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Why Is the Government Paying Companies Fined for Pollution and Accused of Fraud?

Private contractors have reaped tens of millions of dollars in new federal stimulus funds, despite previous pollution violations, criminal probes, and allegations of fraud.

Private corporations working in California have reaped tens of millions of dollars in new federal stimulus funds, despite previous pollution violations, criminal probes, and allegations of fraud, a California Watch investigation has found. 

Residents in Ventura County say they are dismayed that airplane and defense giant Boeing received a $15.9 million stimulus contract for environmental monitoring  at the same site near Simi Valley where the company was fined for polluting a creek with chromium, dioxin, lead and mercury. A local resident and opponent, Dawn Kowalski, called the new contract “the fox guarding the hen house.” 

Watsonville-based Granite Construction received $6.4 million in stimulus contracts to work on airport runways in Salinas and Monterey, and to repair roads in San Bernadino, Riverside and Butte counties. Yet the company faces three federal probes, including a criminal investigation into whether it fraudulently overcharged the city of San Diego in the wake of the devastating 2007 wildfires. 

And a major apartment owner based in Denver, AIMCO, stands to benefit from $13 million in stimulus tax credits to rehabilitate its housing complex in Los Angeles. This federal assistance comes after the company paid $3 million in 2004 to settle a lawsuit from the city of San Francisco over complaints that it operated mold and rodent-infested buildings that posed serious safety hazards to residents. Residents continue to complain about AIMCO’s management. 

To government watchdogs, these contracts and others represent a breakdown in the massive federal stimulus program. Although every major company in America faces lawsuits and regulatory action, these government reformers say a contractor’s entire history should be considered before doling out more money to the same firms. 

“It is very upsetting that the government doesn't do more due diligence before it hands money out,” said Laura Chick, California's inspector general for stimulus funds. “We've gotten very used to handing out taxpayer dollars and not so good at overseeing to whom are we giving and how they are being spent.” 

Stimulus money has flowed quickly into California over the past year, moving from federal agencies to specific contractors that compete for projects, or through the state government and local agencies that have their own bidding processes for distributing the federal money. The process is moving so rapidly, the government is bound to overlook or ignore past problems, one government watchdog said. 

“I think we’re trying to spend money as quickly as possible, and at that point putting taxpayers’ money at risk,” said Scott Amey, general counsel of the Project on Government Oversight, which tracks contractor misconduct. 

But one major stimulus contractor with past legal troubles, CH2M Hill, said focusing on a few isolated cases would be a misleading representation of its work. The company was awarded a $20.7 million federal stimulus contract to clean up contaminated sediment from a defunct mine near Redding in Shasta County – a contract that enabled CH2M Hill to keep as many as 21 positions that otherwise would have been eliminated. 

In 2008, CH2M Hill was sued by the Los Angeles Department of Water and Power for an alleged scheme to deceive and defraud the city with spurious charges over several years.  The suit was settled under undisclosed terms.  The company also was fined more than $800,000 for spilling 85 gallons of radioactive waste in 2007 while cleaning up an old nuclear site in southeastern Washington, according to a report by the federal Government Accountability Office 

“We have more than 10,000 active projects all over the globe and on a rare occasion we may have an issue with an individual project,” said John Corsi, a spokesman for CH2M Hill. Corsi said both the Los Angeles and Washington projects were successful.

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