- Special Projects
Three weeks ago, Carrie Ann Shirota, a prison-reform advocate on Maui, found a strange email sitting in her inbox.
Labeled as “introduction,” the message was from a man named Bob Nardi, whose email signature identified him as senior vice president of a New Jersey-based construction and engineering company called Louis Berger.
Shirota had never heard of Nardi or Louis Berger.
Civil Beat is examining how the state manages its troubled, overcrowded prison system, which includes four prisons and four jails in Hawaii, and a contract private prison in Arizona. This article looks more closely at a state contract intended to begin a planning process for revamping the oldest jail in Hawaii.
But, in a brief message, Nardi explained that he was reaching out to Shirota and other “key stakeholders” on behalf of the Hawaii Department of Public Safety to talk about an “important project” — the plan to replace the crumbling Oahu Community Correctional Center.
Shirota, who once examined the for-profit prison industry as a fellow at the Open Society Foundations, was familiar with the OCCC project. But how come, she wondered, an East Coast company was contacting her about it?
Puzzled, Shirota looked up Louis Berger online and found something disturbing: In recent years, the company has been mired in legal troubles, stemming from a series of corrupt practices that resulted in criminal convictions of five top executives, including its former CEO, and more than $90 million in fines.
Shirota was aghast. “It casts a shadow of doubt as to why we’re working with this particular company,” said Shirota, who has yet to respond to Nardi. “How did they come into the fold?”
It turned out that, despite its checkered history, Louis Berger was brought on as a subcontractor by Honolulu-based Architects Hawaii, which was awarded a $5 million contract to craft a comprehensive blueprint — complete with proposed designs and potential sites — for a new OCCC.
But the OCCC contract, administered by the Hawaii Department of Accounting and General Services, doesn’t specify Louis Berger’s role in the project — or how much the company is getting paid for its work.
Architects Hawaii, which also brought on several other subcontractors for the project, declined to provide any details.
“Architects Hawaii signs confidentiality agreements with all of its clients and therefore cannot legally comment on any of its projects,” said Tammy Lee, the company’s marketing coordinator.
Nardi declined to comment for this story. “At this point, I have to defer to my clients and wait for a green light from them before I can answer any questions you may have,” he said.
But, according to Architects Hawaii’s 377-page bid documents, which were released to Civil Beat by DAGS, Louis Berger’s role in the project appears to be extensive — involved in everything from the overall planning and site evaluation to preparing for the environmental review process and soliciting input from stakeholders like Shirota.
In all, the bid documents show that Louis Berger stands to earn more than $1.3 million for its work, accounting for nearly a third of the total estimated cost of the project.
State Sen. Will Espero, vice chair of the Senate Public Safety Committee, says Architects Hawaii needs to be more transparent about Louis Berger’s involvement.
“There are certainly some red flags that are raised with the selection of this subcontractor,” Espero said. “Architects Hawaii should give us an explanation on why they were chosen, because taxpayer dollars are involved. We need to know that these dollars are spent appropriately and legally.”
The accounts of Louis Berger’s improprieties first began to surface in 2006, when a former executive in the company’s accounting department filed a whistleblower lawsuit under the False Claims Act, alleging a massive fraud against the federal government.
Eventually, in 2010, the case resulted in a deferred prosecution agreement, in which the company admitted overbilling more than $10 million to the U.S. Agency for International Development for its work in Afghanistan and Iraq.
As part of the deal, the company pledged to pay $18.7 million in criminal fines and $50.6 million in civil penalties, as well as undergo federal monitoring to reform its practices.
Around the same time, two of the company’s executives — Salvatore Pepe, former chief financial officer, and Precy Pellettieri, former controller — pleaded guilty to conspiring to defraud the government.
“Architects Hawaii should give us an explanation on why they were chosen, because taxpayer dollars are involved. We need to know that these dollars are spent appropriately and legally.” — State Sen. Will Espero
Four years later, Derish Wolff, the company’s former CEO, also pleaded guilty, admitting to what the FBI described as nearly 20 years of “creating and executing a series of elaborate fraudulent billing schemes, ultimately defrauding the federal government of tens of millions of dollars.”
Wolff was later sentenced to one year of home confinement and fined $4.5 million.
The company’s legal troubles didn’t end there.
In February 2015, the World Bank debarred the company for one year for “engaging in corrupt practices” — bribing officials in Vietnam to secure contracts.
Five months later, the U.S. Justice Department followed up with a similar allegation, accusing the company of bribery in India, Indonesia, Kuwait and Vietnam between 1998 and 2010.
Eventually, two former executives were convicted of violating the Foreign Corrupt Practices Act.
The company, meanwhile, reached another deferred prosecution agreement, this time pledging to pay $17 million in penalties and retain a compliance monitor for at least three years.
Days after agreeing to the deal, the company issued a statement, saying it took responsibility for its misconduct and established an “independent compliance and ethics department” as part of a $25 million reform effort it had started in 2010.
Nicholas Masucci, the company’s then-chairman, said in the statement: “We are a much more efficient, responsible and transparent company today than we were five years ago.”
It appears that neither the Department of Public Safety nor DAGS did much vetting before allowing Architects Hawaii to bring on Louis Berger.
Toni Schwartz, public safety spokeswoman, referred all questions about the OCCC contract to DAGS.
Cathy Chin, DAGS spokeswoman, says the department doesn’t monitor the subcontractors — a situation that leaves little recourse when it encounters potential problems.
“The company’s history proves that they have some problems with the truth. How can we trust information that comes from them?” — Kat Brady, coordinator of the Community Alliance on Prisons
“If we have concerns about the subconsultant, we have to go through the prime consultant and ask for assurances that the prime consultant would be able to complete his project,” Chin said.
Chin added that, once learning about Louis Berger’s history following Civil Beat’s inquiries last week, the department “reached out” to Architects Hawaii about the company’s troubles.
Kat Brady, coordinator of the Community Alliance on Prisons, says the project’s credibility is now in question, thanks to Louis Berger’s involvement.
“The company’s history proves that they have some problems with the truth,” Brady said. “That’s a problem. How can we trust information that comes from them?”
For his part, Espero says it makes sense for state agencies to have more oversight on the subcontractors, but the ultimate responsibility should rest on prime contractors.
“At this point, I don’t know why Architects Hawaii chose” to work with Louis Berger, Espero said. “But they have to be able to assure the public that they are going to be watching the company and the progress of its work, and that there are no signs, hints or rumors of corruption.”
You can read Architects Hawaii’s bid documents for the OCCC project here: