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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.

hintonThe 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.





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3 Responses to “Three contractors profited as DOT’s debt soared, auditors say”

  1. David Doss says:

    In the rush to condem the Georgia Department of Transportation, fueled by irresponsible comments like “Enron Accounting” from Sonny Perdue, several very critical facts seem to be ignored:

    1) After numerous audits and investigations, NOT 1 PENNY OF MONEY IS UNACCOUNTED FOR AT GDOT.
    2) After numerous audits and investigations, NOT 1 PERSON IS SHOWN TO HAVE GAINED PERSONALLY.
    3) The best indicator for GDOT’s financial condition and money management policy is their bond rating. Surely, if “Enron Accounting” is being used, the bond rating at GDOT must have suffered greatly. Absolutely not! The last GDOT GARVEE bond sale, in which the rating is based upon GDOT’s financial management and condition and not based on the State of Georgia, GDOT received THE HIGHEST BOND RATING THAT GARVEE BONDS CAN RECEIVE.
    4) Auditors claim the biggest reason for the spike in payments to highway contractors was that GDOT was spending money that it did not have. Absurd! If GDOT was spending money that it did not have, then how did the contractors get paid? Surely GDOT must have been sued for not paying their bills? Surely GDOT must be overdrawn at the bank by hundreds of millions of dollars? Wrong on both counts. I would challenge the Auditors to produce one shred of proof that GDOT was either overdrawn at the bank or failed to pay their contractual obligations to any highway contractor.
    5) Lastly, there is something evil or sinster implied because payments to several large highway contractors increased from FY’06 – FY’08. Sonny Perdue’s Fast Forward Program compressed 18 years of road projects into just 6 years. What do the bean counters at the Department of Audits expect to happen? When GDOT accelerates the construction program, OBVIUOSLY payments to contractors are going to increase accordingly. But here is the important thing to remember: EVERY CONTRACT WON BY A HIGHWAY CONTRACTOR WAS WON BY SEALED BID, LOW BID PROCESS. Every contract was won fair and square by the lowest bidder.
    And what about C.W. Matthews? How did they more than double their work for GDOT in only 2 years? Surely there must be something evil and sinister at work here! No, the Auditors failed to mention one small thing that happened during 2006. C.W. Matthews BOUGHT ONE OF THEIR LARGEST COMPETITORS, APAC. At the time, APAC was about the same size company as C.W. Matthews and the APAC contracts became Matthews contracts. It’s like when AT&T bought Bellsouth …. AT&T’s revenues increased overnight!
    So Governor, would you please explain “Enron Accounting” to us?

  2. The Truth says:

    Mr. Hinton,

    You have missed the mark on this one, Mr. Doss’ points are once again correct. You seem to be alleging that the three contractors you single out in your editorialized audit did something wrong. If you would have dug a little deeper you would have realized that these companies were simply the Low Bidder on GDOT contracts, nothing was given to them, they earned every penny by following the Law. Maybe you should audit the second bidders on all of those contracts then you could report that the three contractors you single out actually saved the state Millions of dollars over that period of time. I’m also confident that the individual state employees you singled out in your audit haven’t done anything wrong either. If they did anything, it was to look for ways to deliver Fast Forward which was underfunded from the beginning. These are dedicated state employees who have devoted their careers to this state and have done all they can to support the politicians who constantly pressure them to deliver. I think it’s very sad that we have folks who would be willing to fabricate an “audit” to try to destroy others careers just to vindicate themselves.

  3. John Huie says:

    Former GDOT commissioner Gena Evans said she had never before seen private contractors so involved in day-to-day decisions of a state agency as at GDOT. The present commissioner is an ex-road contractor, and many board members over the years have been road contractors. Georgia legislators vote for GDOT board members BY SECRET BALLOT, so fearful are they of GDOT nixing local road projects. No wonder GDOT promises everything to everybody.

    Yet mass transit–the obvious, crying need of the future–is ignored. GDOT kicks and screams at any initiative favoring pedestrians or bikes over cars– even safety initiatives (like Safe Routes to School) so kids can walk to school. Wonderful, expensive new roads to the wealthy suburbs are routinely proposed and funded, instead of other projects that would benefit more citizens.