Pinner Construction Files Lawsuit Confirming Arbitrator's Decision Alleging Scheme that Cheated California Taxpayers Out of More Than $20 Million in the Construction of a Public Performing Arts Center

Pinner's suit alleges fraud and corruption surrounding the construction of Los Angeles Valley College's performing and media arts center by project director Mark Strauss, architect Kevin Tyrell, and others, costing taxpayers over $20 million.

Arbitrator selected by Pinner and the School District found "bad faith" and wrongdoing after a six-week binding arbitration. Pinner attorney Newt Kellam demands that Board President Gabriel Buelna, who misled taxpayers to the Los Angeles Times saying this was just a "lawsuit"  to "correct the record."

 Pinner attorney Lanny J. Davis, former special counsel President Bill Clinton, calls on the state legislature, the governor, and the attorney general to open an immediate investigation – "A state audit is needed after the findings of bad faith and wrongdoing by the arbitrator," said Davis. "The young people who rely on community colleges are the real victims."

LOS ANGELES, Aug. 4, 2022 /PRNewswire/ -- Pinner Construction ("Pinner"), a century-old Southern California construction firm, today filed a lawsuit against the Los Angeles Community College District (the "School District") and its construction project consultants, alleging fraud, corruption, and racketeering conduct surrounding the construction of the School District's performing and media arts center, following the findings of a prestigious arbitrator that the District "consultants" were guilty of bad faith and wrong doing.

Along with the School District, Pinner filed suit against DACM Project Management, QDG, Inc., ARCADIS U.S., Inc., Jacobs Engineering Group, Kevin Tyrell, Mark W. Strauss, and Gig Pukprayura (the "Racketeers") in Los Angeles County Superior Court.

The law suit was reported in a major front page story in California news section by the Los Angeles Times this morning.  The Times headlined the story: "Corruption and fraud besets long-delayed L.A. Valley college theater, project lawsuit alleges." 

The Times also reported the factual findings of an arbitrator, Deborah S. Ballet from JAMS, one of the most prestigious arbitration organizations in the nation comprised of many senior retired judges, selected by both Pinner and the School District, "found multiple management failures by college consultants."  The arbitrator's finding includes the statement that this conduct violated California's "implied covenant of good faith and fair dealing" – i.e., bad faith. 

Pinner Attorney calls out Board President Buelna for misleading comment

Pinner attorney, Newt Kellam, cited the misinformation in his comment to the Los Angeles Times by the Board President Gabriela Buelna, who stated "people file lawsuits." Said Kellam:  "The Board president is either willfully ignorant or has intentionally ignored the facts, which he must know, that the arbitrator selected by Pinner and the District, after an extensive 6-week binding arbitration or, in effect, a trial, found definitively that the District's consultants had "violated their covenant of good faith and fair dealing"—i.e., acted in bad faith.  "Now we at Pinner are suing the wrongdoers/consultant and the companies they work for, to be sure they pay out of their own pockets for their wrongdoing, not the "taxpayers."

"Instead of ignoring this finding by the arbitrator, the entire Board, not just the Board President, should be actively conducting an investigation of this wrongdoing by its own consultants costing taxpayers, we now know from the arbitrator's decision, millions of dollars."

Pinner attorney Lanny J. Davis, former special counsel to President Bill Clinton, called on the state legislature, the governor, and the attorney general to open an immediate investigation – "A state audit is needed after the definitive findings of wrongdoing by the arbitrator," said Davis. "The young people who rely on community colleges are the real victims."

According to the complaint, in September 2016, Pinner contracted with the School District, a state agency created by state legislation, to build a multi-building performing and media arts center on the campus of the Los Angeles Valley College campus ("the Project"). The center is to include three theatres, a lecture hall, a radio station, and several classrooms and studios. Pinner agreed to build the complex for a guaranteed maximum price of just over $78 million in 851 days.

To incentivize a timely completion of the Project, the contract provided limited additional compensation to Pinner if the Project was delayed by the School District and actually charged Pinner with financial penalties if Pinner was responsible for the delay. According to the complaint, that was not the case for the Racketeers:

"Unlike [Pinner], RACKETEERS essentially work hourly and are: (A) guaranteed to receive unlimited additional compensation if the Project is delayed by [Pinner]; (B) guaranteed to receive even more unlimited additional compensation if claims filed by [Pinner] are arbitrated; and (C) are not charged liquidated damages if Project delays are determined to have been caused by themselves or [the School District]."

The lawsuit then asserts that because of this payment structure, the Racketeers, beginning in March 2017, "maliciously conspired to delay the Project, blame it on [Pinner] and earn themselves millions of additional dollars in the process."

They did this, in part, by allegedly "interfering with needed approvals from the Department of State Architect ("DSA"), delaying needed design direction and/ or robbing the contractor and its subcontractors of the capital needed for manpower by cutting monthly payment applications, increasing the cost of performance and/ or refusing to pay change orders." This ultimately resulted in the breach of contract between the School District and Pinner.

Pinner also alleges that from March 2017 onwards, there was a conspiracy among the Racketeers, combined with various actions that are crimes under federal law, and thus, violated the federal Racketeer Influenced and Corrupt Organizations ("RICO") Act. California allows its citizens to file a civil case for damages under federal RICO Act.  Pinner gives several examples of the Racketeers' allegedly illegal conduct:

"RACKETEERS commenced engaging in a wide-ranging and fraudulent scheme to concoct a false narrative that [Construction Change Directive 19] should not be resubmitted, that building the Project without splices in vertical reinforcing steel above 30' would not delay the Project, that the plans clearly precluded splicing above 30' and that Pinner and its subcontractors were not entitled to extra compensation. These statements were proven false and fraudulent at an arbitration which spanned the summer of 2021. Undaunted, [Pinner is] informed and believe[s] that RACKETEERS continue to willfully and maliciously delay the Project through misrepresentations and concealments made to [School District's] board and Chief Facilities Executive related to harvested wood, audio visual design and door hardware design and Trespa culminating with witness tampering related to executed DSA documents."

As a result of the allegedly corrupt overcharges by the Racketeers, Pinner alleges damages of nearly $25 million in extra construction costs, unnecessary consultant fees, attorney fees and loss of existing and future business opportunities.

Pinner also alleges this scheme to delay the project for increased consulting fees has defrauded the people of California. According to the lawsuit's estimates, taxpayers have already footed more than $20 million in wrongful payments to the consultants, extra construction fees, legal fees, and lost resources for students at Los Angeles Valley College – and Pinner says the number is only increasing as this matter goes unresolved.

"Community college students are among the most vulnerable, often learning part-time and coming from first-generation, low-income backgrounds," said Dirk Griffin, CEO of Pinner, who attended Riverside City College. "Resources are scarce at these institutions as they rarely have large endowments, sizeable state funding, or consistent alumni donations. That's what makes this alleged fraudulent scheme so devastating. We believe these consultants are taking advantage of an already vulnerable population just to earn more in fees for themselves. It has to stop."

"We allege this corrupt scheme among the named consultants ended up not just costing the taxpayers who, in the final analysis, fund these corrupt overpayments, but really, it's the students who pay tuition and in other ways are the victims of this corruption," attorney Davis said about the filed complaint. "That's why we are asking to meet with senior leaders of the California state legislature who are responsible for leading a state audit to consider initiating one. Davis went on to point out that it was the state legislature that created the School District and authorized the bonds to be sold to finance the LACCD.  Davis concluded that he hopes leaders of the state legislature, supported by the governor and the attorney general, would start by initiating a state audit of this contract that the arbitrator found was riddled with over-billing and bad faith conduct."

About Pinner Construction

The people of Southern California have entrusted Pinner Construction with their building needs since 1919. Throughout the last century, the sustained growth of the firm, coupled with an unwavering commitment to excellence, has allowed it to provide top-tier customer service and truly one-of-a-kind project delivery to a variety of clients. Pinner is proud to celebrate 102 years of Pinner trust and looks forward to the next century and beyond. To learn more, please visit www.pinnerconstruction.com/

Media Contact: Taylor C. Pearson 
[email protected] 
202-235-3482

SOURCE Newt Kellam, Kellam Law