prosecutors released an affidavit alleging that four construction executives at Streu Construction Co., Manitowoc, and Vinton Construction Co., Two Rivers, engaged in a multiyear bid-rigging scheme affecting $100 million in state road contracts. The allegations fingered a project manager at a third firm, James Cape & Sons Co., Racine, for abetting the conspiracy by providing crucial information on state Department of Transportation bid days between 1997 and 2004.

Especially in the case of the Vinton-Streu scandal, there was great cause for hand-wringing in the Wisconsin construction industry. Executives at rival firms and business associations expressed considerable shock that something like that could happen here. This wasn't the shock one might normally hear in reference to similar dealings in, say, New Jersey. There was genuine disbelief — and dismay — that the state's reputation for squeaky-clean contracting had been sullied in the eyes of the state's public.

Part of the surprise, however, might lie in the fact that Wisconsin truly does seem to have a good reputation. When asked to recall other construction scandals of the last few decades, several sources offered vague recollections of big-rigging rings that arose in the 1950s and 1960s. Or maybe that was the 1940s and 1950s.

The Vinton-Streu case did unearth a similar conspiracy from the late ’60s and early ’70s, when a host of road-building companies, including Vinton, Streu and Cape, were fined for rigging bids. The charges included allegations that the implicated companies, which numbered 16, divvied up geographic areas of the state and agreed to stay out of each other's territory.

In the weeks after the recent Vinton-Streu allegations went public, a group of industry associations organized a seminar for contractors on the ins and outs of bid conspiracies, what constitutes collusion and how to avoid getting caught in a legal snare. To illustrate the problem, attorneys at Michael Best and Friedrich LLP drew on a thin history of state case law. Buck Sweeney, one of the lawyers, said they referred to the Vinton-Streu scandal and the case of two Cottage Grove firms that pleaded guilty a few years ago to federal charges of making false claims, false representations and false reports.

In that case, Straight Arrow Construction Co. Inc. and R.G. Huston Co. Inc. obtained extra seed-bag tickets, submitted them to WisDOT for additional payments and added surplus equipment and personnel to scales when weighing mulch used on WisDOT projects. The agency's lawyer called the actions "sophomoric," and both firms were debarred from bidding on federally funded state work.

But other than those two, Sweeney said most bid-rigging cases amount to little more than speculation, rumor and innuendo, and reports in newspapers rarely rise to the level of prosecution. In other words, nothing like the Lucchese family operation in New York has ever seen the light of day in Wisconsin.

The fact is that the George-Bowles and Vinton-Streu cases cropped up at a time of heightened public sensitivity to official corruption. Wisconsin has long prided itself on dirt-free governance, and the state's character has taken a beating in light of the caucus scandal at the state Capitol, indictments against state legislators (which the Wall Street Journal derided in an editorial as "Chicago, Wisconsin") and the Milwaukee County pension mess.

But what has made these scandals so demoralizing in the eyes of many contractors is that the Wisconsin construction industry functions to some extent like a family. And while firms compete fiercely against each other, much like siblings, the expectation is that no one shoots dirty pool. One company executive likened the Vinton-Streu allegations to finding out that a fishing partner has secretly been using "a periscope and dynamite" instead of a rod and reel to gain an advantage. "Shock and awe is what it amounts to," he said.