VA checks not in the mail

2013-07-13T18:30:00Z 2013-07-15T11:29:04Z VA checks not in the mailJoseph S. Pete (219) 933-3316

The work was finished nearly two years ago, but outstanding bills still haven't been paid to many of the subcontractors that built a new Veterans Affairs clinic in Crown Point.

An estimated 20 subcontractors, mostly from the region, never got paid about $2.4 million they were owed for work on the new Adam Benjamin Jr. Veterans Affairs Outpatient Clinic building, which is nearly twice as big as the old one next door. They have been pursuing lawsuits and filing claims known as liens on the property, but say they are growing increasingly frustrated.

Charles Gluth and Son Roofers in Gary installed the clinic's roof but never got paid about $170,000 for the job, Charles Gluth said. The 65-year-old roofing company, which often employed 20 to 40 union workers, filed for bankruptcy in March.

"It's been terrible, absolutely terrible for the company," Gluth said.

Building owner Crown Point VA, which was incorporated by suburban Cleveland-based Carnegie Management and Development Corp., recently has tried to settle with tradesmen who have been waiting to get paid what they are owed since the clinic opened in September 2011. A few have accepted settlements, but about half a dozen subcontractors said they have rejected offers of 50 cents or less on the dollar.

Unpaid bills

Subcontractors recently gathered at Strongbow Inn in Valparaiso for a court-ordered attempt at mediation, but they said little was accomplished.

Robert Scott, president of Scott Steel Services Inc., said his Crown Point-based company is owed more than $130,000 at a time when there's less construction work than usual. His company has racked up about $15,000 in attorneys' fees so far.

Griffith-based Gatlin Plumbing and Heating Co. is suing over $81,500 in unpaid bills on the project and will ask for a summary judgment at an August hearing, Secretary-Treasurer Clara Murphy said.

"It's been two years, and we haven't even made enough money on the job to cover our debts," she said. "You assume nothing like that would happen when you're working on a building that's for the federal government. It's just kind of sad."

Mechanical Test & Balance Inc. in Crown Point was recently paid $16,800 in outstanding bills for inspection work on the 70,000-square-foot building but incurred $7,000 in legal expenses trying to get paid, President James Larsen said. He doubts his company would gotten a cent if it hadn't withheld inspection documentation for the heating and air-conditioning system, which he said was leverage that other subcontractors didn't have.

His firm still ended up losing money on the job.

"It cost me," Larsen said. "It should never cost me money to do a project."

The dispute is between the subcontractors and the general contractor, said Department of Veterans Affairs spokeswoman Jo Schuda. No disruption of service is expected at the clinic, which employs 115 workers and handled more than 125,400 outpatient visits last year.

The Department of Veterans Affairs rents the building at 9301 Madison St. for $143,000 a month, and signed a 20-year lease with property owner Crown Point VA.

Problems in C.P., Indianapolis

Larry Huggett, president of southwestern Michigan-based Huggett Betten Corp., said the federal agency could resolve the issue right away by by withholding all lease payments until the debt to subcontractors is settled. His business has filed a lien on the VA clinic after it didn't get paid in full for carpentry, drywall installation and ceiling suspension work.

Schuda said the Department of Veterans Affairs is contractually bound to pay its rent and is not a party to the disagreement because it only leases the building.

Carnegie Management and Development Corp. developed the new clinic, and hired Akron-based general contractor Welty Building Co. to build it for $12.1 million. The project went over the original budget, which is not unheard of during big construction jobs.

Welty filed a lien of about $2.4 million on the building, which it said would be enough to pay subcontractors and suppliers.

The contractor has said the owner was not paying for the subcontractors' work. An attorney for Carnegie has said Welty shouldn't be paid more than the maximum $12.1 million amount agreed to in the contract and that the Ohio-based property management company already had directly paid Welty's subcontractors million of dollars.

Neither company responded to multiple requests for comment last week.

Carnegie and Welty also collaborated on an FBI field office building in Indianapolis, where subcontractors say they are collectively owed about $6.4 million, according to a lawsuit filed in Marion County Superior Court. Barth Electric is suing to try to recoup $700,000 it's owed for electrical work on the FBI building that opened in 2011, Mike Barth said.

U.S. Rep. Pete Visclosky, D-Merrillville, has asked that appropriations bills include language that requires the Veterans Administration to work with reputable contractors that fulfill their contracts on time and pay subcontractors in full, spokesman Evan Williamson said. Some of that legislation has been signed into law, but it can't retroactively help the local companies that are still seeking payment for their work on the VA clinic.

Visclosky will continue to advocate for rules that would prevent companies with any history of untimely payments to subcontractors from getting future contracts with the federal government, Williamson said.

Anthony Bledsoe with Georgia Direct Carpet of Richmond, Ind., said he doesn't understand how the federal government could allow the same two companies to not pay subcontractors the full amount they are owed on at least two different projects.

His company didn't receive a cent for installing carpeting in the VA clinic in Crown Point. That has been a major inconvenience because he has been trying to pass the family-owned company onto his son, and the firm has a huge unpaid bill on the books.

"I've been in business since 1975, and I've never seen anything like this," he said.

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