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Three contractors profited as DOT’s debt soared, auditors say
Three highway contractors reaped the proceeds as the Georgia Department of Transportation ran up billions of dollars in unconstitutional deficits, state auditors say.
The DOT in recent years circumvented restrictions on debt by borrowing against future motor fuel taxes, a practice prohibited by the Georgia Constitution, State Auditor Russell Hinton said in a report released Monday. Some DOT officials, auditors said, may also have misled overseers and signed off on fraudulent financial statements to mask the size of the agency’s deficits.
By June 2007, auditors said, the DOT had run up a deficit of $2.2 billion.
In the audit’s back pages, drawing little media attention, auditors asked the question: “Where did the cash go?”‘
Their answer: C.W. Matthews Contracting Co. Inc, Archer-Western Contractors Ltd. and E.R. Snell Contractor Inc.
In fiscal year 2002, the three companies earned a total of $21.4 million from Georgia DOT contracts. Six years later, in FY 2008, the three contractors collected $907 million — 42 times the 2002 total.
Equally as significant, the three companies’ share of all DOT payments grew exponentially. In 2002, their payments made up a little bit less than 9 percent of the total “pie” of DOT contracts. By 2008, they gulped down 42 percent of the pie.
The spike in payments was a result, in part, of fast-track road-building programs launched by Govs. Sonny Perdue (“Fast Forward”) and Roy Barnes, the auditors said. But a bigger factor, they said, was the DOT’s spending of money it didn’t have:
“Our investigation revealed that the large increases in GDOT cash disbursements in FY 2006 through FY 2008 went primarily to construction contractors. … FY 2008 cash disbursements reached an all-time high, exceeding $2.1 billion, a 25% increase over FY 2007 disbursements. FY 2008 increase in cash disbursements can be partly attributable to the effects of Fast Forward, but is primarily the result of excessive obligations entered into with construction contractors during FY 2007.”
From 2002 through 2005, auditors said, payments were spread fairly evenly among the department’s top five contractors.
“That trend, however, began to change in FY 2006 with three contractors separating themselves from the others. This trend continued to become more exaggerated in FY2007 and FY2008.”
C.W. Matthews, the largest of the DOT’s contractors, increased its take from the department from $18 million in 2002 to more than a half-billion dollars in 2008, the auditors said:
$18 million — FY 2002
$50.3 million — FY 2003
$69.3 million — FY 2004
$109.1 million — FY 2005
$251 million — FY 2006
$387.5 million — FY 2007
$525.2 million — FY 2008
All told, C.W. Matthews collected $1.4 billion from state contracts in those seven years. Archer-Western earned $493 million, auditors said, while E.R. Snell made $470 million.