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'This destroyed us': Canalside contractor still fighting for his reputation

Even now, a year after the last of his equipment was auctioned off and the last of his 200 employees walked out the door, Bernie DiPizio is looking for an apology, or at least an explanation, from Gov. Andrew M. Cuomo.

His family-run construction business, part of the contracting landscape in Western New York for 40 years, went out of business after the Erie Canal Harbor Development Corp. fired the company from the ice rink project at Canalside.

Six years later, the 78-year-old DiPizio is still fighting to regain his reputation, and the court record created by his lawsuits and others related to the project – there are seven in all – tell a story most people have never heard before.

From Day One in the legal battle – which has cost taxpayers $2.6 million just through early 2017, with the meter still running – the state took the public position that DiPizio couldn't handle the ice rink project and, after less than a year on the job, needed to be replaced.

But in court papers, it becomes clear state lawmakers, as well as subcontractors working on the ice rink, thought DiPizio Construction was taking the fall for others.

"It seems that, after multiple change orders by the employer, a scapegoat was needed and the scapegoat was this particular contractor," said Assemblyman Robin Schimminger, a Kenmore Democrat.

Seven Republicans in the state delegation joined Schimminger in expressing concern that a longtime family-owned business and widely respected contractor was being set up to fail.

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In a letter to Empire State Development, Sen. Michael Ranzenhofer and the six other lawmakers asked the agency to intervene on DiPizio's behalf and pointed to design flaws and other construction obstacles out of the contractor's control.

"It appears DiPizio has been made a scapegoat for mismanagement of the project by ECHDC," the letter states.

The lawmakers also accused the agency of reneging on a settlement brokered by the judge and agreed to by DiPizio. Two of the seven legislators later recanted the letter, one citing its angry tone and the other indicating he signed it based on one-sided information.

Ranzenhofer, an Amherst Republican, declined to comment, but Schimminger said he remembers the ice rink dispute because of the ruckus it caused in Albany, where a statewide contractors group went to bat for DiPizio. He said the group believed ECHDC wanted another contractor and set out to sabotage DiPizio.

"They're out of business now thanks to this," said Michael Elmendorf, president of the Associated General Contractors of New York State. "They awarded the contract and then proceeded to do everything possible to ensure DiPizio failed."

Elmendorf said his group became involved because the dispute put the state's sacred "lowest bid wins" practice at risk. He said the state never wanted DiPizio, the low bidder by $2 million, and from the start engaged in a campaign against the contractor.

The Canalside ice rink. (John Hickey/News file photo)

Legal fees and extra costs

In May of 2013, ECHDC officially terminated DiPizio, setting off a court battle that continues today.

The legal fight is being played out in two venues – U.S. District Court and State Supreme Court – and ECHDC is viewed as winning the battle.

"DiPizio was terminated for nine reasons," says William Brennan, the Buffalo lawyer representing the agency. "We told them at the time why they were being terminated. And that was after months of dissatisfaction."

The nine reasons, detailed in court papers, range from defective scheduling and poor project coordination to the use of subpar construction materials.

The court record includes hundreds of pages detailing a dispute over granite and sandstone and, in the end, suggests DiPizio breached its contract so many times that the state lost confidence in the contractor.

ECHDC also paints a picture of a company too small and too behind the times to handle the $20 million ice rink.

Just 10 months into the project, which began in 2012, ECHDC notified Travelers Insurance, which had guaranteed DiPizio's performance, that the project was in trouble. A few months later, the state took the first steps toward termination and DiPizio sought help from the courts.

A State Supreme Court judge turned down their request for an injunction, and DiPizio was removed from the job.

Brennan will tell you that nine reasons should be enough for people to stop suggesting DiPizio was wrongfully terminated. For the same nine reasons, he thinks any notion of a settlement is out of the question.

"These are public monies," he said of the state funds that would go toward a settlement. "We're not going to use public money to pay claims we feel have no merit."

Taxpayer money is also paying for Brennan's time and that of other Phillips Lytle attorneys working on the case. By April of 2017, the bill had reached $2.6 million and is no doubt higher at this point.

When asked about it, Brennan said he didn't know how much he had billed ECHDC. The state has yet to respond to a Freedom of Information Law request from The Buffalo News.

From the start, DiPizio has argued that state officials engaged in a high-level scheme to falsely blame the contractor for delays that, in reality, were caused by the agency.

DiPizio also believes ECHDC wanted another contractor and from the outset set out to sabotage its work.

In an email sent before DiPizio signed its contract, then-Harbor Corp. President Thomas Dee told board member Sam Hoyt that DiPizio was "not a good contractor."

There were also internal ECHDC emails sent before DiPizio started work that suggested the agency was preparing for the contractor's failure. One of those emails, sent to Dee, asked if it was time for the agency to reach out to potential replacement contractors such as the Pike Company in Rochester and LPCiminelli in Buffalo.

When DiPizio was eventually fired, Pike was hired by Travelers to finish the job. At the time, Pike had given thousands of dollars to Cuomo's campaigns.

Even more significant than Pike's hiring was the final cost of the $20 million project.

By the time the ice rink was finished, Travelers had paid Pike $23 million. That was on top of the $10 million the state had already paid DiPizio.

8 months of design delays

From the start, DiPizio's legal defense has centered around its contention that the contractor became a scapegoat for others.

Early on in the case, there was testimony from subcontractors and consultants about delays caused by design mistakes and changes.

"My view is the construction on site has been very good," said James Loewke, an independent construction manager hired to oversee DiPizio's final months of work. "I don't believe we have had a serious quality issue on the workmanship at all on the site."

Loewke would not comment for this story but, during court testimony, he noted that DiPizio received five noncompliance notices between May 2012, when it began the ice rink project, and June 2013, when it was removed from the job. Noncompliance notices are an indication of a contractor's failure to perform.

"That's very few to have," he said at the time.

Reginald James, top, and Ron Pittman of DiPizio Construction hang an architectural rendering of the completed Canalside project on the former Aud site in July 2012. (Derek Gee/News file photo)

Several contractors testified about delays caused by design changes to key elements of the ice rink, including the piping that cooled the ice rink.

At one point in the case, a project manager at John W. Danforth Co. testified that there were no specifications for what type of piping to use, but that drawings for the system called for PVC piping. The problem, he said, is that PVC piping becomes brittle in cold temperatures.

He said Danforth questioned the design choice but, by the time the design team responded, it was well into 2013, months past the December 2012 deadline for finishing the piping system.

There also was a problem with the light poles and handrails at the ice rink but the man in charge of the subcontractor doing that work, Industrial Power and Lighting Co., said the delays had nothing to do with DiPizio.

"Now, the delays ... do those have anything to do or are (they) the fault of DiPizio Construction Company?" asked Michael Ferdman, a lawyer for DiPizio.

"No," said George Schlemmer, chief executive officer of Industrial Power and Lighting.

Travelers, the insurance company that took over when DiPizio was fired, now believes DiPizio did nothing wrong. In a report prepared by Delta Consulting, a firm hired by Travelers, the consultant attributed more than eight months of delay to ECHDC's design team, not DiPizio.

Even more important, perhaps: Pike, the company brought in by Travelers to finish the work, would later acknowledge that its predecessor did nothing wrong.

"Pike, who came down as the Travelers' completion contractor, said the real problem was that Erie Canal did not have a set of performance drawings," Benjamin Lentz, a lawyer for Travelers, told a judge last year.

Lentz said Pike also concluded that, "DiPizio pushed the project much further than we would have pushed it because we didn't know how this project was supposed to work."

Before DiPizio was fired, ECHDC reached out to Maria Lehman,  a professional engineer and former interim executive director of the New York State Thruway Authority.

Asked to evaluate DiPizio's performance, Lehman concluded that both the contractor and the LiRo Group, the construction manager overseeing DiPizio, should be removed from the job.

Later, during a court appearance, she would acknowledge that her opinion was based on information ECHDC provided her and nothing more. She did not talk to DiPizio, did not visit the work site and did not speak to subcontractors.

"I was asked to look at it very cursory," she said."I was asked to to do a quick third-party review."

When asked about design changes, Lehman said she was unaware of them or the impact they might have had in delays on the ice rink project.

The rink at Canalside, decorated for the 2018 holiday season. (Derek Gee/News file photo)

"If the fault is, if the reasons for that are design changes as opposed to anything the contractor did, wouldn't that be something important for you to know?" Ferdman, DiPizio's lawyer, asked of the delays.

"It could be," she said.

Ken Adams, a former president of Empire State Development, also testified about design changes and acknowledged he was unaware of Delta Consulting's report documenting ECHDC's delays in the project.

"You weren't told this very, very important fact by any of the people who were reporting to you, were you?" Ferdman asked.

"I never saw this report," he said. "That is true."

Lawsuits and recusals 

Like a hot potato, the legal battle over DiPizio's firing has been handed from one judge to another.

At last count, five of them – three in U.S. District Court, two in state Supreme Court – have either recused themselves or been taken off the case. Most of the judges did not offer a reason, but lawyers believe it's because they know someone involved in the case.

In state court, where the legal challenge began seven years ago, the case was initially assigned to Justice Timothy J. Walker. One of Walker's first acts was to reject DiPizio's request for a preliminary injunction against its termination.

A few months later, the case was transferred, without explanation, to Justice Deborah A. Chimes. In a victory for ECHDC, Chimes ruled that then-President Thomas Dee had the legal authority to fire DiPizio.

A short time later, Chimes recused herself and the case went to Justice Henry J. Nowak.

One of Nowak's first acts was to meet with attorneys from ECHDC and Travelers, and one of the topics of discussion was Chimes' decision regarding Dee's authority to fire DiPizio. Nowak wanted to know about her legal rationale.

"I can't get into her head," said Lentz, the Travelers lawyer, "because she recused herself a week later."

One of the consequences of the change in judges has been more than six delays in a trial.

"I just want my day in court," Rosanne DiPizio, the contractor's daughter and project manager on the ice rink project, said of the carousel of judges.

In federal court, the case is being handled by Chief U.S. District Judge Frank P. Geraci Jr., but only because three other judges recused themselves.

At this point, the four state court cases at the heart of the DiPizio legal fight have been consolidated into one case, and ECHDC continues to argue that DiPizio's firing was justified. In court papers, the agency portrays DiPizio as a contractor unable to keep up with changes in the construction industry and ill-equipped to oversee a project as complex as the ice rink.

To support its argument, ECHDC points to the testimony of executives from Pike and Ciminelli. Each of them complained about DiPizio's poor coordination.

The agency also went out of its way to discredit Schlemmer's praise of DiPizio by suggesting emails indicate his company was unhappy with DiPizio. In one of those emails, an Industrial Power & Lighting foreman wrote, "We run daily fire drills. This is no way to run a job."

ECHDC points to delay after delay in the first year of the ice rink project and, in court papers, offers a wide range of reasons for those delays, all of them the fault of the contractor.

In court papers, the agency claims DiPizio wanted to dispose of contaminated soil in an unlicensed landfill and insisted on using a cheaper granite, both in hopes of saving money.

For Brennan, any one of those reasons should be enough to end the seven-year legal battle.

"There have been 60 days of depositions, millions of pages of documents and the testimony of 40 witnesses," he said.

DiPizio's court case is continuing in State Supreme Court but its claims are now held by Travelers. If the suit succeeds and results in monetary compensation, Travelers would likely be the one to benefit.

When the insurer moved to take over the contractor's legal claims, DiPizio opposed the move but lost at both the trial court and appeals court level.

The contractor is also battling Travelers in federal court, where it recently lost a decision over financial losses in the ice rink project and money owed to the insurer. The court ordered DiPizio to post $4.25 million in collateral, money that remains unpaid to this day.

Travelers is seeking reimbursement from ECHDC for the money it paid Pike, a figure Brennan believes is excessive.

"The question is whether the cost is reasonable," he said. "We know it's highly inflated. "

Early on in the case, Travelers took the position that DiPizio's firing was justified, a claim at the crux of its monetary claim against the contractor.

Later, the insurer would reverse course and, as part of its legal battle for reimbursement from ECHDC, adopt the position that DiPizio was thrown under the bus.

"They accepted hook, line and sinker what Erie Canal Harbor Development was saying," said Daniel Isaacs, one of the DiPizios' lawyers.

Travelers declined to comment for this story.

'This is personal'

Even though the court fight continues, DiPizio Construction is no more. After losing its bonding ability because of the ice rink project, the company survived for years on money from the DiPizio family.

In May of last year, Bernie DiPizio shut the doors for good and auctioned off what was left of his equipment.

Today, he devotes his time to the Cheektowaga business park owned by a family trust. Rosanne DiPizio said she is working as a consultant to her daughter's company, AI Asphalt, on the controversial plans for an asphalt plant in Hamburg.

Despite her new consulting business, she remains angry at what the dispute did to her father and is intent on taking the court case as far as it will go to clear the family's name.

"This is personal," she said. "This destroyed us."

Even now, her father expresses surprise at what happened at Canalside.

"I worked hard to get my reputation," he said. "I didn't think we would ever get thrown off the job."

Early on in the dispute, DiPizio said he wrote and called Cuomo in an effort to settle their problems, but the governor never responded.

"There's right and there's wrong," he said. "That's the way I was brought up."

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