Attorney General's Opinion
Attorney General, Richard Blumenthal
June 5, 2006
Honorable James T. Fleming
CommissionerDepartment of Public Works
165 Capitol Avenue
Hartford, CT 06106
Dear Commissioner Fleming:
The Tunxis Management Co. (“Tunxis”) and William A. Tomasso, former president of Tunxis, recently pled guilty to federal charges related to the corrupt relationship between William A. Tomasso, and Peter N. Ellef and Lawrence E. Alibozek, chief of staff and deputy chief of staff to former Governor John G. Rowland, that resulted in the selection of Tunxis for state property management contracts.1
According to Tunxis’ Plea Agreement, the corrupt relationship existed from on or about January 1, 1998 until at least October 31, 2003. On April 27, 2006 the United States District Court for the District of Connecticut entered judgment of guilty, sentencing the company to a fine, probation and community service. The William A. Tomasso Plea Agreement similarly acknowledged the corrupt relationship. William A. Tomasso was also sentenced on April 27, 2006, receiving incarceration and a fine, to be followed by supervised release and community service.
In light of Tunxis’ and William A. Tomasso’s guilty pleas and the April 27, 2006 judgments in federal court, you have asked whether you have the authority to terminate two property management contracts with Tunxis on state buildings located at 25 Sigourney Street in Hartford and the Uncas-on-Thames campus in Norwich. You have also asked whether the Department of Public Works (“DPW”) should disqualify Tunxis “from any further business with this agency.”
In my opinion, DPW has clear legal authority -- consistent with sound public policy -- to terminate both contracts, and to disqualify Tunxis from further business with DPW because of its admitted corrupt acts involving State projects and facilities. There is no reason that the State should allow Tunxis to receive the balance of remaining benefits from these contracts -- a total of over one million dollars -- or to be considered for further business with the state in light of its admitted subversion of state contracting integrity.2
The Tunxis Plea Agreement makes clear that the State of Connecticut and its citizens were harmed because of preferential treatment given by corrupt state officials to Tunxis in awarding state contracts. While the Tunxis Plea Agreement is silent as to these particular contracts, the contracts were executed during the January 1, 1998 to October 31, 2003 time frame that the admitted corrupt acts took place. Indeed, the Plea Agreement establishes that Tunxis was an integral part of the illegal conspiracy to give Tomasso-related entities preferential treatment on State contracts, subverting the contracting process.
My opinion is that you have abundant legal authority to terminate the two Tunxis contracts. Termination may be either “without cause” upon 30 days’ written notice, or “for cause” upon three days' written notice, followed by a meeting with Tunxis. The guilty pleas also provide you strong authority to initiate a disqualification proceeding pursuant to Conn. Gen. Stat. § 31-57c to bar Tunxis from bidding on additional state contracts in the future.
I urge both steps -- terminating existing contracts, and disqualifying Tunxis from future business -- in light of serious state contracting corruption involving Tunxis and other Tomasso–related entities. Wrongdoing revealed by federal criminal proceedings and my office's investigation and civil lawsuit provide powerful support for such actions. I strongly recommend it.
Indictment and Guilty Plea by Tunxis and William A. Tomasso
In 2004, William A. Tomasso (“Tomasso”), co-founder and then-president of Tunxis, and Tunxis were both charged in a multi-count Indictment with conspiracy to commit racketeering, racketeering, conspiracy to commit theft/bribery concerning programs receiving federal funds, mail fraud/theft of honest services, wire fraud/theft of honest services, and conspiracy to defraud the United States, all based on their activities on various State of Connecticut projects and facilities. Both William A. Tomasso and Tunxis entered into guilty plea agreements relating to these charges. Tunxis pled guilty to Count One of the Information, which charged Tunxis with “Conspiracy to Defraud the <st1:country-region>United States</st1:country-region> pursuant to 18 U.S.C. §§ 371 and 2” in October 2005. William A. Tomasso pled guilty to Counts One and Three of the Indictment, which charged him with “Conspiracy to Defraud the United States” and “Conspiracy to Commit Bribery” pursuant to 18 U.S.C. §371.
The Indictment and Information allege and the two Plea Agreements confirm, among other things, that from on or about January 1, 1998 until at least October 31, 2003, William A. Tomasso and Tunxis, together with others, did willfully and knowingly conspire and agree to defraud the United States government in the payment of their income taxes, and that William A. Tomasso, together with others, willfully and knowingly conspired to commit bribery. As part of the conspiracy, William A. Tomasso directed Tunxis and other Tomasso-related companies to provide personal and financial benefits to Peter N. Ellef (former Governor Rowland’s then co-chief of staff), Lawrence E. Alibozek (former Governor Rowland’s then deputy chief of staff) and certain others in exchange for preferential treatment and inside information in obtaining state contracts. William Tomasso and Tunxis also admitted that the State of Connecticut and its citizens were harmed by these actions.
In its guilty plea, Tunxis specifically admitted to being a member of this conspiracy, to having committed at least “one of the overt acts charged in the Information,” and that the overt acts “were committed to further some objective of the conspiracy.” The United States District Court for the District of Connecticut entered judgment in the Tunxis matter on April 27, 2006, ordering Tunxis to pay restitution and a special assessment, and to perform four hundred (400) hours of community service. Tunxis’ former president, William A. Tomasso, further specifically admitted to conspiracy to commit bribery.
Tunxis’ Contracts with DPW
Attached to your letter are copies of two Property Services Management contracts with Tunxis, one for 25 Sigourney Street and the other for the Uncas-on-Thames campus in Norwich. Both of the contracts are effective from February 1, 2003 through January 31, 2008. The standard terms and conditions of both contracts are the same. They were both executed and approved in early February 2003, during the same period that Tunxis admitted to conspiring with Ellef and Alibozek and others and having received preferential treatment and inside information regarding State contracting procedures and defrauding the IRS.
Article 5 of Exhibit A to each contract contains the termination provisions. The two relevant provisions provide as follows:
5.1 Termination on 30 Days’ Notice – Either party may terminate this agreement without cause by giving the other party at least thirty 30 days’ prior written notice.
5.2 Termination on 3 Days’ Notice – The DPW may terminate this agreement for cause by giving the contractor 3 days prior written notice.
By their express terms, both contracts give the DPW the right to terminate the contracts -- either "without cause" upon 30 days prior notice or "for cause" with 3 days prior notice. If DPW is considering terminating the contracts without cause, the notice need not, and should not, set forth any particular reason because use of this contractual provision does not trigger procedural due process protections. S & D Maintenance Co., Inc. v. Goldin, 844 F.2d 962, 967 (2nd Cir. 1988) (termination without cause of a contract with New York City for the maintenance of city parking meters pending the outcome of an investigation for fraudulent procurement of such contract did not “constitutionalize contractual interests that are not associated with any cognizable status of the claimant beyond its temporary role as a governmental contractor”); see also Tucker v. Darien Bd. Of Educ., 222 F. Supp. 2d 202, 206 (D. Conn. 2002).
On the other hand, if DPW is considering termination for cause based on the guilty pleas and the facts contained in the federal Indictment, Information and Plea Agreements, the notice should contain the specific reasons for the termination and should give Tunxis an opportunity to meet with the DPW to discuss the termination in order to avoid any possible concerns regarding due process. See S & D Maintenance Co., Inc. v. Goldin, supra.
DPW’s statutory authority for disqualification of any contractor is set forth in Connecticut General Statute §31-57c.
Conn. Gen. Stat. §31-57c(a) defines contractor as:
[A]ny person, firm or corporation which has contracted or seeks to contract with the state, or to participate in such a contract, in connection with any public works of the state or a political subdivision of the state.
Section 31-57c(c) provides that:
[T]he Commissioner of Public Works may disqualify any contractor, for up to two years, from bidding on, applying for, or participating as a subcontractor under, contracts with the state…” for certain enumerated actions.
The causes for disqualification are enumerated in Conn. Gen. Stat. §31-57c(d), and include two causes that are relevant here: “(1) [c]onviction or entry of a plea of guilty or nolo contendere for or admission to commission of a criminal offense as an incident to obtaining or attempting to obtain a public or private contract or subcontract, or in the performance of such contract or subcontract; (2) [c]onviction or entry of a plea of guilty or nolo contendere for or admission to the violation of any state or federal law for embezzlement, theft, forgery, bribery, falsification or destruction of records, receiving stolen property or any other offense indicating a lack of business integrity or business honesty which affects responsibility as a state contractor.”
Clearly, Tunxis’ admission of conspiracy to defraud the <st1:country-region>United States</st1:country-region> by providing state officials financial benefits to obtain state contracts, thus subverting the integrity of the state contracting process, satisfies these two statutory causes for initiating disqualification proceedings. This is further supported by the admissions of Tunxis’ former president, William A. Tomasso, in his own case.
The statute requires notice and an opportunity for a hearing held in conformance with the procedures specified in the Administrative Procedures Act, chapter 54 of the Connecticut General Statutes. Prior to initiating any disqualification proceedings, the statute also requires you to consult with the contract awarding agency, if any, and with the Attorney General. Your written decision on disqualification will be a final decision for purposes of section 4-180 and 4-183.
My office stands ready to assist you in following the appropriate procedures required by law if you pursue my recommendations to take action regarding Tunxis, which I strongly urge you to do. Please call me if you wish to further discuss this very important matter.
Very truly yours,
1 The Plea Agreement executed by Tunxis specifically states that the “Government’s evidence would establish that the corrupt relationship between Tomasso, Ellef, and, to a lesser extent, Alibozek, compromised … the honesty and impartiality of the selection processes relating to other State of Connecticut business transactions such as the selection of a property management company [Tunxis] to perform renovations at Long Lane School.”
2 From June 1, 2006 through January 31, 2008, the end date of the contracts, Tunxis would receive $426,000.00 under the Uncas-on-the-Thames contract and $666,000.00 under the 25 Sigourney Street contract, for a total of $1,092,000.00 in state payments.
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