Thursday, September 15, 2005
Copyright © Las Vegas Review-Journal

1,372-BED EXPANSION: County: Firm overbilled on jail work

Lawsuit says construction company should repay more than $15 million

Clark County's ongoing legal battle with the construction company that expanded its jail escalated Wednesday when the county filed a new lawsuit in an effort to recover millions of dollars.

The county claims AF Construction overbilled it more than $15 million when the company built a new seven-story tower at the Clark County Detention Center.

The two sides have presented their arguments on various problems with the expansion before an arbitration panel, which in July found enough evidence to allow the county to proceed with its overbilling claim.

However, under Nevada law, specific liability issues such as false claims are separated from the arbitration and must be brought forward with the approval of the attorney general.

"This was filed under the false claims act," Deputy District Attorney Lee Thompson said Wednesday. "It's a matter that has to be authorized by the attorney general and brought as a civil action."

The attorney general's office agreed to assist in the legal action.

The lawsuit, filed in District Court, also asks that AF Construction and its subcontractors be disqualified from bidding on future public projects.

Paul Faulkner, the owner of AF Construction, could not be reached for comment Wednesday. In the past, he has declined to comment on the matter because of the ongoing litigation.

The complaint says AF Construction submitted false claims, records and statements to the county during the expansion of the jail. The false statements continued during the arbitration process, the complaint says.

AF Construction's 12 subcontractors and Fireman's Fund Insurance Co. are also named as defendants in the lawsuit. The county claims the companies supported and assisted AF Construction's actions.

AF Construction was awarded the detention center contract in 1999 with its bid of $66 million. According to the county, by the end of the project, the company billed the county $98 million and was paid $93 million.

The project was expected to be completed in May 2001, but was not finished until October 2003.

Despite requests from the county throughout the construction of the building, AF Construction continually failed to deliver updates on its progress, according to the complaint.

Failing to submit reports allowed AF Construction and its subcontractors to "manipulate construction schedules, claim delays that were not real, attribute delays to the county's changes when they were the result of AFC and the subcontractors' own conduct, claim that they had accelerated work when they had not, and conceal their false overbillings," the complaint says.

The complaint stems from a 2002 agreement to renegotiate the contract for the expansion. Rather than pay a lump sum, as the original contract required, both sides agreed the contractor would be paid for work completed to that point, then compensated for time and materials it used to complete the remainder of the project.

At that point, AF Construction claimed it had finished 92 percent of the work. But the company billed the county $33 million, half the cost of the original bid, for the remaining 8 percent of the work.

The county claims it was billed twice for much of the work on the 379,000-square-foot, 1,372-bed expansion.

"AFC and the subcontractors had falsely billed and been paid by the county for more than $15,000,000 worth of work AFC falsely claimed was complete but, in reality, had not been performed," the lawsuits says.

AF Construction was also awarded the contract to build the county's Regional Justice Center in downtown Las Vegas in 1999. The $185 million courthouse was expected to be completed in 2002.

In March 2003, the county stopped paying AF Construction and started penalizing the company $12,000 for each day that project was overdue. Those fines now exceed $14 million.

The county finally removed AF Construction from the courthouse project in April. The county expects to begin moving into the building by Oct. 1.

County officials have said that as soon as the Regional Justice Center is completed, they will pursue legal action against AF Construction on that project, too.