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Beneath the wild success of Canalside lurks a bitter court battle

When the ice rink at Canalside opened in December 2014, it quickly became one of the most visible and exciting success stories of Buffalo’s rebirth.

Since then, more than 100,000 people have skated, scooted along on ice bikes or participated in curling matches on the picturesque ice park near the downtown waterfront.

But beneath the surface of this feel-good story is an unpleasant tale of harsh disputes involving state officials, the project’s designer and a local construction company. The finger-pointing has escalated to lawsuits and accusations that political donations influenced the award of a state contract worth millions of dollars.

When construction began in May 2012, state officials predicted the ice rink would be ready for skaters in eight months. Instead, it took two years and eight months of stop-and-start construction and bickering before the rink finally opened.

Operators of a Cheektowaga company, DiPizio Construction – which had been awarded a $19.8 million contract to build the rink and old-style canals on the site of the old Memorial Auditorium – say state development officials engaged in a “wide-ranging conspiracy” of illegal activities to make DiPizio a scapegoat for the delays. They say state officials were determined to force DiPizio, the original low bidder, off the rink project and hand it over to the Pike Company of Rochester, a construction firm that has donated tens of thousands of dollars to Gov. Andrew M. Cuomo and other state politicians.

State officials deny those allegations, saying DiPizio Construction was unable to handle the ice rink project and responsible for the delays.

In July 2013, the state terminated its agreement with DiPizio. The state agency accused the DiPizio firm of “deficient work” on the project, which was about half completed at that time.

“DiPizio has failed to demonstrate any significant improvement in its performance,” wrote Thomas Dee, president of Erie Canal Harbor Development Corp., the state agency that sent the termination letter.

“Absolutely untrue,” said Rosanne DiPizio, who worked on the project with her father, Bernard DiPizio, president of DiPizio Construction. “There were delays, but they were caused by design problems, weather problems and the state’s construction people. The delays were not our fault.”

The DiPizios launched lawsuits in state and federal courts, reeling from a state decision that could devastate the construction company the family has operated for 37 years.

In court papers, Travelers Casualty and Surety Co. – the DiPizios’ bonding company – said delays on the ice rink job were beyond the DiPizios’ control and they should not have been terminated. Travelers blamed the original design plans for delays that affected the DiPizios.

DiPizio Construction

Bernard DiPizio, a 75-year-old man who still operates a bulldozer on his company’s jobs, is well-respected among his peers in Western New York’s construction industry. His daughter, Rosanne DiPizio, runs a development company and works closely with her father.

Local developers and labors leaders describe Bernard DiPizio as a dependable and honorable contractor.

“I’ve known him for 10 years and by reputation for 40 years. He has a sterling reputation among local construction people,” said Norman J. Noon, president and business manager for Local 17 of the International Union of Operating Engineers. “I think what happened to him on this project is a travesty. They submitted the low bid for the project at Canalside. Some rules of the job were changed midstream and they got blamed for it.”

DiPizio’s company has done “excellent work” on runways and a fueling facility at Buffalo Niagara International Airport and on major road projects across the region, Noon said. He said he never heard complaints about DiPizio until the ice rink job.

The DiPizios say they have built hundreds of publicly financed projects across Western New York, receiving about $400 million for public works projects in the past decade. Bernard DiPizio said state officials unfairly damaged his reputation by kicking his company off the Canalside job.

“In 37 years of running my company, this is the one and only time I have ever not finished a job,” he said.

The dispute

In November 2011, DiPizio Construction outbid Pike and four other companies to build the ice rink, old-style canals and footbridges at Canalside. DiPizio’s low bid of $19.8 million was $3 million lower than what state engineers projected.

Delays in state funding pushed the project back by three months, and construction began in May 2012. Over the next year, court documents show, there was one disagreement after another between Mark E. Smith, construction project manager for the harbor development corporation, and the DiPizios over design changes on the project, over which materials could be used and over the disposal of contaminated soil.

George R. Schlemmer, chief executive officer of Buffalo-based Industrial Power & Lighting Co., was one of three subcontractors who testified in state court about project difficulties. In an interview with The Buffalo News, Schlemmer said his part of the ice rink job turned into “a fiasco” because it was hard to deal with the state’s consultants and engineers on design changes that needed to be made in order to proceed with installation of lighting.

“These approvals, a process that should have taken a month, or no more than two months, took the better part of a year,” Schlemmer said.

None of his company’s problems were caused by the DiPizios, Schlemmer told The News.

Schlemmer said he does not know the specifics of what happened between state officials and the DiPizios, but added: “Bernie DiPizio is salt of the earth, a very honest man. I don’t know if his company will survive this, but I would work with him again.”

State officials and their attorneys say the DiPizios were difficult to work with. The DiPizios are highly qualified road contractors, they say, but the family construction company made an unrealistically low bid and got in over their heads on the ice rink project.

The ice rink was a difficult project, involving many different trades and contractors, and it was also a high-profile project whose progress was watched closely by people all over the region, said Sam Hoyt, the regional director of Empire State Development who also sits on the harbor development corporation’s board. In one of the delays, Hoyt cited a dispute over the disposal of thousands of tons of contaminated soil from the old Aud site. The DiPizios wanted to cut their expenses by using a cheaper method of disposal, Hoyt said. Harbor development officials insisted the soil be taken to a government-approved landfill.

“We’re a government agency,” Hoyt said. “We wanted to be absolutely certain that any contaminated product leaving the site is disposed of in the absolutely safest way. That was specified in the contract.”

The DiPizios maintain that their method for soil removal, although cheaper, met state safety standards.

DiPizio gets the ax

In May 2013, Dee sent a letter to the DiPizios, threatening to replace them with another contractor.

The DiPizios tried to explain that the delays were beyond their control, but the state terminated their contract in July 2013.

At the state’s request, Travelers – the bonding company that had guaranteed DiPizio’s work – agreed to take over the project and hire a contractor to finish the job. In September 2013, Travelers hired Pike, one of the companies outbid by DiPizio in 2011.

Government records show that Pike was hired for almost $11.5 million to complete the work, even though two Buffalo construction companies submitted lower bids.

Pike’s bid was $662,000 higher than the low bid, submitted by Ciminelli Construction.

Why did Travelers hire the highest bidder?

Travelers declined to comment. So far, the bonding company has not stated its reasons in court.

The state had no input into the selection of Pike, Hoyt said.

“Once DiPizio was taken off the job, Travelers became the party responsible for completing it,” Hoyt said. “They chose Pike, not us.”

But it makes sense for Travelers to hire the most competent contractor to finish the job, according to state officials and their lawyers.

Bill Tehan, chief operating officer for Pike, said his company has earned a reputation for completing major, complex projects across the state.

“We’ve been doing work in Western New York since 1873,” Tehan said. “This one was a fairly complex project. Travelers wanted to limit their losses as much as possible.”

Political donations

About two months after Pike was awarded the project, a principal of the Rochester company donated $10,000 to Cuomo’s political campaign. Over the next 10 months, another principal of Pike gave another $10,000 campaign donation to Cuomo and $5,000 to the campaign of his lieutenant governor, Kathy Hochul, according to state records.

Tehan said he does not believe political donations played any role in Travelers’ choice. He noted that many construction and development firms give donations to politicians.

Bernard DiPizio and his daughter have also donated thousands of dollars to officeholders. That includes a $2,000 donation that Rosanne DiPizio sent to the Cuomo campaign in 2010.

Her family’s donations to politicians are minuscule when compared to those of Pike officials, Rosanne DiPizio said. “We do it not because we want special favors, but because we want people to do their jobs,” she said.

She said she is convinced state officials influenced the bonding company’s decision to hire Pike.

“Erie Canal Harbor Development made it clear from the very start of the project that they wanted Pike to get to the contract, not us,” she said.

Finishing the job

After taking over the project from DiPizio, Pike also encountered some delays, according to court documents.

During Pike’s tenure as general contractor, the rink project was delayed eight months because of damage to concrete that was the result of a harbor development company “design error,” Benjamin D. Lentz, an attorney for Travelers, said in federal court papers.

Although Travelers agreed in 2013 to finish the project, the bonding company now maintains in federal court that state officials wrongly terminated DiPizio Construction from the ice rink job and should have allowed the DiPizios to complete it.

“Design changes,” challenging job site conditions and other “excusable delays” on the ice rink job were beyond the DiPizios’ control, and the Cheektowaga company should have been given a “significant time extension” rather than termination, Lentz said in a court document submitted in August 2014.

“Design team errors encountered by Travelers and Pike are similar to the delays” that the DiPizios faced during their time on the job, Lentz stated. He said the state’s termination of DiPizio from the project “was improper.”

Battles in two courts

The DiPizios have filed two legal actions against state officials and others involved in the ice project. A state court lawsuit alleges that DiPizio Construction was wrongly terminated. A civil racketeering lawsuit filed by Rosanne DiPizio in federal court alleges that state officials engaged in criminal activity – including wire fraud and mail fraud – to create a false paper trail showing that the DiPizios were incompetent.

“There were design changes and errors, delays in state funding, problems with weather conditions – all problems that would have confronted any contractor who was awarded that job,” Daniel W. Isaacs, Rosanne DiPizio’s attorney, said in an interview. “The state created false documents and used them to discredit DiPizio, and to bring in the contractor they wanted from the beginning.”

State officials deny those claims, and the dispute has resulted in hefty legal fees. In September 2014 – 15 months ago – the state authorized paying up to $1.7 million to the Phillips Lytle law firm to defend itself from the DiPizio lawsuits. The legal fees reached $1.6 million as of last Oct. 31.

The legal fees were necessary because the state has to defend itself against legal attacks from the DiPizios, Hoyt said.

So far, the price tag for construction of the ice rink is just under $20 million, or about the same as the original contract estimate, Hoyt said.

Despite the legal dispute that could drag on for years, Hoyt said state officials are delighted with the ice rink.

Hoyt called it a “magnificent” attraction in Buffalo.

But the DiPizios said their nightmarish experience at Canalside could wind up destroying their company. Rosanne DiPizio said her family’s construction business had more than 135 employees before being terminated from Canalside. Now, the number is down to about 60 employees.

“At this point, because of what happened to us at Canalside, we can no longer get bonding for our jobs,” Bernard DiPizio said. “This means we can’t bid on public works projects. I worked very hard to build up this company, to pass on to my children and grandchildren. Now, I don’t know what we’re going to do.”

email: dherbeck@buffnews.com