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Big Dig Contractor Files for Bankruptcy

This article is more than 11 years old.

The largest construction contractor on Boston's beleaguered Big Dig project filed for bankruptcy protection Monday, the first business day after federal prosecutors charged the company with lying about its work on the nation's costliest public works project.

Modern Continental Co. made a Chapter 11 filing in federal bankruptcy court in Boston, alleging the state of Massachusetts had failed to pay it for construction work _ work for which the state says it was overbilled. The firm has been paid more than $3 billion for Big Dig work, according to state records reviewed by The Associated Press.

Massachusetts Turnpike Authority spokesman Mac Daniel said the state is holding back $20 million from Modern Continental because of disputes over its work.

The bankruptcy petition lists debts of $500 million to $1 billion owed to more than 200 creditors, and assets of $100 million to $500 million.

The filing says Modern Continental's board voted June 11 to seek protection from creditors.

A statement by the Cambridge-based firm said the company has struggled to collect on much of its recent construction work, including in its home state.

"As a result of Modern's struggle to collect due and owing contract balances from the commonwealth, Modern's ability to timely fulfill its remaining contractual requirements as well as its obligations to its creditors has been placed in jeopardy,'' the company said.

On Friday, federal prosecutors say Modern Continental systematically overbilled the Big Dig in a scheme that totaled hundreds of thousands of dollars. Prosecutors also charged Modern Continental with lying about the quality of its work on two areas of the Big Dig, including a section where a ceiling collapse killed a woman.

If convicted, the company faces up to $24.5 million in fines, as well as restitution payments.

U.S. Attorney Michael Sullivan said Modern Continental's bankruptcy filing "does not impact the government's criminal case, and will not deter us from trying to recover taxpayer dollars.''

A bankruptcy law expert agreed.

"The government has priority here,'' said Anthony Sabino, a professor at St. John's University's School of Law. "Private creditors could be hurt by the criminal case. But this bankruptcy is not going to stop the criminal case.''

The bankruptcy petition says Modern Continental's largest creditor is URS Corp., a Boston-based firm owed nearly $9.9 million.

Modern Continental's Web site says the privately held firm was founded in 1967, and is the largest contractor in New England, with overseas operations as well.

Modern Continental was the largest construction contractor on the Big Dig, which created a series of bridges and tunnels to replace Boston's old Central Artery. At $14.8 billion, it is the most expensive highway project in U.S. history.

Modern Continental was not part of a $458 million settlement the government reached in January with Bechtel/Parsons Brinckerhoff _ the manager of the project, whose obligations totaled $407 million _ and 24 smaller companies over the cost of tunnel repairs to fix leaks and other problems.

Prosecutors on Friday accused Modern Continental, builder of the tunnel ceiling, of knowingly using the wrong epoxy to hold up concrete anchors that failed in the 2006 ceiling collapse in the Interstate 90 Connector Tunnel. The collapse killed 39-year-old Milena Del Valle, who was crushed when tons concrete dropped on a car driven by her husband.

Prosecutors also accused Modern Continental of knowing about poor workmanship on slurry walls in the I-93 Tip O'Neill Tunnel before portions of the walls blew out in 2004.

Modern Continental was charged with making false statements, submitting false time and materials slips on contracts and wire fraud. No individual executives or employees were charged.

The company issued a statement calling the charges "completely unfounded,'' saying the complaint was "an attempt after the fact to criminalize actions'' approved by state officials.

Modern Continental said its overbilling was a result of bookkeeping errors that were fixed. It said the company underbilled the project for other time and work, and ultimately charged less than it was owed.

Modern Continental said it expects "no substantial change in its operations'' due to the bankruptcy.

Sabino, the law professor, said Modern Continental's lawyers undoubtedly knew when the company's board voted June 11 to seek bankruptcy protection that the firm might soon face a criminal case. The law clearly states that criminal cases take precedence over bankruptcy matters, so it's unlikely the company could have expected to delay or prevent any criminal penalties by seeking Chapter 11 protection, Sabino said.

"When the U.S. attorney is sniffing around, you know it,'' Sabino said. "Indictments don't happen overnight.''

This program aired on June 24, 2008. The audio for this program is not available.

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