PORT SEEKS $100M IN FRAUD SUIT KAJIMA ATTORNEY CALLS ACTION 'FANTASYLAND'.

Byline: Beth Barrett Staff Writer

The Port of Los Angeles accuses a sister company of the lead contractor on the controversial Belmont Learning Center project of fraud and racketeering in connection with a contract to remove a bridge linking the port to Terminal Island, according to a new court filing.

Port officials are seeking $100 million in damages from Kajima Engineering and Construction Inc., a local subsidiary of the world's largest construction firm and a sister company to Kajima International, the leading partner in the firm building the Belmont Learning Center.

A Long Beach Superior Court judge is scheduled to decide June 20 whether to allow the port's claim, which is made in a new filing to be heard. If it is approved, the port would be able to amend an earlier, far narrower cross-complaint filed in response to Kajima Engineering's suit over the bridge removal.

At the heart of the proposed amendment is the port's contention Kajima Engineering won a $34.6 million contract to dismantle and float out the 5,000-ton Badger Avenue Bridge by deliberately low-bidding the project despite knowing it was incapable of carrying out the engineering feat, documents attached to the city's motion state.

``If KEC's plans had been implemented during the float-out, the bridge span would have sunk to the bottom of the channel,'' the proposed amended cross-complaint states.

``If this had occurred, the Cerritos Channel would have been blocked, and all rail traffic in and out of the Terminal Island would have been stopped, severely impeding the operations of one of the world's busiest seaports for an indefinite period of time.''

City officials said the size and scope of the proposed litigation is unprecedented.

``In port history, it's certainly the biggest lawsuit we've prosecuted - by a lot,'' Assistant City Attorney David McKenna said.

Officials with Kajima Engineering did not return telephone calls.

Its attorney, Mark Johnson of Manatt, Phelps & Phillips, called the cross-complaint ``pure fantasyland from an out-of-control public agency.''

``Kajima built the bridge,'' he said. ``It's up and operating and the city hasn't paid Kajima.''

His co-counsel, Bernard Kamine of Kamine, Steiner & Ungerer, added: ``Our position is that until the court takes action on the motion, there's nothing to discuss.''

Kajima Engineering and Construction, based in Monterey Park, is a subsidiary of Kajima U.S.A. Inc. in New York, which is wholly owned by Kajima Corp., based in Japan.

< 3-year dispute

The accusation is the latest chapter in a three-year contract dispute that escalated Jan. 12, 1999, when the firm filed a breach-of-contract lawsuit against the port for $35 million in combined claims and liquidated damages associated with the bridge work. The port denied the allegations.

In broadening its cross-complaint, the city asserted the claim against Kajima Engineering is consistent with the firm's, and its parent's, business practices throughout the country.

The city alleges that ``Kajima's difficulties in obtaining new construction contracts in Japan and other Asian countries was exacerbated when it was suspended in the mid-1990s from bidding on public construction projects . . . because of a pattern and practice of bribing public officials and/or other criminal activity,'' the proposed cross-complaint states.

``The city is informed and believes . . . that in furtherance of this fraudulent scheme, KEC increased the number of public works contracts it was awarded by intensifying its intentional underbidding.''

Kajima Engineering, in making its claims against the city more than a year ago, asserted the port's demands drove up the price. It asserted it was fully qualified to do the work, and that its in-house plan to float the heavy bridge span out on barges was safe; only the port's insistence it hire a subcontractor to do the work drove up the price, the company said.

< 21 allegations

The proposed amended cross-complaint makes 21 allegations against Kajima Engineering, alleging it submitted an ``unrealistic bid'' to win the work, which failed to take into account material and equipment costs.

The company then ``engaged in imprudent methods,'' to cut costs, hiring poorly qualified and inexperienced people who were quickly promoted, the court document states. The inexperienced crew did work out of sequence and soon encountered technical problems around the pilings in the channel - slipping some 100 days behind schedule, the document says. Kajima Engineering in previous court documents blamed all delays on the port, or unforeseen obstacles like timbers and debris in the channel.

In early 1997, a team of experts identified ``a significant omission'' in the bridge-removal plan, which they warned would result in it sinking to the bottom of the channel. At that point, the port asked Kajima Engineering to hire a ``competent'' marine contractor. The subcontractor, Manson Construction and Engineering, completed the work using a different method.

< Plan defended

Kajima Engineering representatives consistently have defended the safety of their plan to float the bridge on barges.

The port claims the firm cut other corners to make money off its low bid, including the unauthorized substitution of a subcontractor and intentionally disregarding the city's minority hiring requirements.

Kajima Engineering ``fraudulently misrepresented that it would comply with the (minority and gender) requirements when it had no intention of doing so,'' the city's brief states.

The company ``falsely certified'' that its minority and women's participation in the project was 16 percent when it less than 7 percent, it adds.

The city alleges the firm's charges include ``embezzlement'' of $45,000 in public funds for a non-existent second security guard.

Taken together, the city charges Kajima Engineering and its parents' actions amounted to a ``pattern of racketeering activity'' by using funds from Japan ``derived from bribery, bid rigging, tax fraud and kickbacks''; filing false and fraudulent claims; extorting others to commit illegal acts; and extorting money by the filing or threat of lawsuits.