Birdsall bankruptcy leaves towns guessing

UNION COUNTY — In the wake of the state attorney general seizing the assets of one of the largest engineering firms doing business in Union County, whether or not local municipalities and the county would be left holding the bag for incomplete projects is unknown.

One thing is certain, though, municipalities doing business with Birdsall Services Group may not have any answers, but they certainly have a lot of questions. Especially after state authorities seized the public engineering firm’s $41.6 million in assets and $5.4 million in cash last week. Adding further alarm was the fact the engineering firm filed for Chapter 11 bankruptcy two days later.

The engineering company, one of the most politically connected in the state, has been charged with conspiracy and money laundering, with seven of its top executives and shareholders indicted for the crimes.

Late on Monday a federal bankruptcy judge allowed Birdsall access to more than $1.6 million so they could pay employees, but none of the executives indicted. This move by the court also temporarily prevented public projects the firm is contracted for from stopping abruptly. However, there is no word on how long these public projects, including many in Union County, will continue.

One of those indicted, James Johnson, 51, of North Brunswick, was president of the environmental consulting division of Birdsall and a significant shareholder, according to the attorney general.

He allegedly made at least $45,797 in illegally reimbursed political contributions.
According to several sources, Johnson was involved heavily in Union County.

“He was at everything involving the county,” the source noted.
Controversy about Birdsall’s covert campaign donation strategies that circumvented the state pay-to-play law in order to gain financially lucrative contracts in the public sector broke last year in May when the state seized computers and files from the engineering company.

In 2011 Birdsall did more than $28 million in contracts with municipalities and counties throughout New Jersey, including Union County, contributing $129,700 to Democrat and Republican affiliations, including state senators and council members, according to state Election Law Enforcement Commission records.

By November, a former executive of the engineering company pleaded guilty to disguising corporate campaign contributions from the firm’s employees, but authorities continued to investigate the engineering firm.
Last week the former CEO of the company was indicted along with six other executives and shareholders on charges they conspired in a scheme to avoid the restrictions of the Pay-to-Play Act by disclosing illegal corporate political contributions as personal contributions from employees of the firm.

Under the scheme, Attorney General Jeffrey Chiesa said, instead of Birdsall group making corporate political contributions to campaigns and political organizations that would disqualify it from public contracts awarded by government agencies, the firm’s employees made personal political contributions of $300 or less, which do not have to be reported to the state.

In return for doing this, employees were directly or indirectly reimbursed by Birdsall through added bonus payments. The scheme allegedly continued for more than six years and involved hundreds of thousands of dollars in contributions.

“The defendants secured millions of dollars in public contracts for which they should have been disqualified,” said Chiesa last week, adding that there are rules preventing publicly connected firms from “stacking the deck in their favor in public contracting.”

But that was not the first time Birdsall had a run-in with the attorney general’s office. In October 2010 Birdsall was slapped with an 18-month suspension for violating the state’s pay-to-play laws. Specifically the suspension was the result of two donations, $1,500 to the Hillside Democratic Organization and $6,000 to the Piscataway Democratic Organization in Oct. 201o.

Both donations were in violation of the state statute baring political contributions from state vendors. Although the company appealed the suspension, it was denied.

The Union County Improvement Authority was also heavily involved with Birdsall and the PMK Group of Cranford, which merged with the firm in 2008. From November 2009 through December 2011, the engineering firm billed the UCIA $347,951 for renewable energy work.

In Jan. 2012, the UCIA paid Birdsall $28,822 for its services on various projects involving renewable energy and also the new Linden firehouse.

When asked how the shutdown of Birdsall would affect ongoing projects the engineering firm is doing for the county, Communications Director Sebastian D’Elia said an assessment was underway to determine the number of ongoing projects the engineering firm was involved with and how far each had progressed.

If county officials were concerned about any future repercussions politically, it was not evident. In fact, in a statement issued Monday, the county expressed their own sentiment on the breaking of this particular state law.

“The County of Union has always abided by pay to play laws. The allegations pertaining to Birdsall Engineering do not involve the County of Union,” it read, but expressed loyalty to the engineering firm.

“Birdsall Engineering has consistently delivered an exemplary work product to the County of Union and there are a number of existing contracts on projects at various stages of development,” county officials said in a statement.

They also noted that for now, the situation between the state attorney general’s office and Birdsall “remains unsettled and the County of Union is closely monitoring all developments before charting a final course of action.”

The implications of the investigation go beyond simply finding a way around the pay to play law, and raise questions about the potential for ethics violations by politicians, although no such allegations have been made. Notably, for Birdsall to gain anything from the individual contributions by their employees, wouldn’t those benefiting from the contributions need to be made aware of the scam?
Among the hundreds of political campaign donations made by Birdsall from 2008 through 2011, many were to Union County Democrats, including freeholder candidates for re-election.

Included among them was $2,700 to State Sen. Raymond Lesniak; $17,100 to Mirabella, Scanlon and Jalloh Victory 2009; $15,300 for Sullivan, Kowalski and Carter Victory 2010; and $7,800 for Estrada, Hudak and Wright for Freeholder Victory 2011.

In 2011, Birdsall also contributed $1,300 to Republican Assemblyman Jon Bramnick, but no other Republicans in Union County.
On a more local level, mayors from several towns were concerned about repercussions their municipalities would have because of the shutdown of Birdsall.

In an interview Monday, Mayor Chris Bollwage of Elizabeth said the city does have open contracts with the engineering firm for environmental remediation, but that Birdsall was not always involved.

The mayor explained that he previously contracted with PMK Group of Cranford, who merged with Birdsall in 2008.
“They have been doing work for us going back even further than since I have been mayor,” he added, but admitted mayors in all local towns using the engineering firm have concerns about ongoing contracts.

“Say Birdsall did half the job and we have to do a progress report to the DEP, they’re not going to be able to go with us,” Bollwage said, adding that this could put Elizabeth and other municipalities in a bind.

He is hopeful, though, that this will be taken into consideration by the attorney general, for all towns with open contracts.
“I’m hopeful that Birdsall and the state can find a way to ensure these contracts are honored,” he added.

The problem, according to one mayor, is that it is unlikely that another engineering firm would want to step in and take over the work of another firm. Not only is it complicated but it also could be costly for towns who already expended money for the work.
In Linden, Mayor Rich Gerbounka admitted he was initially concerned, especially because Birdsall has been handling the city’s obligation to close a 55-acre landfill for years.

“They have done all that engineering work and monitoring and they are still involved with it,” the mayor explained. But he mentioned that while it was alarming to hear the company had been shut down and also filed for Chapter 11 bankruptcy, he felt certain Linden would not be left out in the cold.

“I was just on the phone with the engineer at Birdsall that handles our contract and he assured me that he would still be handling our contract,” Gerbounka said. He also said the engineer was at work, despite the attorney general shutting down the facility.

Of concern, the mayor explained that Birdsall had been involved with the cleaning up of the landfill since the beginning.

“They did the engineering, planned everything and advised us when we had to go to the DEP,” Gerbounka said, adding that the city paid $13 million to close the landfill and several million dollars of that went to Birdsall.

The mayor also noted that Birdsall was involved with the one and a half mile boardwalk that juts out into the forested wetland area.
“When we shut down the landfill in an environmentally sound manner, part of the deal was that we would do something environmentally friendly,” Gerbounka added.

Birdsall filed for bankruptcy March 29 after failing to reach an agreement that would allow the firm to continue operating and paying its employees. Although the court did allow the firm access to $1.6 million, that will not be enough to keep Birdsall afloat for long.

The engineering firm asked the court last week to void the seizure of assets by the attorney general’s office and allow the company to have access to its cash so they would not have to permanently shut down.

According to the bankruptcy filing, Birdsall made $5.6 million before taxes last year on net revenue of $49.5 million, with liabilities of $29.4 million. Since the beginning of 2008, when PMK Group and Birdsall merged, the company has had $86.7 million in public contracts with municipalities all over the state.