MASSACHUSETTS:Big Dig coverup: “FHWA, B/PB accomplices” State IG

The report does not allege misappropriation of funds or other direct thievery, but it does report massive destruction of Big Dig records, indicative of something much bigger than the pattern of deceptions over costs. Scuttlebutt in Washington DC linked the surprise retirement of Bud Shuster head of the House transp committee to the beginning of the state IG’s unravelling of the Big Dig scandal. Shuster and his office were heavily involved in trading favors for support at the Big Dig, as revealed by the House Ethics committee and a criminal conviction of Anne Epstein, Shuster’s longtime aide and fundraiser.

The IG report signed by state Inspector-General (IG) Robert A. Cerasoli says: “Documents show that Big Dig officials knew about large cost overruns long before they submitted to Wall Street inaccurate bond disclosure documents now under investigation by the Securities and Exchange Commission.” Similar deception occurred in 1996 in connection with bond issues and other funding efforts, and even earlier. The largest bunch of lies was hatched in the June 1994- March 1995 timeframe. Senior officials could be charged with securities fraud for providing false information to the capital markets.

“Big Dig and local FHWA officials shirked their fiduciary responsibilities by not disclosing all relevant financial facts to the public, the state legislature, or as required by law, the bond markets,” says the state IG.

Natsios reports theft, trashing files

The current chairman of the Turnpike Andrew Natsios told the IG that a former staffer was caught on video surveillance tape removing boxes of records from the Mass Turnpike offices in one of four cases of trespass or break-ins detected over a 3-day period in early 2000. “Thousands of pages” of documents on the Big Dig are missing, the IG report states. Still they managed to review about 100k pages of documents that remain.

The heart of the Big Dig deception was a so-called “cost reduction initiative” in which officials systematically culled cost estimates, reducing some arbitrarily across-the-board, and then simply omitting several major categories of costs that they knew would be incurred. The smoking gun is a December 1994 document called “Cost & Schedule Update - Revision 6.” The project officials only reduced estimates of costs in the name of reducing costs. They reduced no real costs at all. Local FHWA officials were in on the scheme from the beginning and approved the cost concealment methodology!

C&SU-6 of 1994 started with an honest costing by consultants B/PB for the Big Dig of $13.8b, a number which was kept secret, but which has turned out to be quite accurate. The project team judged the $13.8b estimate to be politically unsustainable. So by arbitrary cuts in estimates they reduced it to around $8b. From then on the coverup consisted of presenting each actual cost figure emerging from work done as an unfortunate overrun, when in fact the cost estimates were all cooked. A simple scam.

Sand-blasting HDs

Natsios said that after he arrived at the Turnpike in the spring of 2000 file cabinets were systematically emptied and computer hard-disks were ‘sand-blasted’ to make them unreadable in a major attempt to coverup wrongdoing.

The IG report says deceptions were quite deliberately embarked upon. Deception was itself the subject in one case of a systematic pros/cons type analysis in a document marked ‘Confidential’ in which the likely fury of the legislature and ‘brutal press scrutiny’ treatment were written down as arguments against fessing up with the truth.

The former governor of the state Paul Cellucci when Lt-Gov was in charge of a Big Dig Oversight Task Force which “likely knew” of deceptions going back to 1994, the IG claims. The governor at the time William Weld surely knew also. FHWA officials at least those in the Boston offices, were also party to the deceptions.

“Anxious to avoid the sticker shock of B/PB’s estimate, Big Dig officials undertook a 9-month initiative between June 1994 and March 1995 to decrease B/PB’s total cost estimate from $13.8b to $8b.” B/PB was given a directive by state officials to “hit the target” of $7.98b in its new projection of cost. Eight different procedures were followed to knock nearly $6b off the $13.8b number.

Consultants B/PB are portrayed as attempting to maintain the integrity of the project, but being pressured to collaborate, sometimes resisting, but other times succumbing. One B/PB project manager lost his job for refusing to go along with official deception. Eventually they were at the heart of the conspiracy.

“B/PB presented Big Dig officials with an excruciatingly detailed total cost forecast of $13.79b in Nov 1994, a figure close to the $13.8b revised estimate announced by Big Dig officials in Oct 2000.”

A key senior partner of Bechtel flew to Boston in Dec 1994 to brief the governor and senior officials on the B/PB cost estimates, knowing that Big Dig officials were blocking them. However the IG report ends up damning B/PB’s role, saying that it had it in its power to blow the whistle on the wrongdoing, but chose to remain part of the conspiracy. The IG accuses B/PB of “full and active cooperation” in the deception. It says: “B/PB must share the blame because it abided by the instructions of a select few Big Dig officials to report costs in a less than forthcoming manner.... B/PB knew that the public, the press, and the State Legislature had not been told that Big Dig officials based the estimate on a deceptively downsized definition approved by FHWA in 1995. The State Legislature should have been given the same facts as the FHWA... The most serious failure committed by B/PB was its participation in the production of misleading Finance Plans for the State Legislature beginning in 1997. B/PB produced these semi-annual reports as deliverable products under its contract with the Commonwealth.”

One B/PB deception involved the claim that it was using especially reliable and advanced “estimating techniques” when in fact it was cooking the books.

The IG’s report says: “Big Dig officials would never have been able to perpetrate the inaccurate presentation of such detailed information without the active collaboration of B/PB – the entity that gathered, controlled, and manipulated all Big Dig cost data. B/PB did not participate passively. B/PB took control soon after Big Dig officials decided to obscure the true costs and after FHWA accepted the accounting assumptions. In fact, documents reviewed by this Office illustrate B/PB’s efforts to develop and maintain the mechanisms used to obscure Big Dig costs.”

FHWA officials were kept fully informed about the number-laundering effort going right back to 1994, the IG report states, making nonsense of the Clinton Administration’s claims it was misled by Kerasiotes and his team at the Mass Pike. The IG says FHWA officials acknowledged to its office that they were aware of the fabricated assumptions all along.

Feds investigate FHWA

An FHWA investigation in 2000 “failed to investigate, or chose to gloss over, the role of FHWA officials themselves in the overrun scandal,” says then state IG report. The Feds should initiate their own investigation into the FHWA:

“This office concludes that local FHWA officials assisted state officials in the public-relations downsizing of the Big Dig cost (and) bear great responsibility for the fiscal policies that led to the overrun.”

In early 1999 B/PB gave a new project director a confidential “Estimate Evolution Chart” describing a Dec 94 estimate of $13.25b, excluding change orders of $526m, and demonstrating the total $13.8b estimate of five years earlier. Later he was given a table listing the assumptions Big Dig officials had imposed to cut $6b off the cost estimates together with data showing how the assumptions had proven wrong, and their understatement of actual costs.

“Measured against B/PB’s $13.78b 1994 estimate the Big Dig, ironically, has been constructed on time and on budget,” says the IG report.

Following the IG’s report, investigations have been launched by the US Securities and Exchange Comm, the US Justice Dept, the US Dept of Transp’s inspector general, and the Massachusetts AG’s office. Project managers of the Big Dig for much of the period of the deceptions were Peter Zuk and Patrick J. Moynihan. James Rooney was financial officer at the Turnpike in the latter period. The Turnpike was paying the legal costs of Kerasiotes, Rooney, Zuk and Moynihan until recently when the board of the turnpike ordered staff to discontinue the payments. Nearly $1.9m had been spent on lawyers for those accused of wrongdoing. (See www.state.ma.us/ig/publ/cat01ex.htm)