Big Dig Contractor Files for Bankruptcy After Feds Charge It With Lying About Work

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.

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 some of the more than $1 billion in construction work it has completed the past four years, much of it 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.

A spokeswoman for the U.S. Attorney's office declined to immediately comment on the bankruptcy filing. If convicted in the criminal case, the company faces up to $24.5 million in fines, as well as restitution payments.

An expert in bankruptcy law said the filing would not slow the government's ability to press its criminal case against Modern Continental, or potentially extract financial penalties if it wins its case.

"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 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.

After the charges were announced, Modern Continental issued a statement calling them "completely unfounded and without merit." The company said the charges were "an attempt after the fact to criminalize actions" that were 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. But 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."