A fraud case concerning the construction of the Metro East Forensics Laboratory in Fairview Heights is at trial this week in Madison County Circuit Judge Barbara Crowder’s court.
The trial began on February 29.
The two-count complaint alleges separate claims of fraudulent misrepresentation for false applications for payment and an altered stored material log.
Contegra Construction Company LLC filed the lawsuit against Robert Sutphen on Jan. 17, 2013.
The plaintiff claims Sutphen misrepresented the amount of work his company was performing on steel fabrication for the project, which caused Contegra to overpay.
Contegra also claims Sutphen altered the stored material log, which prevented the plaintiff from retrieving all of the steel it paid for after Sutphen’s employer, Advance Iron Works, or AIW, filed for bankruptcy.
Sutphen denies the allegations.
Contegra is represented in the case by Nicholas Garzia and Christopher Baucom of Armstrong Teasdale in St. Louis and Alan Napp of Schrempf, Kelly, Napp & Darr in Alton.
Sutphen is represented by Edward Moor of the Moor Law Office in Chicago.
In its complaint, Contegra explains that it was the general contractor on the Metro East Forensics Lap public works project for the State of Illinois by the Capital Development Board, or CDB, which is a three-story steel-framed structure. The facility is intended to house a crime laboratory for the Illinois State Police.
Contegra and AIW entered into a contract requiring AIW to fabricate and deliver structured steel. Contegra says the contract was executed by Sutphen, as vice president of AIW, who was the sole representative of AIW during negotiations with the plaintiff.
According to the contract, Contegra was to pay $1,283,490, which was later increased to $1,369,735.
Contegra agreed to pre-pay AIW for raw steel. And AIW was required to complete a stored material log, present the materials for inspection and certification by the architect, request the architect to also execute a stored material log and acknowledge transfer of title of the materials referenced in the log to the State of Illinois.
Sutphen allegedly executed a proper stored material log for the project through Jan. 20, 2012, and then created a similar log for the pay period of Jan. 21, 2012, through Feb. 23, 2012, but omitted the Transfer of Title Provision.
Contegra claims Sutphen failed to inform the plaintiff of its removal of the Transfer of Title Provision, and Contegra ended up submitted the altered stored material log to the CDB.
Sutphen also allegedly submitted periodic applications for payment, requesting progress payments based on a “schedule of values” for a portion of what was allocated to various categories of work for the project.
Contegra explained that the parties first agreed to assign a dollar value for total fabricated steel on the project, then Sutphen was to inform Contegra of the percentage of that value by applying the actual percentage completion of the fabricated structural steel compared to the total tonnage of fabricated steel required under the contract.
Sutphen allegedly prepared and executed each application for payment.
As of late October 2012, Contegra had paid AIW $881,500, or 64 percent, of the adjusted contract lump-sum.
However, the structural steel fabricated as of late October 2012 was significantly less than a third of the total steel project and not enough steel to begin erection of the first floor of the three-story project.
The fabrication shop drawings reveal that the total structural steel tonnage required under the contract is 569 tons or more, meaning Sutphen “grossly” understated the total tonnage in the formula used to calculate progress payments, the suit states.
As of late October 2012, AIW had fabricated only 257 tons of structured steel, which has a value of $536,490.
But Contegra paid $793,500, overpaying AIW by $257,009.
As a result, Contegra rejected AIW’s applications for further payment until AIW fabricated and made sufficient steel ready for delivery with the percentage AIW had already been paid.
Contegra alleges Sutphen refused to allow the plaintiff to review the fabrication shop drawings to verify the total steel tonnage used by the defendant to calculate payment applications.
“In the application for progress payments, defendant manipulated the percentage of the structural steel value for which it was entitled to payment by both inflating the amount of fabricated steel and grossly underestimating the total structural steel tonnages for the project.
“Simultaneously, defendant overstated the tonnage of fabricated structural steel in payment applications by including stairs, metal decking and other miscellaneous non-structural steel,” the suit states.
Contegra alleges Sutphen refused to adjust his calculation of payment applications to reflect a proper total structural steel tonnage for the project and refused to deliver critical steel pieces for the job.
Further, AIW allegedly refused to deliver fabricated steel required for the project until Contegra agreed to pay AIW’s applications for payment in full, including the amounts in dispute.
As a result of the dispute, the project’s construction was halted in November 2012.
Then on Nov. 20, 2012, AIW filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois.
At the time, AIW had approximately 95 tons of unfabricated steel at its facility. But because the Transfer of Title Provision was not included in the altered stored material log, the remaining steel cannot be transferred to the CDB and may not be integrated into the project.
The replacement cost to Contegra of the remaining raw steel at AIW’s facility is roughly $100,000, the plaintiff alleges.
“Contegra will not be entitled to reimbursement from the CDB to replace the Remaining Unfabricated Steel because the CDB has already paid Contegra, and Contegra has already paid AIW for the Remaining Unfabricated Steel currently in AIW’s yard,” the suit states.
In his amended affirmative defenses filed Feb. 26, Sutphen argues that the claims are precluded by the doctrine of res judicata.
He alleges that one month before this case was filed, Contegra filed identical claims against AIW in an adversary proceeding in AIW’s bankruptcy case on Dec. 18, 2012. He says Counts I and II in this action are identical to Counts III and IV of the bankruptcy case, the only difference being the defendants named in the claims.
Because Sutphen was an officer, director and majority shareholder of AIW, he says he is in privity with AIW for purposes of res judicata.
On April 19, 2013, the counts at issue in the bankruptcy case were nonsuited with prejudice.
Therefore, Sutphen argues that dismissal is proper here.
Contegra seeks a judgment of no less than $50,000 for each of the two counts of fraudulent misrepresentation.
Madison County Circuit Court case number 13-L-82