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Wednesday, May 28, 2014

Charlestown awards $661K Klondike Road paving project to contractor with sketchy track record

Town ignores warning
By Will Collette
Cheezburger animated GIF
NOT Tom Miozzi
The Charlestown Town Council, on a motion by Councilor Lisa DiBello, seconded by Dan Slattery and by a vote of 4 to 1, Councilor Paula Andersen (D) dissenting, awarded a contract of $660,899.95 to asphalt contractor T. Miozzi of Coventry. 

Miozzi is being hired to do the next major phase of road reconstruction and paving on Klondike Road.

Because the cost of the project was substantial, I decided to look at the bid documents and noticed a wide disparity, where Miozzi underbid its competitors by a large margin. 

That is not normal on a public construction project because prevailing wage requirements and material specs tend to fix most of the costs and usually make the margin a lot smaller than the 15% spread between Miozzi’s bid and the next lowest bidder. There was an almost 50% spread - $300,000 - between Miozzi and the highest bidder.

Even Charlestown Public Works Director Alan Arsenault expressed some concern about that spread in his recommendation to the Town Administrator, specifically an illegal tactic called "unbalanced bidding." However, Arsenault then covered his ass by saying he had gotten several positive recommendations from other municipalities and decided Miozzi's bid was acceptable. 

As you read on about Miozzi's troubles, it's clear that Arsenault only heard from a very select group of references, ones I'm willing to bet were given to him by Miozzi.

Alan Arsenault's misgivings about this contractor, alleviated by his references that, I'll bet, aren't the ones noted below
I worked ten years in the building trades. One of my main responsibilities was to research the backgrounds of hundreds of contractors coast to coast. I knew Miozzi's unusually low bid was a red flag. "Low-ball" bids generally mean trouble – low-ball bidders often make up the lost margin by cutting corners, use substandard materials, cheat on worker wages through misclassification, or jack up the final price through change orders. Given the rules in public construction, you can't low-ball without cheating and still make money.

I had no prior knowledge about Miozzi so I did a quick, 15-minute check, the kind I did many times when my colleagues would ask me to look at a company and “see if there’s anything suspicious.

In the case of Miozzi, there is. A lot. In those 15 minutes, I found that Miozzi’s neighbors in Coventry had filled over 150 complaints with DEM and I found a ton of IRS tax liens, civil judgments and lawsuits. The DEM complaints and responses were pretty eerie because they were an echo of the nightmare neighbors of the Copar Quarry have experienced. 

I bundled the information up into a fast e-mail to Town Administrator Mark Stankiewicz on Thursday, May 8 with the suggestion that the bid should not be accepted until proper due diligence had been done. 

I knew the Council meeting was that Monday (May 12) and wanted to give him as much lead time as possible to do the right thing.

But at the Council meeting on Monday night, Stankiewicz reported to the Town Council that there was no cause for alarm and no reason to hold up awarding the contract, which the Council did on that 4-1 vote, Paula voting NO.

The next day, Tuesday, May 13, Stankiewicz sent me an e-mail saying “I could find no sustainable legal basis to disqualify the company or reject the award.”

Here's the e-mail string that starts with Stankiewicz's statement in reply to my warning:

I have to guess that Stankiewicz didn’t do much of a “review” on his own.

Stankiewicz (far left) - it's all good.
There are two troubling things about Stankiewicz’s statement. 

First, there was lots of evidence to warrant a disqualification just in the raw files I sent him after 15 minutes of my own research. 

As I went back into the records for a few hours to do what I used to call a “Level 1” search, I found even more things that obviously Stankiewicz didn’t find or ignored.

Second, Stankiewicz is completely wrong to claim there is no “sustainable legal basis” to disqualify Miozzi. 

He is wrong under Massachusetts bid law, which he dealt with constantly when he worked in Stoughton and Plymouth, MA[1], and wrong under Rhode Island bid law[2].

State law in Rhode Island, Massachusetts as well as Connecticut requires government “awarding agencies” such as our Town Council to contract with the “lowest responsible contractor” and that does not have to be the lowest bidder. 

State courts in all three states have held that they will not overturn a decision to bump a contractor deemed to be not responsible unless the decision to award to the next low bidder was arbitrary, corrupt or against the law.

But let’s deal with Miozzi’s record to see what kind of company Charlestown has just hired for an expensive road job and whether there is any reason to believe Miozzi is not a responsible contractor.

The Miozzi family has run variously named companies in Coventry for well over 25 years usually involving some mixture of John Jr., John Sr. and Catherine Miozzi and sometimes other family members. Most of these companies are defunct.

The records I found of their persistent legal troubles start in 1991 and are on-going.

I found:
  • The Town of West Warwick[3] fought and beat the Miozzis over shoddy paving work that Miozzi had to re-do;
  • The Town of North Kingstown fought and beat the Miozzis in court over Miozzi’s plan to build an asphalt plant in a sensitive groundwater protection zone;
  • The Town of Coventry is still fighting with Miozzi over violations of town ordinances for their operations of the asphalt plant that generated over 150 citizen complaints to DEM (click here for the link to the Coventry Council minutes. 
  • Then there are those 150+ complaints from Miozzi's Coventry neighbors. Click here for the link to the DEM report on Miozzi and here for the bizarre claim of what caused neighbors’ complaints and here for how the neighbors feel about it. (Also here);
  • Miozzi was hit with 14 separate IRS tax liens totaling $460,642;
  • Also 4 state tax liens;
  • Over a dozen civil cases brought against the Miozzis where the Miozzis lost;
  • Among these cases are a workers comp suit by Beacon Mutual, a default to Citibank, and a suit by the RI Depositors agency (RIDEPCO) to recover money lost during the credit union crash and scandal;
  • Both Thomas and Catherine Miozzi separately went into Chapter 7 bankruptcy to wipe out their creditors’ claims (except IRS can’t be thwarted by bankruptcy);
  • Though Miozzi was not paying his taxes or his creditors, he had enough money to repeatedly fly a seaplane with his buddies to Martha’s Vineyard and to engage in a running battle with the Town of Edgartown board of selectmen who objected to his use of a protected pond as his regular landing zone.
  • FAA records show Miozzi holds licenses for two airplanes despite his on-going tax and debt payment problems. As a side business, he gives biplane tours.
Click here to read my “Level 1” research on T. Miozzi and ask yourself: by what definition T. Miozzi Paving qualifies as a “responsible contractor?”

Tour RI from the sky
Miozzi working on one of his planes
I also found that Miozzi has hired 53 of its workers as “independent contractors,” which is an unusual, often illegal, practice for a asphalt paving contractor. 

Construction contractors frequently cheat by misclassifying workers as independent contractors[4] and make up for "low-ball" bids by not paying Social Security, workers comp, unemployment comp, or a proper prevailing wage.

When I see lots of listed independent contractors in a business that generally doesn’t need to temporarily hire specialized trades people (e.g. plumbers, electricians, etc.), it’s almost a sure sign of misclassification. Plus, Miozzi is a small company and hiring 53 individuals as independent contractors is a very bad sign.

Click here for the list of Miozzi’s so called “independent contractors.”

The file I sent Stankiewicz on May 8 contained some of most of the worst of what I incorporated into my Level 1 profile. There was more than enough material in that May 8th file to warrant more research and due diligence before a hasty award of such a large contract. 

In particular, all the IRS tax liens are a huge red flag. I think most honest people go out of the way to avoid pissing off the IRS because the IRS can really hurt you. So when I see lots of tax liens in my initial search, I know there’s going to be lots more that’s wrong.

After doing my Level 1 assessment, I am convinced the town should reconsider the award and withdraw the contract.

Either that, or the town will have to put in lots of extra man-hours watching to make sure Miozzi does the job right. 

Or, like West Warwick, Charlestown may have to fight to get Miozzi to fix the job if they don’t do it right the first time. And, having been warned by me, and having botched its dealings with Copar, the blame rests squarely on Stankiewicz, Ruggiero and the CCA Party boys who constitute the Town Council majority plus Lisa DiBello. In DiBello's defense, she was talked into making the motion to award the contract by Council Boss Tom Gentz.

But let’s get back to Stankiewicz’s line about the town’s ability to disqualify Miozzi based on all of his financial and legal problems. Stankiewicz seems to set a very high bar when in fact the bar is much lower.

Rhode Island’s courts have had to frequently address the question of how much discretion municipalities have to deny an applicant a contract or a permit. In Rhode Island construction law, the controlling case is H.V. Collins v. Tarro. But there’s also a relevant case in Miozzi’s own long legal history: JMM Enterprises & T. Miozzi V. Cohen (town of North Kingstown).

In this case, Miozzi challenged North Kingstown’s right to deny it a permit to build an asphalt plant in what the town believed was a sensitive water protection zone. Miozzi lost. 

Independent contractors? I don't think so.
In denying Miozzi's claim, the court upheld the legal doctrine set out in Collins v. Tarro and dozens of other cases that “the court will not substitute its judgment” for that of the government agency unless there is proof of unlawful conduct, arbitrary or capricious behavior or corruption by the government agency. 

In other words, the court will give the town the benefit of the doubt and not overrule one of its decisions without a very compelling reason[5].

If a town makes a reasonable decision in good faith based on substantial evidence, it is unlikely in the extreme that the court will “substitute its judgment” for the town’s. A decision to disqualify Miozzi would meet the RI Supreme Court's standards.

Charlestown did not have to make this contract award to Miozzi. Indeed, given Charlestown’s recent nightmares with Copar, I think the Council majority behaved in a way you’d have to describe as reckless, stupid or corrupt. Can you think of any other ways to describe their conduct?

Then ask yourself: who gains from the town’s award of a big contract to this contractor?

I do not understand Stankiewicz’s or Town Solicitor Peter Ruggiero’s reluctance to tell the Council that they can exercise their proper discretionary rights under law to disqualify Miozzi and protect the taxpayers. 

Did they disregard the files I sent them? 

Did they fail to do any of their own research? 

Did they decide it was simply easier to just let the contract go through? 

Or is there some other motive?

However, it will ultimately fall on the taxpayers to deal with the consequences of this decision. And perhaps after this November’s election, Charlestown will get serious about these recurring problems and will enact a “Bad Actor” ordinance barring contracts, licenses and permits to applicants with unsavory records.


[1] I’d be surprised if Stankiewicz isn’t aware of the key Massachusetts case, Capuano v. Wilbraham, which upheld the right of municipalities to make their own determination about who is a responsible contractor without the court intervening unless the decision was arbitrary, corrupt or obviously wrong.

[2] My own experience is based on ten years of work for building trades unions where one of my main responsibilities was busting bad contractors by doing the kind of digging you see in this article and them preparing what we called “protest packs” to challenge the right of bad contractors to public construction contracts just like the one that Charlestown plans to award to T. Miozzi.

[3] The Providence Journal news articles are no longer available on line. However, I found copies and included them in the Miozzi research package you can read by clicking here.

[4] To be a legitimate independent contractor, a worker must control his or her own time, conditions of work, use his or her own tools and be in every real sense “independent.” Independent contractors work for multiple employers.

[5] In 2012, the Chariho School District School Building Committee exercised its discretion to throw out the low bid of Connecticut-based Barr, Inc. when it discovered that Barr, Inc. had a tarnished past in Massachusetts.

Barr did not challenge Chariho because it had just lost its case in Barr, Inc. V. Williston, MA over that town’s decision to bounce them for not being a responsible contractor. The Supreme Judicial Court of Massachusetts upheld the town’s right to do so.