LPCiminelli cites $3.88 billion in lost work from criminal probe - The Buffalo News

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LPCiminelli cites $3.88 billion in lost work from criminal probe

Several months ago, LPCiminelli officials insisted the criminal charges against three of the construction firm's top executives were having almost no impact on the company's day-to-day operations.

This week, they're telling a very different story.

In court papers filed Tuesday, a lawyer for Louis Ciminelli claimed the firm has lost $3.88 billion worth of "work and inventory" in the past 18 months, citing the bad publicity surrounding the federal probe and bribery indictments against Ciminelli, Kevin Schuler and Michael Laipple. That includes canceled contracts and bid disqualifications, as well as other missed opportunities, the documents say.

Among other projects, the lost work allegedly includes the $40 million replacement for the Ellicott-Goodrich Garage on the Buffalo Niagara Medical Campus, the $20 million Explore & More Children's Museum planned for Canalside and the $22 million STEM building on Erie Community College's North Campus.

The court papers also reveal the construction company has laid off 10 percent of its roughly 200-person workforce, which it says is a result of the legal problems facing its executives.

"The investigation and this case has caused tremendous damage to LPCiminelli and has threatened its future," attorney Daniel C. Oliverio said in the filing. "The coming months and the coming years are critical to its survival and re-growth."

Ciminelli defendants reveal nearly $4 billion in lost work

How the company would prove that the loss of its business was directly tied to the probe or indictments isn't clear.

There are many factors that go into a client's decision about which company to use – including price, financing, work schedule, qualifications and experience. Few clients will publicly say that concern over negative publicity played a role in their decisions. And more than half of the 21 projects cited by LPCiminelli are public, which means stricter rules govern the bidding process.

For example, the ECC project went to Scrufari Construction based on price, said Peter Anderson, spokesman for Erie County Executive Mark Poloncarz.

"They lost out because they were not the lowest responsible bidder, definitely not because of the criminal case, which I don't think was even public by then," Anderson said. "They raised a stink about it at the time."

Two of the losses cited by LPCiminelli – a $228 million Rochester City School District contract and a Utica-area "nanocenter" – happened in August 2015, according to the company's documents. That's before news broke in September 2015 that the company had been subpoenaed.

LPCiminelli officials could not be reached for comment.

The three executives were arrested and charged last year with bribery as part of a larger corruption investigation by U.S. Attorney Preet Bharara into Gov. Andrew Cuomo's Buffalo Billion economic development program. They were accused, along with several others, of rigging the bidding process in which LPCiminelli won the $750 million state contract to build the SolarCity plant at RiverBend in South Buffalo.

They have maintained they did nothing wrong.

One of LPCiminelli's projects on the Buffalo Niagara Medical Campus. (News file photo)

Oliverio's statements on behalf LPCiminelli are part of the defendants' legal strategy to move the court case from the Southern District of New York in Manhattan, where Bharara is based, to the Western District in Buffalo. Among other factors, Oliverio used the company's lost business to show that a trial downstate would further harm efforts to repair the damage.

"The future of LPCiminelli, a company having a 60-year history, is unknown," he wrote. "The company's inability to continue would result in the loss of approximately 200 well-paying jobs in Western New York."

Meanwhile, the three executives – who resigned Jan. 12 from their formal roles with LPCiminelli – haven't completely cut their ties, but are working from the outside to help the company rebuild.

In the court documents, Oliverio said Ciminelli, Schuler and Laipple stepped down "to facilitate the continued viability of LPCiminelli and meet vendor responsibility requirements given the pending charges." Ciminelli also put his ownership in a blind trust and left his son, President Frank Ciminelli II, in charge of the company.

Ciminelli had served as chairman and CEO. Schuler was senior vice president, and Laipple was president.

But the court documents reveal that Ciminelli on Jan. 20 formed a separate company, called LPC Infrastructure Development LLC, that now employs all three executives, plus two others. It will be based in Buffalo, although Ciminelli is largely working for now from his second home in Scottsdale, Ariz.

The new company will "focus on pursuing development opportunities outside of New York State," using existing LPCiminelli resources and infrastructure. And LPCiminelli employees "will consult and coordinate" with the new firm and the embattled former executives "regarding development opportunities" that "would result in new projects (and resulting new revenue)" for LPCiminelli "in the years to come, contributing to its continued viability."

"The continued presence of the Buffalo defendants to work on and collaborate with LPCiminelli on non-New York State pursuits is particularly important given that LPCiminelli is a closely held, family-operated business," the attorney wrote. A long trial in New York City could "preclude them from having any regular and meaningful prospect or customer contact during that time."

Already, the company claims, the case has had a major impact. According to Oliverio's statement, LPCiminelli lost 14 projects "immediately" after news reports in September 2015 that the firm had received a subpoena from the government. "This was before any charges were placed in this case or an indictment was returned," Oliverio wrote.

That work included a $1 billion school construction program for the Yonkers Public Schools, a $228 million project for the Rochester City School District and a $256 million project for Rochester General Hospital, as well as six Western New York projects. Besides the garage, museum and ECC building, they are:

  • A $30 million capital project for the Tonawanda City School District
  • The $25 million Learning Commons at Niagara County Community College
  • Renovations of Bishop Hall at Buffalo State College, totaling $16.1 million

NCCC President James P. Klyczek confirmed that LPCiminelli was one of eight to 10 bidders and "a serious contender" for a construction management contract. But the work ultimately went to Waterbourne Construction Advisors, even though Klyczek said the school had previously had a great experience with LPCiminelli for its culinary building in downtown Niagara Falls.

"There's probably a dozen things we were looking at and evaluating in comparing the proposals," Klyczek said. "Waterbourne got a whole lot of points because they were so much less than any of the other bidders."

Klyczek insisted the criminal case had nothing to do with the decision. "I'm one of the people that did the evaluation," he said. "That really wasn't a consideration. What we were looking at is our criteria and how it fits."

After the indictment came down in September 2016, the firm lost seven projects, Oliverio wrote. The largest was a $900 million contract with the Hunts Point Terminal Produce Cooperative Association in the Bronx, followed by a $550 million transit-oriented development project with the Connecticut Department of Transportation.

One of LPCiminelli's projects on the Buffalo Niagara Medical Campus. (News file photo)

The company's list of lost projects includes the $25 million Workforce Training Center that the Buffalo Urban Development Corp. plans to build as part of its Northland Corridor project. That bid went to Gilbane Building Co. and Thurman Thomas' 3480 Group, which beat out not only LPCiminelli but also Turner Construction Co.

In all, 10 firms submitted qualifications. A committee then narrowed the list to three, said BUDC Vice President David Stebbins.

"They didn't lose because of the indictment. Our initial recommendation was made before we were aware of that," he said. "It had no material difference in our decision-making. We just felt Gilbane was the better team."

– News Albany Bureau Chief Tom Precious contributed to this report.

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