Resort alleges builders in scheme for kickbacks

Grace Leong

Friday, Dec. 8, 2000 | 10:29 a.m.

The Regent Las Vegas is seeking a court order to compel the deposition of a J.A. Jones Construction Co. project manager, whom it alleges to be at "the center of the focus of a possible scheme of kickbacks and conspiracy to defraud" the hotel-casino of millions of dollars.

In court papers filed Nov. 27, the Regent said it had "direct evidence" showing J.A. Jones' Eric Brehm and Victor DuBois, a manager of subcontractor Performance Contracting Inc. of Anaheim, Calif., conspired to fabricate change orders to bill the hotel-casino for work that was allegedly never performed and to "reimburse" Performance for "extraordinary entertainment and other expenses" incurred to entertain the two men.

The Regent, which said it discovered J.A. Jones and Performance worked together on several projects including the Regent and the Las Vegas Federal Courthouse, alleged Brehm and Pat Contrardie, a J.A. Jones chief purchasing agent for the courthouse project, accepted "thousands of dollars worth of travel and entertainment from (J.A. Jones') contractors in exchange for an agreement to approve change orders that were illegitimate."

The 16-month old Regent, which filed for Chapter 11 bankruptcy protection Nov. 21, sued J.A. Jones of Charlotte, N.C., Helix Electric Inc. and Micco LLC on Feb. 11, alleging breach of contract, negligence, fraud and misrepresentation because of problems and delays in construction of the resort. The Regent demanded more than $200 million in punitive and compensatory damages from the three defendants.

J.A. Jones countersued on March 3, alleging the project was delayed because the Regent failed to timely make payments, provide "complete and constructable design documents, initiated excessive and unwarranted changes to the designs and interfered with J.A. Jones' management by hiring trade contractors during critical phases of construction without its approval."

The Regent is asking for a trial date that was scheduled on March 12, 2001, in U.S. District Court to be postponed to the week of May 7, 2001, because of its recent bankruptcy filing.

Dozens of trade contractors claimed they haven't been paid for their work on the hotel-casino, and the Regent and J.A. Jones are blaming each other. The Regent's lawsuit is related to a $16.6 million lien filed against the property by J.A. Jones in January.

Denny Weddle, the Regent's spokesman, said up to 80 liens have been filed against the Regent by its trade contractors. He said the Regent has since settled most of the liens, with about 20 liens now outstanding.

David Rivers, J.A. Jones' attorney, said lawsuits involving the Regent and J.A. Jones in Clark County District Court are now stayed, while those in U.S. District Court are expected to proceed despite the bankruptcy filing.

"The bankers, contractors and subcontractors will be fighting about who gets priority in getting their money back. The bankers are claiming $95 million in unpaid loans," he said. "Between $29 million to $40 million is (allegedly) owed to mechanic's lien claimants such as contractors and subcontractors. And if the lien claimants succeed and if the Resort can't pay, then there'll likely be a (foreclosure) sale."

The Regent said J.A. Jones allegedly concealed that its project personnel were accepting thousands of dollars worth of kickbacks from contractors and that many of the contractors refused to commit to finish the Resort on time by April 30, 1999.

The resort was originally scheduled to open on June 29, 1999, but did not actually open until July 15, 1999. However, the Regent remained incomplete until January, when it finally opened its second hotel tower.

The Regent cited a Jan. 13, 1999, letter from DuBois to his supervisor, Ed Caparelli, that allegedly detailed $15,000 out of $28,300 in Super Bowl expenses that Performance allegedly intended to bill to the Regent and the Federal Courthouse projects.

DuBois allegedly said in the letter he wanted to take Brehm, Contrardie and Ron Rendina, a project manager from another contractor, Kitchell Contractors, and their wives, to the 1999 Super Bowl in Miami because "these customers have been very important to our branches' success thus far."

"I have commitments from both Eric and Pat to issue a $5,000 and $10,000 change order to help cover the costs," DuBois allegedly wrote in the letter.

The Regent said these costs included "a five-day trip for eight people to the Super Bowl, (including $3,500 in cash for spending); tickets to the National Finals Rodeo for Jones' staff, one evening's entertainment for Brehm at what appears to be Cheetah's (topless dancing club) identifying dinner, show and entertainment for $1,852."

The Regent said the letter suggested Brehm agreed to issue a $5,000 change order on the Resort project -- allegedly without the Regent's authorization -- to help cover part of the Super Bowl expenses, while Contrardie agreed to issue a $10,000 change order on the Federal Courthouse project.

But J.A. Jones' Rivers disputed the allegations. "There's no mention that the change orders were issued against the federal building or the resort. It just says they have commitments for change orders and none have surfaced so far that would back up that claim."

"J.A. Jones contacted the (U.S.) Department of Justice a week after the allegations about the courthouse surfaced in September, and offered to open our books to them if they wanted it," he said.

"We definitely deny that there was any conspiracy to defraud the resort," said another J.A. Jones attorney, Douglas Patin. "To the extent that there was any allegation of excessive entertainment, we take that seriously, and we are investigating (the allegations)."

Todd Touton, the Regent's attorney, could not be reached for comment on whether the federal government is investigating the allegations regarding its courthouse.

The Regent also alleged Jones manipulated schedules to show an April 30, 1999, completion date of the Regent -- then known as the Resort at Summerlin -- even though it knew it wasn't going to meet that date, and then exacerbated the problem by allegedly lying about why some of the schedules it received showed a completion date later than April 30. The Regent alleged Jones claimed the delays shown were the result of a "software glitch."

The Regent alleged J.A. Jones repeatedly threatened to stop work to force the hotel-casino to sign improper change orders and pay overtime that was allegedly J.A. Jones' responsibility.

But J.A. Jones disputed these allegations in a Nov. 21 response. It said the Regent failed to "identify the date on which the alleged fraudulent statements were made, by and to whom each such statement was made and the specific substance of those representations."

The Regent said it is taking legal action because it feared its efforts to continue discovery of the "financially disastrous results of its construction project" may be thwarted if the court approved Brehm's request to refuse to produce several documents.

Brehm was subpoenaed on Nov. 20 to produce documents relating to the purchase and title of a boat, entertainment and travel charges between Dec. 22, 1997, and April 25, 2000, and funds in excess of $250 deposited or withdrawn from Brehm's bank accounts in that period. Wells Fargo Bank was also subpoenaed to produce Brehm's records.

But Brehm refused to comply, saying in his motion to quash the subpoenas he had no new information and that the Regent's request is an attempt to portray him as a "scapegoat, thereby ruining his reputation in the community and inflicting serious emotional and physical distress upon himself and his spouse." He said the Regent's request to have his private bank records subpoenaed was a "violation of his guaranteed right to privacy."

DuBois, whom the Regent claims conspired with Brehm to "inflate labor, material, equipment charges and crew rates used in change order pricing," asserted his rights not to answer on the basis of self-incrimination under the Fifth Amendment to every question put to him at his Nov. 1 deposition, the Regent said.

The Regent said the latest discovery proceedings reveal Jones approved 19 different change orders that increased Performance's base contract more than 10-fold to $5.323 million from $500,818. The Regent said 15 of the 19 change orders were executed directly by DuBois and more than $4 million in change orders were approved between DuBois and Brehm.

Rivers disputed the allegations. "DuBois was in charge. Brehm didn't have the authority to finalize any change orders. All he did was gather the change orders and hand them over to higher management for approval or denial."

The hotel-casino said Performance produced "109 cost-coded internal vouchers totalling about $351,059 for labor and materials provided to sites other than the Resort's project." "These were invoices for work performed on the Federal Courthouse, the Pahrump Detention Center, the Beatty Justice Center."

The Regent alleged PCI reimbursed DuBois for "lavish entertainment expenses" of more than $122,324 and coded these charges in Performance's cost records for the Resort project under headings such as "scaffold rent" and "tax accrual."

Rivers denied the allegations. "I've seen entertainment expenses were charged to Performance by DuBois and Performance coded it internally so it knew what project he's entertaining on. But there's no evidence to show the expenses were charged to either the Regent or J.A. Jones."

The Regent said Performance "appears to have been presented with sham invoices -- allegedly approved for payment by DuBois and Caparelli -- upon which payments of $158,000 were made." The hotel-casino contends that money "siphoned away through these sham invoices was shared with others, including Brehm."

Separately, the Regent's insurer, Steadfast Insurance Co., said it paid the hotel-casino $15.021 million in damages for delay costs on Oct. 10 and now is seeking to recover that sum from J.A. Jones, Helix and Micco.

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