Big Dig payment for fraud at $50m

Aggregate Industries NE Inc., which pleaded guilty to fraud for supplying 5,700 truckloads of substandard concrete on the Big Dig, will pay $50 million to settle the case, but it can still do business with the state and federal governments.

In a key provision of the agreement announced yesterday between Aggregate and state and federal prosecutors, the region's largest concrete supplier avoided debarment, an administrative sanction that would have prevented the company from bidding on federal or state contracts, which make up most of the company's business.

R. Robert Popeo, a lawyer who represented Aggregate, said debarment would have forced its parent company to close Aggregate and sell its assets.

US Attorney Michael J. Sullivan acknowledged that the provision was a key factor in Aggregate accepting the settlement. "Obviously, a debarred company has less value than one that is not debarred," he said during a press conference.

Aggregate -- which was paid $105 million for its work on the Big Dig, including about $4.5 million for the substandard concrete -- agreed to pay $42 million to settle a civil investigation and $8 million in criminal fines.

Sullivan and Attorney General Martha Coakley said they want $27 million of the settlement to be used as a first-of-its-kind endowment to pay for future maintenance and repairs on the long-troubled highway-and-tunnel project.

"I think this is an extremely good result," said Coakley. "It's forward-looking, and it benefits taxpayers."

John Lamontagne -- spokesman for the Massachusetts Turnpike Authority, which manages the Big Dig -- said annual maintenance and operation costs are about $50 million a year.

Under the agreement, Aggregate will also sell its largest asphalt plant in Boston and pay for a monitor to track its legal compliance. The company also agreed to provide as much as $75 million in insurance for potential structural maintenance costs and to pay $500,000 to state highway officials to check regularly the places where they suspect substandard concrete was poured.

While the case against the company is finished, criminal charges remain against six of its former managers. In a 135-count indictment announced last year, the managers were accused of repeatedly passing off over-age concrete as fresh and of falsifying documents to cover the scheme.

Concrete must be used within 90 minutes of being mixed; otherwise it begins to harden and may not solidify properly. Sullivan said invoices and delivery records showed that 5,700 truckloads, each carrying about 10 cubic yards of cement, were tainted. In total, Aggregate supplied about 135,000 truckloads to the Big Dig.

The tainted concrete represents about 2 percent of the concrete on the $15 billion project and is concentrated within the huge side walls of the Thomas P. "Tip" O'Neill Jr. Tunnel that takes Interstate 93 under downtown Boston.

Asked whether there was a connection between the substandard concrete Aggregate supplied and persistent leaks in the O'Neill tunnel, Sullivan said that the concrete "could pose serious problems," but that finding a direct correlation between the concrete and leaks was very difficult.

"It's a very complicated procedure," he said.

Fred M. Wyshak Jr., the federal prosecutor who headed the investigation, said it was difficult to pinpoint a few substandard loads of concrete among the scores of loads used to form the walls.

Sullivan, whose investigators spent almost two years sifting through tens of thousands of pages of documents, said the case marked a breakthrough for the protection of taxpayers from fraudulent contractors.

Prosecutors also credited the help of four one-time Aggregate employees who provided authorities with information about the company's practices. Three of the whistle-blowers, who filed suits in 2005, will share $2.7 million, or about $900,000 each, under state and federal laws that attempt to encourage those who are aware of fraud against the government to come forward by offering a share of any money recovered.

In an interview yesterday, Daniel Johnston, a fourth whistle-blower who filed suit in 2006 and will receive $75,000, said he was a concrete inspector for Aggregate on the Big Dig when he began to suspect that too-old concrete was being recycled and delivered as new.

When he questioned the practice, he said, Aggregate personnel told him, "This is how business is done." He said later that he was warned his questions could cause him to wind up "in a hole."

Johnston said he was worried that the substandard concrete was creating a safety risk

But Sullivan said the Big Dig tunnels have been thoroughly inspected, especially since last summer's fatal ceiling collapse in the Interstate 90 Connector tunnel and determined to be safe.

The Aggregate settlement does not affect negotiations by Coakley and Sullivan's office to reach a resolution with Big Dig contractors for shoddy work. Coakley said she expects to announce "within weeks, not months" whether to seek criminal charges in the ceiling collapse that killed Milena Del Valle.

Sean P. Murphy can be reached at smurphy@com.