An epidemic of single-bidder contracts

As prosecutors get down to unraveling the complex web of relationships behind the "solar gold rush" that resulted in some politically-connected firms getting a lot of money while taxpayers in counties like Sussex were left holding the bag, they will no doubt focus on who knew whom way back in 2005 when these political alliances were forming.  The social circles these people travelled in -- gatherings in upscale Manhattan and the political cocktail circuit of some of the more expensive communities in Morris and Somerset Counties.  And let's not forget the hot tub parties hosted at a multi-million dollar shore house.  All gathering grounds for the chic and well-connected to play, exchange information, and make deals.

The result of all this was a notable absence of competition to facilitate the "solar gold rush" in New Jersey.  While some states saw scores of engineering and other vendors line up for a taste of taxpayer dollars, too often New Jersey saw a single bidder looking for a too narrowly-written contract.  This trend was getting noticed even before Sussex County decided to try its hand at going solar.

Consultants get a cut from North Jersey solar energy projects

JULY 24, 2011    LAST UPDATED: MONDAY, JULY 25, 2011, 6:37 PM

BY JOEL SCHECTMAN

STAFF WRITER | 

THE RECORD

Two politically connected firms at the front of the solar energy development gold rush are teaming with North Jersey improvement authorities to sell projects to local governments and school districts.

In the latest push, the firms, together with the Passaic County Improvement Authority, are pitching a no-money-down solar-paneling solution to the county’s municipalities and districts to help reduce electricity costs. It’s asking them to sign on to a 15-year pact in which a developer would install the panels and then charge the government entities rates lower than those currently paid.

Bergen County is using a different approach — private financing and smaller scale.

So far, Passaic County’s efforts have met with mixed results after numerous presentations. For instance, Clifton has signaled interest, and both the borough of Ringwood and the Lakeland school district signed on to the plan this month, but North Haledon’s Borough Council recently heard the pitch and took a pass, expressing concern about unknowns of the cost structure.

"The advantage of the program is having an outside agency look at the proposals and make sure there are real cost savings," said Clifton Mayor James Anzaldi.

But the project would include layers of professional fees from the collaborative efforts of the legal firm of Decotiis, Fitzpatrick and Cole LLP based in Teaneck and New York, and the engineering firm Birdsall Services Group of Sea Girt. The two firms have already spearheaded the same solar development model in Morris, Union and Somerset counties and are now helping evangelize the plan throughout Passaic County.

Decotiis is responsible for the legal side of the project, writing the contracts with the developers and drafting the wording of resolutions to bind local governments to agreements. Birdsall Services Group is responsible for the engineering side — helping governments select sites for the construction and vetting developers to build the panels once bids are sought.

 Former Decotiis partner Steven Pearlman, called the "godfather" of the plan by one county administrator, created the concept when he was general counsel for Morris County in 2008. The $21.6 million project is estimated to save the county $3.8 million over the 15-year life of the project. The plan became known as the "Morris Plan," and Pearlman pitched it to the Somerset County freeholders in 2009, signing the county onto the plan in 2010. Over the next year Union County brought the same team in to develop the plan for its towns.

Somerset County Improvement Authority project manager Yvonne Childress said that although the county went through a competitive selection process before signing on with the firms, the three companies selected were the only ones to apply: Birdsall; the Decotiis firm; and Inglesino, Pearlman, Wyciskala & Taylor LLC — a firm Pearlman helped found after leaving Decotiis.

Pearlman’s new law firm handled the bonding for the project, obtaining credit through the county. Birdsall, Decotiis and Pearlman did not respond to requests for comment.

"We have learned that more law firms are starting to model this program, so going forward, there may be more players in this game," Childress said in an email.

Both firms have contributed generously to election campaigns statewide, and have received impressive contracts from state and local governments.

Birdsall has contributed at least $669,910 to state and local elections since the solar push began in 2008 through 2010, the last date for which complete contributions are tallied. During that same period, the company received $70 million on all its state public-works contracts. The improvement authorities have not yet provided The Record with contract amounts for the solar projects.

Decotiis employees gave at least $200,000 to state and local campaigns, according to state election records. The firm received $45.7 million in New Jersey contracts in the same three years, according to public records.

In Passaic County, the group of consultants, along with the PCIA, has pitched the proposal to towns that include Hawthorne, Woodland Park and West Milford.

Nicole Fox, PCIA executive director, said she would not be available for comment by deadline.

In the solar-paneling project, the construction costs would all be paid by the developer, using cheaper credit from bonds written through the county. The builder would make back his money by charging the governments involved for the electricity produced and used by those governments. The firms pitching the deal are offering significant savings to government over the life of the program — Clifton, for example, would save as much as $85,000. Bonding through the county could, presumably, offer a lower rate than private financing and help the developer to pass on the savings to taxpayers.

In Passaic County, the developer, which hasn’t yet been selected, will have to charge governments enough to recoup construction costs and make a profit over a 15-year contract, and it also will have to add in the fees for Birdsall and Decotiis, according to the PCIA.

John Bonanni, commissioner of the Morris County Improvement Authority, the first to use the plan, noted those add-ons as significant.

"But someone has got to pay them," he said. "[The fee] gets baked into the cake."

Passaic County’s local governments and school districts have until the beginning of August to sign on — the PCIA will request proposals from developers by the end of that month, Fox said. Construction would start in fall and last one year.

Bergen County’s solar projects are of a smaller scale and without financing through public bonds. Instead a private solar financing company, Sunlight General Capital, is putting up the money and charging for the electricity. Bergen has built panels on the  Prosecutor’s Office in Paramus and the parking garage of the County Administrative in Hackensack.

Crabb ally who wanted to give Freeholders a raise now threatens newspaper for exposing solar scam

Ann Smulewicz, an ardent and often loud supporter of Freeholder Phil Crabb, is at it again. 

Speaking at the Freeholder's meeting on April 8th, Smulewicz suggested to the Freeholders that they take economic retribution against the New Jersey Herald by no longer posting public notices in the newspaper.  The reason for this outrageous suggestion:  The NJ Herald's coverage of the Freeholder Board's handling of the solar project that is costing Sussex taxpayers millions and of the bailout that will cost taxpayers more.

Smulewicz made her remarks in front of members of the press, including the NJ Herald, as Freeholders Crabb and Vohden smiled, and the county's chief bureaucrat John Eskilson joined them.  Who dumped that thought in her brain? 

So the attempt at covering up the solar scam continues.  Now threats are being made. 

And instead of following the example of Morris County and demanding the resignations of those responsible, Sussex County continues paying them and smiles as their political supporters threaten the members of the media who have exposed them.

At last year's June 27th meeting of the Sussex County Board of Freeholders Smulewicz told the Freeholders that they do not make enough money. 

According to the Alternative Press, Smulewicz said that the "freeholders deserve $100,000 a year."  That's more than four times what they are currently receiving from the taxpayers.  A Sussex County Freeholder currently receives $23,000 a year, with an additional $1,000 for the director.  Freeholder Crabb is the only Board member who receives benefits and a pension, so a salary increase could be especially beneficial to him.

The plan to increase the Freeholders salaries would make Sussex County's Freeholders the most expensive in New Jersey.  Smulewicz defended the idea, telling the Press:  "It's not a part-time job."  In fact, it is a part-time job.  No Freeholder works a 40 hour or even a 20 hour week.  All that is required is attendance at two meetings a month and an occasional additional meeting or two.

Oddly enough, while wanting part-time elected officials to be paid more, Smulewicz wants full-time elected officials to be paid less.  Smulewicz objected to paying the County Clerk and County Surrogate more than $107,000 a year, even though they work documented 40-hour weeks, plus attending meetings after hours.  

One thing is certain, Ann Smulewicz is an enormous fan of Freeholder Phil Crabb.  During this year's February 26th meeting of the Sussex County Board of Freeholders, Smulewicz spoke up and loudly proclaimed her support for Crabb, as the official minutes of the Board attest:  "Ann Smulewicz of Wantage came forward, she said she was pleased that Freeholder Crabb is running for his Freeholder seat again and will work to make sure that he retains the seat."

Should public meetings be turned into venues for campaign endorsement? 

Should Sussex County Freeholders get a $77,000 pay raise each?

Should paying the Sussex County Board of Freeholders go from costing county taxpayers $116,000 a year to $501,000 a year?  Freeholders serve 3-year terms, that's $348,000 vs. over $1.5 million!

Feel free to let us know what you think.

Crabb cover-up: 1800 words, Evaluation Report not mentioned

Giving unprecedented access to its pages, the New Jersey Herald permitted Freeholder Director Phil Crabb to pen an 1,800 word apology in today's edition that presents itself as an explanation of the solar mess, while it slyly attempts to blame Parker Space. 

So let's see, you have a lawyer, a bureaucrat, an accountant, a talk show host, a pharmaceutical salesman, and a union boss... and they want us to believe that the farmer did it.  Really?

Space was one of the Freeholders who voted for the concept in 2011.  He was an Assemblyman when the project went bad and required a taxpayer-funded bailout.  Space opposed the bailout and joined Freeholders Phoebus and Graham in asking the state Attorney General to initiate an investigation.  That investigation has begun.

As reported in the Herald, the Star-Ledger, the Advertiser, and Sparta Independent, the Express-Times and other media, a document called the Solar Proposal Evaluation Report  was  the sales document used to convince the Sussex County Freeholders that the solar plan was viable.   

Why then -- in his 1,800 word statement in the Herald -- didn't Freeholder Crabb mention the Solar Proposal Evaluation Report even once?

Because Crabb is trying to mislead the Herald's readers.  Because Crabb is attempting to protect the guilty.

Here is what really happened:

How it was sold to the Freeholders

In 2011, the Sussex County Board of Chosen Freeholder was composed of the following members:  Freeholder Director Rich Zeoli, Deputy Director Sue Zellman, and Freeholder members Phil Crabb, Rich Vohden, and Parker Space.  Vohden and Space were new to the  Board.  On November 14, 2011, the Freeholder Board voted unanimously to take the solar deal offered by SunLight  General.  How did it happen? 

Watchdog has uncovered the document used to sell the deal to the Freeholders, but first, let's look at the committee that was formed to sell the solar scheme.  It was called the Sussex County Evaluation Team and it was composed of the following people/organizations:

- John Eskilson Sussex County Administrator

- Dennis McConnell, Sussex County Attorney

- Bernard Re, Sussex County Treasurer

- Steve Pearlman, a lawyer with Inglesino, Pearlman, Wyciskala & Taylor

- Deb Verderame, a lawyer with Inglesino, Pearlman, Wyciskala & Taylor

- Gerry Genna, Birdsall Services Group

- Tom Brys, Birdsall Services Group

- Douglas Bacher, NW Financial Group

- Heather Litzebauer, NW Financial Group

- Steven Gabel, Gabel Associates

- Richard Preiss, Gabel Associates

- Cadence Bowden, Gabel Associates

This is the committee that recommended to the Freeholder Board that they agree to the solar scheme.  These are the promises they made to the Board: 

"The SunLight/MasTec team possesses high quality management, installation capabilities, and sound solar development experience.  In addition, the SunLight/MasTec proposal provides Sussex benefits in the following key areas:

- It provides substantial direct energy cost savings;

- It provides the Local Units the potential for additional savings through the sharing of revenues from the sale of Solar Renewable Energy Certificates (SRECs) and other environmental benefits;

- Due to SunLight/MasTec's proposed capital investment, which reduces the required size of the Authority bonds, it provides a strong level of protection for Sussex from financial risk;

- It provided additional financial protection for Sussex in the form of a debt service reserve fund; and,

- It includes a restoration security providing for additional Local Unit protection at the end of contract."

The entire process was open to public bid, but only one bidder showed up.  Another showed up late and was disqualified.  Some wanted to redo the bid, but that suggestion was brushed aside.  Only one bidder?

The Aftermath

While Sussex County continues to pay these lobbyists and consultants, neighboring Morris County has taken action. 

Lawyer Pearlman and his firm were asked to resign by Morris County and they complied.  Gabel Associates was also asked to resign and complied.  That is 5 of 12 members of the Sussex County Evaluation Team .

In 2013, Birdsall Services Group pleaded guilty to charges of public corruption  and was ordered to pay $1m in penalties, as well as $2.6 million to settle a civil forfeiture action brought by the attorney general’s office.  Individual cases against seven executives are pending. 

That makes 7 of the 12 members of the Sussex County Evaluation Team.

But while they have suffered sanctions from Morris County or from the New Jersey Attorney General, Sussex County Freeholder Director Phil Crabb continues to be more than happy to do business with these people.

Maybe Sussex County taxpayers should think about recalling some of these Freeholders who continue to do business with the people who ripped off Sussex County?

Watchdog is read by 11,000 residents in Sussex County, either by email or online.  Let us hear from you.  Tell us what you think we should do...

Do you want your tax dollars to continue to pay the Sussex County Evaluation Team members who have been fired by Morris County or who have pled guilty to actions brought by the New Jersey Attorney General?

Let us know:  info@sussexcountywatchdog.com

Phoebus and Graham were right

An important news story by Ben Horowitz and Seth Augenstein of the Star-Ledger.  A new report shows that the companies behind the Sussex solar mess were culpable.  They do not deserve to be protected by the terms of the bailout, including the "hold harmless clause" and the gag order (non-disparagement clause).

Morris County got the resignations of Gabel and Pearlman.  Sussex County had the opportunity to follow their leadership at Wednesday's Freeholder Board meeting and didn't.  When will they?

Official: Solar project design flaws and site changes led to millions in cost overruns

"Significant" cost overruns occurred in the solar project at the County College of Morris, according to the county's construction administrator. (Courtesy of Sunlight General Capital)

By Ben Horowitz and Seth Augenstein | NJ Advance Media for NJ.com
on April 10, 2015 at 9:05 AM, updated April 10, 2015 at 12:32 PM

MORRIS COUNTY — Design drawings that had to be changed, construction that had to be redone and the changing of sites contributed to cost overruns that led to lawsuits resulting in a $66.3 million arbitration award in a three-county solar project that fizzled, according to a report by the project's construction adminstrator.

The cost overruns were part of a 71-project, $88 million solar project bonded by Morris, Somerset and Sussex counties in 2011.

In 2013, the contractor, MasTec, sued the developer, SunLight General, saying it had performed more than $79.2 million worth of "construction services" for solar projects, but had been paid only $33 million by Sunlight, leaving it short by $46.2 million, according to court documents.

In 2014, an arbitrator awarded an even greater sum -- $66.3 million -- to MasTec. That included $59 million SunLight owed MasTec following cost overruns, along with interest.

SunLight was declared in default and the counties, which held the ultimate responsibility for the project, were on the hook for the debt. They settled with MasTec for $21 million in February, effectively bailing out the project.

Earlier this month, Steve Gabel, the head of energy consultant Gabel Associates, and Stephen Pearlman, the Morris County Improvement Authority's attorney who advised on the projects setup, both submitted letters of resignation, effective June 1.

But before leaving, Gabel Associates prepared a report summarizing the causes of the cost overruns. The report was intended to be confidential but was released by the Morris freeholders on Wednesday.

Gabel, describing its role as "liaison" between the various parties to monitor the status of construction, said it did not have authority to approve design drawings or direct the projects.

Discussing problems that led to cost overruns, Gable said in some cases, sites that had been expected to get solar panels could not be included in the program for reasons including "structural inadequacy" and some areas that did not meet SunLight's "shading tolerances."

Cost overruns resulted from the elimination of carport structures at the Randolph Board of Education building and from the Morris School District's decision not to proceed with the program, Gabel said.

Those decisions required the developer and contractor to identify additional projects that could generate another 2 megawatts of electrical power, Gabel said.

There were also problems with MasTec's initial design drawings, Gabel said.

MasTec hired the same engineering design professional, Innovative Engineering Inc., to complete the designs in all three county-wide projects, Gabel said.

That workload "stressed IEI's resources" and "some drawings were in conflict with elements of the National Electrical Code," Gabel said.

Some of the problems included improper sizing of conductors and the running of unfused conductors for lengths greater than permitted by local inspectors, Gabel said.

As a result, proposed changes were sent to IEI and site drawings had to be updated. That resulted in delays in submitting updated drawings to SunLight and delayed the start of projects, Gabel said.

Because "time was of the essence," MasTec directed its contractors to start the field work, "which it did at its own risk as it elected to proceed without approved construction drawings" from SunLight, Gabel said. However, the report added, at no time did electrical contractors perform work that violated standard industry practices or the electrical code.

As a result of these design issues, work was frequently started without approved construction drawings and that led to much of the work "having to be redone" due to SunLight's requirements for material and equipment, Gabel said.

While MasTec had sometimes worked without construction drawings, SunLight was insisting on "enhanced standards" that "went above the normal, accepted practices of the industry," Gabel said.

"Use of the enhanced standards led to cost overruns, especially in light of the fact that much of the work had been completed using other methods and required redoing," according to Gabel.

A "significant" cost overrun occurred at the County College of Morris, Gabel said.

That project had "inadequate design drawings, issues with material delivery (caused by the canopy manufacturer) and problems in the construction of the canopy structures," Gabel said.

Gabel concluded that is findings are "not intended to disparage any party in the Morris Renewable Energy Program, nor does it ... assign fault to any party."

"The report is only intended to provide factual information in response to the request of Morris County for information on the basis of cost overruns," Gabel said.

Morris Freeholder David Scapicchio, who voted against the settlement, called the situation "unbelievable."

"What led to the bulk of the cost overruns was building specifications that were not approved," Scappichio said. "When they finally did get a set of approved drawings, they had to start over."

Scappichio agreed that even though SunLight owed MasTec money, and the counties wound up paying, MasTec was "absolutely at fault" in many areas.

"A lot of stuff was designed improperly," he said.

Scappichio reiterated that it was unfair that the counties wound up "holding the bag" for the mistakes of others, but he acknowledged that was how the contracts were structured.

Officials at SunLight were unavailable for comment on Thursday and officials at MasTec could not be reached.

Ben Horowitz may be reached at bhorowitz@njadvancemedia.com. Follow him on Twitter @HorowitzBen. Find NJ.com on Facebook.

http://www.nj.com/morris/index.ssf/2015/04/official_says_problems_with_design_drawings_and_ch.html#incart_river

While Crabb makes excuses, Morris County gets resignations

Last evening we had the opportunity to watch Freeholder Director Phil Crabb try to pass the blame and make excuses for a solar project that he, Rich Vohden, and Dennis Mudrick voted to bail out with millions of taxpayers' money.  Crabb made his statement on Vernon Vibes, a public service cable program.  

To make matters worse, at about the same time in Frankford, Mayor Gary Larson was leading the charge against even investigating the solar mess -- that's like sending the police away after a bank has been robbed.  But isn't that just like Sussex County?

Meanwhile, over in Morris County, they were acting like grown-ups and making sure that their taxpayers wouldn't be robbed again.  The Star-Ledger reported that two consultants connected with the deal had been asked to resign and their resignations accepted. 

Morris County consultants resign, in wake of solar project bailout

A month after investing more millions on a three-county solar project that fizzled amid an industry downturn, the Morris County freeholders and the county's improvement authority have accepted the resignation of two experts who advised on both the initial deal - and the bailout.

Morris County is now "looking for a possible exit strategy from the solar business," the county said in a release.

Stephen Pearlman, the Morris County Improvement Authority's attorney, and Steve Gabel, the head of energy consultant Gabel Associates, both submitted letters of resignation on Wednesday, which were accepted.

Pearlman was the attorney who advised on the project's setup, according to public documents. As the attorney for the improvement authority, he helped convince Sussex County to join with Somerset and Morris counties in the project.

Gabel advised on solar-energy prices, which plummeted just as the project was being built, according to those documents.

The three-county project was based on the "Morris model," a public-private way of financing that intermingles tax subsidies, private investment, and taxpayer money. The electricity produced would help pay off the public debt. Sussex, Somerset and Morris counties collectively borrowed $88 million to finance the project, which began in 2011.

But tumbling solar subsidy prices and litigation between the contractor and developer derailed the project, leaving roughly half the work in Morris and Sussex counties unfinished. Arbitrators awarded $66.3 million to the contractor, Power Partners MasTec, against developer SunLight General Capital LLC, according to court documents. SunLight then hired a bankruptcy law firm, using some $700,000 of the public money.

The counties then borrowed an additional $21 million last month to end all the litigation and to try and get the projects back on track - and limit losses. Critics, most notably Assemblyman Parker Space and Sussex County freeholders Gail Phoebus and George Graham, have requested an outside investigation into where the money went. A series of Sussex County municipalities have also requested the resignations of multiple county officials.

Pearlman and Gabel both did not comment on the reason for their resignation in their letters. Pearlman, reached by phone, declined comment. Their resignations take effect June 1.

Seth Augenstein can be reached at saugenstein@njadvancemedia.com. Follow him on Twitter @SethAugenstein. Find NJ.com on Facebook.

http://www.nj.com/morris/index.ssf/2015/04/morris_county_consultants_resign_in_wake_of_solar.html