Taxpayers, turnpike users pay price for corruption
By Brad Bumsted
Published: Sunday, March 24, 2013, 10:56 p.m.
HARRISBURG — Colorado-based Ciber Inc. snagged a 2005 Turnpike Commission contract with a $3.2 million bid almost seven times higher than IBM's $496,000 low bid, a decision that reeked of insider dealing, witnesses told a grand jury.
The Ciber contract, some witnesses testified, wasn't even necessary. It grew by $62.7 million in 2006, an extension the grand jury called “dramatic and unprecedented.”
The grand jury's more than three-year investigation into turnpike operations resulted in charges this month against eight people.
As the case continues, Ciber still does business with the state. PennDOT last week said it awarded the company an $8.6 million contract that the agency said was competitively bid and above board.
Attorney General Kathleen Kane, in announcing the charges, said corruption in the turnpike case cost the state “untold millions.”
Anyone using the turnpike since 2004 paid more for tolls. Yet how much any corruption contributed to toll increases is not known. Since 2008, much of the increased revenue from higher tolls has gone to PennDOT for statewide road work, bridges and mass transit.
“There's no specific number (on corruption costs),” said Carl DeFebo, a Turnpike Commission spokesman. Of the Ciber contract, he said: “We are pursuing all civil remedies (for recovery), and the process is ongoing.”
“If there is a kickback, the bid is jacked up,” said Jack Treadway, former chairman of the political science department at Kutztown University. “Lower bidders don't have an equal chance.”
Throughout state government, it's difficult, if not impossible, to estimate corruption costs, said Jerry Shuster, a professor of political rhetoric at the University of Pittsburgh.
“The actual cost in dollars and cents is pretty much incalculable,” Shuster said. “The major cost is damage to the public trust and the people who administer it.”
Proven corruption reinforces the public perception that all government officials are corrupt, when that clearly is not true, he said.
Taxpayers bear burden
Since a 42.5 percent toll increase in 2004, the cost of driving the turnpike increased from 5.9 cents per mile to 10.9 cents this year, or 8.6 cents with an E-ZPass, according to agency figures. Since 2004, 1.6 billion vehicles have traveled the turnpike. During that period, they paid a combined $5.7 billion in tolls, according to turnpike figures compiled by the Tribune-Review.
A share of those toll increases since 2008 stems from Act 44, which requires the Turnpike Commission to pay $450 million a year to PennDOT.
For turnpike drivers who paid cash, tolls have risen 7 1 percent since 2008, said Matthew Brouillette, president of the Commonwealth Foundation; for E-ZPass customers, 35 percent.
“There is a tremendous cost to the people of Pennsylvania for the corruption and mismanagement at the Turnpike Commission,” he said.
Recent corruption cases in state government dug into taxpayers' pockets:
• In the House Democratic bonus scandal, convicted officials provided $1.4 million in bonuses to legislative staffers who worked on campaigns.
• In a House Republican computer scandal, top GOP lawmakers and staff illegally spent $10 million on computer equipment and databases purchased for campaigns.
• Taxpayers paid $15.9 million in legal bills overall to defend House and Senate members and staff before prosecutors charged them with crimes from 2007-12.
That does not include the tab for former Senate Minority Leader Bob Mellow, D-Scranton, whose attorneys' fee records are in litigation. Mellow is serving a federal sentence on a charge of conspiracy to commit mail fraud. Kane charged him with nine counts in the turnpike case.
Since 2009, prosecutors charged 31 people with corruption in Northeastern Pennsylvania, including judges, commissioners and senators. Twenty-eight of them pleaded guilty or were convicted at trial. Two of the remaining three are awaiting trial; the other case was resolved in a civil proceeding, according to the U.S. attorney's office.
In Harrisburg and Pittsburgh, state, county and federal investigations led to convictions of more than 30 people since 2009, including former lawmakers, sitting legislators, people with ties to the Legislature and a Supreme Court justice — most of them for using state resources for campaigns.
“What you can prove in a corruption investigation is probably 1/100th of what is going on,” said James West, former U.S. attorney for the Middle District of Pennsylvania, who represents two turnpike whistleblowers in civil lawsuits.
The grand jury charged that Ciber got the turnpike contract because a company executive paid for trips and dinners for turnpike officials and contributed to campaigns of senators with turnpike ties. A Ciber official received information other bidders didn't get, the grand jury said.
Former Ciber vice president Dennis Miller formed a personal friendship with former turnpike Chief Operating Officer George Hatalowich, the grand jury said. It accused Miller of paying for gifts and trips for Hatalowich and other turnpike officials, donating $19,000 to campaigns of ex-Sen. Vincent Fumo, D-Philadelphia, and asking subcontractors to contribute to Fumo's campaigns.
Miller's lawyer, Mark Sheppard, could not be reached; nor could Catherine Recker, who represents Hatalowich.
Ciber consultants received “repetitive, useless assignments,” part of the “make work” that enabled the company to bill for the full contract amounts, the grand jury said.
A consultant testified that Miller received inside information about what it would take to win the contract. His daughter, “with no experience whatsoever,” became a turnpike consultant making more than $100 an hour, a witness said.
Kane charged Miller with offenses ranging from bid-rigging to theft. Hatalowich is charged with incidents beyond the Ciber contract.
Miller no longer works for Ciber, said Betsy Loeff, the company's communications director.
“There's an investigation under way, and we're cooperating,” she said. “We'll continue to cooperate.”
Turnpike employees who testified to the grand jury about Ciber were fired or believe they were demoted because of their testimony, the jury's report said.
From 2003 through 2006, Miller received about $309,000 in salary, $253,456 in commissions and $28,641 in bonuses from the turnpike.
Brad Bumsted is the state Capitol reporter for Trib Total Media.
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