Leader Blues

Thursday, October 04, 2007

TOP STORY >>Area contractors wonder whether they will be paid

By JOHN HOFHEIMER
Leader senior staff writer

The housing-privatization debacle—as one subcontractor called it—at Little Rock Air Force Base has left area contractors wondering if and when they will be paid for hundreds of thousands of dollars worth of work and materials.
Some could go under.

“It’s like we’re bobbing around in a 55-gallon drum and someone’s trying to seal the lid down on us,” said a spokesman for JR Construction of Cabot.

American Eagle Communities, a partnership between Carabetta Enterprises and Shaw Infrastructure, contracted to own, remodel, build and manage about 1,200 homes for airmen and their families at the base, but quickly fell behind, completing only 25 of the 468 new homes to be completed by 2011.

They were two years behind schedule, according to Brig. Gen. Rowayne Schatz, the base commander. American Eagle was to remodel another 732 homes. The developer pulled the plug on the job May 7.


OWED $136,000

JR Construction isn’t about to file for bankruptcy protection, but the company is still owed about $136,000 for dirt and concrete work it did for American Eagle Communities at LRAFB over the past two years.

JR Construction says it can’t pay its subcontractors like Tommy Austin of Austin Concrete.


BOND SIGNED

On April 3, 2006, Salvatore R. Carabetta, as manager of American Eagle Design-Build Studio LLC and also manager of Little Rock Family Housing LLC, along with Robert Pearson, an attorney for Arch Insurance, signed a $5.8 million performance and payment bond ensuring construction of 50 new homes on the base.

Some central Arkansas contractors have filed claims against the bondholder, Arch Insurance, and while they say Arch has acknowledged receipt of their claims, none have been paid within the time allowed the bondholder.

Spokesmen for neither Arch Insurance nor the Carabetta organization responded to phone calls or emails for this story.
JR Construction has filed a lien with the surety bondholder, Arch Insurance Company, and co-owners Rebecca Schiermeyer and Jack Sullivan can’t understand why the Air Force isn’t forcing someone to pay up.

The 45 days Arch had to respond to JR Construction’s claim has expired and now JR has filed suit.


ENOUGH ANGER

There is enough anger and frustration to go around—directed at American Eagle for its failure to pay its bills, at Arch Insurance Company and its broker Richard F. Ferrucci & Associates of Garden City, New York and finally, at the Air Force and the U.S. government, which they say has been no help so far.

Sen. Mark Pryor has passed a resolution giving the U.S. comptroller general 180 days to find out what went wrong and suggest ways to straighten it out.

The comptroller general will look into American Eagle Communities housing privatization contracts at Little Rock Air Force Base and elsewhere, the extent of the problem and options open to the federal government and to subcontractors hurt by American Eagle, thanks to a resolution sponsored by Pryor and Sen. Saxby Chambliss of Georgia. Moody AFB, where American Eagle has defaulted on a similar project, reportedly leaving subcontractors out of work and owed millions of dollars, is in Georgia.

Meanwhile, the Air Force says American Eagle and its managing partner, Carabetta Enterprises, are “actively pursuing a sale of (their) ownership interest in the project,” according to a spokesman for the Air Force Center for Engineering and the Environment, based at Brooks, Texas.

Neither American Eagle nor the Carabetta family is mentioned by name in the resolution, but according to the Air Force, they are the only privatization developers experiencing such problems.

JR Construction, named for Jack Sullivan and Rebecca Schiermeyer, built forms, poured concrete slabs and did grading to minimize storm-water pollution.

“We’re just hanging on by a thread,” said Schiermeyer.


ARCH RESPONSIBLE

“I don’t understand why the Air Force isn’t pushing harder. If American Eagle can’t do it, then Arch Insurance should have some responsibility,” Schiermeyer said.

Sullivan said several houses were essentially complete, but exposed to the weather without siding or paint.

Schiermeyer estimated that there were about 22 contractors still owed money, including Central Arkansas Plumbing,
Jonesboro Heat and Air, Patriot Pest Control, Ferguson Excavating and Concrete, Capitol Insulators and Advance Lawn and Landscape.

The subcontractors began having trouble collecting on their bills almost immediately.

Getting paid for their work, “It’s like pulling teeth,” said Blake Poe, division manager for Capital Insulators. “They always had an excuse,” for not paying on time.

“The bond company is the one screwing us out of our money,” said Poe.


COURT EXPENSIVE

His outfit is owed about $25,000, he said. He has filed with Arch Insurance, but said if they aren’t given their money or suitable assurances by Monday, “We’ll have to go to federal district court and that’s real expensive.”

Poe said his company was set to do about $250,000 worth of work on the job. It had done about $50,000 worth of insulation and gutters and been paid for about half of that.

Jason Ferguson of Ferguson Excavating and Concrete figures he is owed about $60,000. He’s paid all his people and paid off materials, although he had to take loans out when American Eagle failed to live up to its side of the bargain.

Ferguson and his employees excavated yards, removed and replaced curbs, gutters, sidewalks and driveways—pretty much dirt work and drainage.

“I think it’s crazy that the Air Force doesn’t step up and take care of it,” he said.

He said even if he gets paid, any profit could be offset by interest on the loans he took to pay off workers and suppliers.


SELL EQUIPMENT

Still, he says he’s in better shape than some. “I’ve had several tell me they’ve had to sell equipment. I’ve stayed busy enough, but it’s not easy. Some ain’t been that fortunate.”

Carabetta, alone or in partnership with Shaw, was due to own, manage, remodel, build and collect rents on perhaps 10,000 housing units. Those included privatization jobs here, at Moody AFB in Georgia, Hanscom Air Force Base in Maryland, Patrick Air Force Base in Florida and also Navy housing at Puget Sound, Washington.

They have defaulted on all the Air Force jobs, sold the Navy job pending approval of the defense department and may yet finish a privatization job at Fort Leonard Wood in Missouri.

While there is little online to suggest widespread problems with Shaw Infrastructure, there are plenty of cautionary reports detailing Carabetta bankruptcy, and a 25-year history of unpaid subcontractors, suits and counter suits and failed projects. Contractors on one completed and paid-for public school job in Connecticut say Carabetta still owes them about $1 million. Local contractors—and the U.S. Senate—want to know how and why the Air Force overlooked those problems in awarding so many contracts to the Carabettas. Mostly, they want to know when they will be paid.