Firm’s methods questioned

“That could happen, but I have never seen that before,” said Javier Irizarry, an assistant professor at Georgia Tech’s School of Building Construction. “If I saw that in one of the projects I worked I would raise the alarm immediately and probably take it to upper management, because that’s misrepresentation of time performed.”

Heery’s attorneys dismissed the complaints, saying that the company did the job it was hired to do and that the school board approved many of the actions for which the district is now suing.

“Their experts say, ‘You committed fraud by moving time from one school to another,’ but this was per their instruction and the board signed off on it,” said Paul Monnin, a lawyer for Heery. “Can you say it’s fraud to bill for time you earned?”

School board chairman Tom Bowen said that many times the board didn’t know what it was voting on or was told to approve it or risk having buildings not ready in time for the start of school.

“Approval of change orders by nine board members randomly elected by the public with almost no candidacy requirements other than residency cannot reasonably be considered to be any kind of approval of the quality of the construction or the construction program,” Bowen said.

The case involves Heery’s management of DeKalb’s school SPLOST from 2002-2006. This was the second special local option sales tax Heery was hired to manage. Combined, the two SPLOSTs included about 300 projects and sales tax money of about $1 billion. As the program manager, Heery’s job was to oversee the contractors, engineers and architects on the projects. By 2006, the company and the school board were squabbling.

The school system terminated Heery after board members began accusing the company of overbilling and questionable work. Heery sued, demanding payment of about $400,000 that it said the school district still owed the company.

DeKalb countersued for $100 million, alleging fraud and mismanagement. It hired one of Atlanta’s premier law firms, King & Spalding, to handle the case and spent $15.5 million in legal fees during the next four years. The case still has no trial date, and King & Spalding is no longer billing by the hour. Instead, it has a contingency agreement that grants the firm a percentage of money recovered or additional attorney’s fees.

“The contractors have large budgets that they can count on for legal fees and lawyers, so they can spend a lot of time, and usually the government, in time, gives up, caves in,” said Irizarry, who said he worked for one of Puerto Rico’s largest contractors before getting a doctorate in construction management and teaching full time at Tech.

The AJC and Channel 2 showed the business records from the case file to Irizarry before identifying the company involved. Irizarry said Heery has a great reputation and he was surprised to learn Heery was the contractor in the case. Irizarry said he recently served on a board and recommended Heery for a $3 million program management contract for the Atlanta-Fulton Library System.

Heery insists that there was no fraud. Under the contract to manage the first SPLOST, Heery was entitled to bill for $8.6 million and billed for $7.7 million. The company says it would have finished the second contract, which was for $9.5 million, under budget as well had not DeKalb schools terminated the contract.

As the program manager, experts said, Heery’s job was to represent the district’s interests. But school officials say this didn’t happen.

They point to one instance in which the school board approved a $3.8 million change order because Heery didn’t realize there would be a need to blast underground rock from a school site near Stone Mountain. Records show Heery authorized the blasting months before the board even approved the extra money.

Heery says it’s customary to start work before the client approves change orders, especially government entities that have a slow bureaucratic process.

“If they don’t approve it, you’re out of luck. You don’t get paid,” said lawyer Mark Grantham, who also works for Heery. “It’s very common changes have to be made in the field. You can’t hold up $1 billion in construction waiting on paperwork.”

But this isn’t a practice that Khalid Siddiqi, chair of the construction management program at Southern Polytechnic State University, would teach his students, he said.

“A program manager needs to have an authority from the client to do those things. Without such authority, they are not acting on behalf of the client, but on behalf of themselves,” said Siddiqi, whose 30 years of construction experience includes managing projects for the World Bank and the U.S. Army. “Without approval of the client, where are you going to get the money?”

Heery lawyers accuse the school board of changing priorities for projects based on different pressure they received from PTAs and from other politicians, which ended up costing them money.

The AJC obtained e-mails that show Heery managers instructed their employees to submit blank time sheets. In other situations, the company told employees to turn in their timesheets for days they had not yet worked.

In May 2005, one Heery employee submitted a timesheet with specific schools listed, but a manager later crossed those out and billed the time to other projects. Several months later, he started turning in blank time sheets, records show. “Attached is my blank timesheet for week ending Aug. 14, 2005. As per your direction, you will charge my time accordingly,” one project manager wrote to his boss.

Other documents show where supervisors crossed out employees’ time by hand to move their hours to other projects.

“Time switched to other projects is perfectly permissible,” Monnin said. “We have approvals from the school district and board that approved everything.”

Siddiqi says the whole point of the time sheets is to show detailed accounting for the client.

“How can they turn in blank time sheets? That is not an acceptable practice,” he said. “If it’s standard, why even have time sheets?”

Heery also accuses DeKalb of filing the litigation to cover up actions by former superintendent Crawford Lewis and former chief operating officer Patricia Reid. The two were indicted last year on charges of racketeering, theft and bribery.

“We’re dealing with a case of rampant public corruption,” Grantham said. “The two people in this case are indicted. ...We’re confident the citizens of DeKalb will see through the smoke and mirrors. This is public corruption.”

DeKalb’s district attorney reviewed the case when Reid and Lewis were indicted but decided not to take action.

“The DA looked at us but they passed,” Monnin said. “I’m a former U.S. attorney. I would have looked at this for 20 minutes and sent them packing on the fraud case.”

District Attorney Robert James, who was not in office at the time of the indictments, said, “Officially there is no investigation, just allegations people have made to me. There is nothing the board has brought me collectively that would constitute me reopening an investigation.”

While litigation between contractors and clients is not uncommon, Irizarry said it’s rare to see program managers involved in legal disputes.

“I have not seen many cases where that happens, the program manager is usually the first line of defense between contractors and owners, so they’re the owner representative,” he said.

DeKalb’s school board also has to take some responsibility, said John Mouton, a construction management professor at Auburn University.

“I think public agencies need to be careful of how much latitude they give people they contract with and if they give them that latitude, someone needs to be monitoring,” said Mouton, who has worked as a construction manager for 40 years.

“The government agency takes public funds in and has a responsibility for the funds they receive. They can give away authority, but they can’t give away responsibility.”