Friends at Work

Keep New Times Free
I Support
  • Local
  • Community
  • Journalism
  • logo

Support the independent voice of Phoenix and help keep the future of New Times free.

A little more than a year ago, the Arizona Department of Transportation paid Paul Braunstein almost a million dollars to go away.

Braunstein is the owner of BasePlans, a small engineering firm in Tempe. He once counted ADOT as his biggest client. A native of Hoboken, New Jersey, Braunstein had moved to Phoenix in the 1970s, started his own company, and set to work winning regular ADOT contracts for underground utility work -- and, records show, stellar evaluations from the agency.

But that was before things went bad.


Arizona Department of Transportation

Before ADOT took a contract he'd won, fair and square, and handed the work to a competitor.

Before Braunstein, trying to get to the bottom of his dwindling workload, discovered a hornet's nest of alliances between ADOT staffers and the private companies it hired.

Before he realized that he could complain all he wanted, and that he could even have irrefutable proof. But no one would pay attention unless he, Paul Braunstein, forced them to.

It was the political education of a man who'd never really cared about politics.

Sitting in his office in April, Braunstein doesn't bother to give explanations or offer a sound bite. He's an engineer through and through, albeit an excitable one, and his tale is a litany of dates, legal references, contract numbers. It only begins to make sense after weeks of subsequent study; on this subject, Braunstein ought to come with an appendix.

"Everything you would have expected to happen," Braunstein says, feverishly, "did not happen."

BasePlans' headquarters is a modest suite of rooms in a Tempe office park. Nothing fancy; there are only four employees.

Behind Braunstein are framed photographs and blueprints from the bridges of his childhood: the Brooklyn Bridge, the East River Bridge. In front of him are binders stuffed with documents, the physical representation of his mania to get at what's really happening at ADOT.

With his short, stocky build and rumpled appearance, Braunstein looks harmless enough. But his soul is pure badger.

After Braunstein won his $910,000, he probably should have gone away. But he was convinced that -- despite the payment -- he hadn't gotten ADOT's attention: The same old good-old-boys network and tangled connections continued to guide the expense of taxpayer money. ADOT workers were still slighting qualified companies, like his, in favor of their friends.

And so Braunstein has chosen to spend his settlement money on another lawsuit against ADOT, this one with even more explosive charges against the agency.

Instead of contracts worth less than a million dollars, Braunstein is now challenging awards that eventually could be worth $500 million.

And thanks to his fat settlement payment, he may actually have enough money to fight them.

And win.

The suit that Paul Braunstein filed in Maricopa County Superior Court last spring, his second against ADOT, focuses on freeway funds from Proposition 400, the half-cent sales tax that voters re-approved in November 2004.

Coupled with federal and state contributions, the sales tax is expected to haul in $17.6 billion over the next 20 years. And while it was the fat subsidy for light-rail lines that brought out the proposition's critics, the biggest share of the money is earmarked for freeways: 57 percent, or $9 billion. (Light rail gets just 15 percent, or $2.3 billion.)

Freeways are infinitely important to continued growth in the Valley, and that's one reason Braunstein's allegations are so scary.

In court documents, he suggests that the best people for the job weren't picked. He argues that cronyism trumped qualifications.

Indeed, one ADOT staffer on the selection committee that awarded freeway design contracts had a clear conflict: The staffer's daughter's company is listed as a subcontractor on all three winning proposals.

Tim Hogan is an attorney with the Arizona Center for Law in the Public Interest. While he is not familiar with the facts of the situation, he said the father/daughter relationship raises serious questions.

"Obviously, government employees are prohibited from steering contracts to themselves or a family member," he says. "When something like that happens, you may wonder whether the people of the state of Arizona are getting the best deal."

Because Braunstein's allegations are the subject of a pending lawsuit, ADOT spokeswoman Jodi Sorrell said the agency would decline comment. State Engineer Sam Elters did agree to talk to New Times, but the conversation was limited to the structuring of certain contracts.

In court filings, ADOT insists that it didn't abuse its power, and that contracts have been awarded to the best qualified companies. But public records suggest that this is hardly the entire story.

As ADOT officials admit, they've awarded the contracts in question without following the federal guidelines designed to ensure fair competition.

As long as the contracts aren't paid with federal money, that's technically okay. But thanks to the Legislature, ADOT also has a special exemption from state procurement requirements.

Without either state or federal guidelines, the agency really doesn't have a set of rules to govern its purchases. And that gave ADOT's staffers great freedom to structure the freeway management contracts as they saw fit.

And now, records show, some of the companies that have profited most in the first nine months of Proposition 400 invoices have a short work history in Phoenix -- but plenty of connections.

Their selection didn't go through ADOT's usual qualifications-based process.

Typically, the agency solicits proposals for various engineering specialties. But this time, ADOT chose to bundle every piece of freeway design work funded by Proposition 400 under three large management contracts.

State Engineer Elters concedes that bundling the work was a change. But, says Elters, it was one made for reasons of efficiency. Rather than deal with multiple contracts and companies, ADOT now deals just with the big guys: "We do see a benefit in combining these tasks to ensure we don't have significant delays," Elters says.

Thanks to the contracts' size, only giant national firms had the ability to compete for the work. (Six submitted qualifications; three were selected.) To get work, local engineering firms had to persuade one of the bigger companies to enlist them as a subcontractor.

Federal guidelines discourage contracts with such a large scope. They say that ADOT should only bundle work if the agency has done market research to determine it's "necessary and justified" -- because, as the federal acquisition regulations point out, large contracts can badly affect small businesses.

With bundled contracts, the only small companies that can get the work are those chosen by bigger companies.

Braunstein alleges that, because the national companies needed ADOT approval to get the multimillion-dollar contracts, they were only too willing to accept staffers' recommendations, even though the subs weren't the best qualified.

Indeed, some of the subs chosen most frequently appear to have close connections to ADOT staff: At least one employs a close relative. Others have hired recently retired ADOT workers.

Most of them, too, donated thousands of dollars to the Proposition 400 campaign.

Unlike candidates running for office, who are subject to very strict contribution limits, campaigns for ballot measures have much more freedom to accept money in large sums. They can even take money directly from companies, rather than just their employees.

The three big national companies donated more than $23,000, each, to the campaign. Many of their subs also kicked in fat checks.

Braunstein, who did not write a check, is convinced that ADOT directed the management firms to hire a few favored local subs.

Prior to ADOT's selection, Braunstein called all six firms competing for the contracts. He wanted to be chosen as a subcontractor.

Most of the guys putting together their company's list of subs wouldn't even take his call. But one of them, Braunstein alleges, told him that the company was "checking" with ADOT staffers to find out which subs he was supposed to choose.

Braunstein wasn't picked.

In a letter to ADOT, the national firm disputed his allegation. It'd already picked its subs when Braunstein called, it claimed. There was no "check" with ADOT.

Records show, however, that the management firms selected by ADOT repeatedly chose the same subcontractors, despite, in some cases, a very short work history.


• All three management firms selected by ADOT chose to hire NFra, Inc. -- a small engineering company that started up barely months before. One of NFra's owners, Dale Schaub, is friends with ADOT transportation manager James Romero, who sat on the selection panel, according to court testimony.

• All three also chose to partner with Aztec Engineering. Aztec also has ties to Romero: His daughter, an Arizona State University student, works for the company.

• ADOT had a history of giving Aztec favorable treatment. The company was the subject of Braunstein's 2003 suit, which alleged that ADOT had handed work to Aztec that it had not earned.

• All three management firms also selected Alpha Engineering, which only recently opened offices in Phoenix. Alpha has unusually close ties to Aztec: Aztec's owner is both its landlord and the person who registered its Web site. Records show that one-third of the work Alpha has billed the state for is actually being performed by Aztec workers.

To date, the three connected companies have earned more than $1.5 million in Proposition 400 money.

Other than Braunstein, most of the companies that didn't get selected didn't want to talk to New Times. They said they didn't want to see their ADOT work dry up completely; they didn't see how talking could possibly help their business.

Some, who begged that their names not be used, said that the list of subcontractors now billing for Proposition 400 engineering work appears to be a classic example of ADOT cronyism.

To win work, they whisper, companies hire former ADOT workers and stress their connections.

As one company owner explains, this is not unique to Arizona. Even though many of them don't like it, good businessmen know that they have to hire recent retirees from state departments of transportation to compete for contracts.

"This is common practice for engineering companies," the owner says. "Basically, department of transportation contracts are what they're buying."

If Paul Braunstein had a physical opposite, it might well be Hemant Patel. Where Braunstein is scrappy and sweaty, Patel is smooth, a charming guy who looks perfectly in place in a suit and his company's elegant headquarters.

Patel opened his company, Aztec Engineering, in Phoenix in 1992. As a start-up, it owed much of its early success to Patel's exotic pedigree: East Indian parents, a childhood in Kenya, and schooling in Great Britain. Eventually, Patel made his way to Houston before eventually settling in Paradise Valley.

Patel's background qualified Aztec for an important calling card: certification as a "disadvantaged business enterprise," or DBE. Government agencies, including ADOT and the City of Phoenix, try to steer at least 9 percent of contracts to DBEs, hoping to help women and minority-owned companies get started in business.

(The federal government was initially supportive of the set-asides, but has become critical in recent years.)

Patel, associates say, is an ambitious man and a hard worker. The company did well enough to average more than $4 million in annual revenue by 2000 -- too big to count anymore as "disadvantaged" under the City of Phoenix's rules. In that year, Aztec officially graduated from the city's program, records show.

For some companies, the transition from getting set-asides to competing on their own can be difficult. But Aztec seemed to do just fine. Today, the company has 200 employees, Patel says, and engineers working in Arizona, California and Nevada.

"My goal," he says, "was always to graduate and compete."

For Aztec, "graduating" meant finding new jobs and new sources of revenue. And it didn't take the company long to find a good, steady source of that: subsurface utility engineering, or "locating."

For engineering students who dream of building bridges, locating is about as far from sexy as it gets.

"This is not rocket science," explains Jonathan Lim Tan, president of Chicago-based Geotrack, which pioneered many of the locating techniques still in use today. "Basically, you're digging holes with a vacuum truck."

The work is actually a little more complicated than Tan's self-deprecating explanation. Engineers work with utility companies to map underground infrastructure such as electrical lines and pipes, then verify the placement on-site.

The idea is to keep the utilities out of harm's way during road projects, something that's become increasingly difficult as underground lines multiply and roads grow ever wider. That keeps costs low and projects on pace.

Since federal highway officials began urging states to incorporate locating into highway projects in the early 1990s, the work has provided steady business for a handful of local firms.

Aztec hadn't been one of them, other than a disastrous attempt to merge with Geotrack in 1992. (The companies' merger plan collapsed within a year. A lawsuit -- and accusations from both sides -- was eventually settled out of court.)

But after Aztec graduated from its DBE work, Patel clearly saw an opportunity to expand its list of services -- and government contracts.

The company's entree came in the form of Terry Bourland.

Bourland, who ran ADOT's utility program, retired from the agency January 5, 2001.

Three days later, he went to work for Aztec.

And four months after that, he made a pitch to his former ADOT co-workers on behalf of his new company: Aztec was vying for the state's "on-call" utility locating contract.

The law restricts state workers for a full year after they've left the public sector. They can't represent a business on any matter that they worked on as a government employee.

"There have been past situations where people tried to take advantage of the work they did for the government," says Tim Hogan, of the Arizona Center for Law in the Public Interest. "When they're working for the government, you want their sole allegiance to be to the people of the state."

Hogan says the three-day window in Bourland's case seems troubling. But Bourland is probably exempt from legal fallout, since he didn't actually work on the on-call contract as a government employee.

Neither Bourland nor Patel is accused of any wrongdoing. Patel says that what he did was nothing unusual.

"We are not as competitive or successful in attracting ADOT retirees as other firms," he insists. "You don't do it to win contracts -- you do it because working for ADOT is a tough process. You've gotta fill out 15 forms for every step. When you have veterans from ADOT, you can make sure you don't run afoul of anything."

Even with Bourland on board, however, Aztec's bid came up short. ADOT's selection panel gave Aztec low marks for not having real experience in the field. When the panel named three winners July 27, 2001, Aztec wasn't among them.

The firm was the only one of the four applicants not selected.

But soon after, things got weird -- and that's when Paul Braunstein's quest began.

For it was Braunstein who was actually the top pick of ADOT's panel. Long before Patel decided to pursue locating contracts aggressively, Braunstein had made them BasePlans' bread and butter. He'd earned locating contracts from both ADOT and its Nevada counterpart, including ADOT's "on-call" contract in 1998. By 2000, he was billing ADOT for nearly $1 million annually in work.

But soon after ADOT awarded Braunstein his new contract in October 2001, something odd happened: The agency stopped calling.

BasePlans' workload dropped dramatically.

At first, Braunstein wasn't worried. His contract, after all, had been signed soon after September 11, 2001.

"We're figuring, everything is slowing down," Braunstein explains.

But by September 2002, it was clear that his company's revenue drop was far too dramatic to be merely the result of 9/11. BasePlans' ADOT receipts had gone from about $1 million a year under the old contract to just $125,000.

So Braunstein called his contact at DMJM Harris, the Manhattan-based engineering behemoth serving as ADOT's project manager. His source reported troubling news, Braunstein says.

An ADOT manager had changed the contract.

DMJM Harris had been instructed to use Aztec instead.

It seemed unbelievable. Braunstein had won the contract, fair and square. So how could Aztec be getting the work?

Some businessmen might have accepted the change as government at work. They might have sat quietly, or tried to worm their way back into the ADOT bureaucracy's good graces, hoping to safeguard future contracts by giving up a current one.

Plenty of contractors affected by ADOT's more recent decisions, after all, told New Times they were doing just that.

But that isn't Paul Braunstein's way. So Braunstein called ADOT's deputy director, Debra Brisk. Brisk, who has since moved to Minnesota to work for the engineering giant HDR, did not return calls for comment.

In her deposition, Brisk said that she took Braunstein's allegation seriously: "I was concerned with the wording that Paul noted to me, such as fraud, favoritism, very alarming words."

Brisk asked ADOT's auditors to look at the matter. It was her "intent," she said, to do a thorough inquiry, but she started by asking the auditors to find out some basic facts: Had Braunstein been given a contract? And then, had the work he earned been given to a competitor?

The auditors began asking questions in mid-September 2002. On October 1, they summarized their findings in a "confidential memo" to Brisk.

Yes, they agreed, BasePlans had been chosen for the work. But, as they reported, "under a change of policy (non-written?)," Aztec -- the very company that finished dead last in ADOT's competitive selection process months before -- had been added to DMJM's contract as the only company to do utility locating in Maricopa County.

Since that date, BasePlans had received only $121,016 of locating work, the auditors concluded. Aztec had received $496,400.

And, the auditors concluded, the switch had been made by an ADOT employee named Steven Jimenez.

Jimenez didn't work for the utility section of ADOT. Nor did he have direct supervision of the utility designating contract. The guy who did, Bruce Vana, didn't even learn of the change until after the fact, as Vana would later confirm in deposition.

Jimenez, though, worked for a small ADOT department called Valley Project. At full capacity, the department has just 11 members.

Until just months before Jimenez made the contract alteration, one of those workers had been Terry Bourland. Before Bourland left ADOT for Aztec, he and Jimenez had been colleagues for 20 years.

Now Jimenez, it seemed, had changed DMJM's contract to add a specialty he didn't supervise, and give that specialty to his former co-worker.

It didn't smell right.

Supervisor Vana reported to the auditors that -- when he confronted Jimenez -- his colleague had defended the change as better for keeping work on schedule.

That didn't smell right, either.

When Braunstein was dumped, Vana would later confirm, BasePlans had been "99.9 percent on schedule."

Records show that, the year before, Vana had scored BasePlans five out of five on its evaluation. As he would repeat in deposition, he had no problem with BasePlans' work.

So why did Jimenez make the switch?

It was a question that cried out for further investigation. But Brisk didn't ask the auditors to make any further inquiry. As the auditors would later confirm in deposition, they didn't even get to the point of talking to Jimenez.

Instead, Brisk said she would take it from there.

At her command, the auditors stopped working on the matter. And a few weeks later, Brisk sent Braunstein a letter, a letter that seemed designed to calm his worries, yet do nothing to change the situation.

She told him that ADOT management had decided, for "schedule and coordination needs," to make an organizational change and put utility work under DMJM's control. But, Brisk added, it was DMJM's decision to choose Aztec, not ADOT's.

As court records would eventually prove, she was completely wrong about who'd chosen Aztec. But her letter was a whitewash for plenty of other reasons: It never mentioned what Bruce Vana had told the auditors. It never explained that anyone had found the switch potentially troubling.

It was only after Braunstein made a public records request that he learned the truth.

Braunstein requested the auditor's report. When he went to read it, he would later claim in his first lawsuit against ADOT, the auditors met with him to explain its contents.

During that meeting, the suit alleged, the auditors explained that their division "just did the report and it did not have the authority like that of the Inspector General's Office to clean up any illegalities or improprieties."

Their conclusion, according to Braunstein's suit?

"BasePlans would need to take further steps on its own."

It didn't matter that BasePlans had been awarded the contract.

Or that the company's track record with ADOT had been excellent, according to Bruce Vana, who actually supervised its work.

That day, Paul Braunstein learned the truth: If he wanted to get the work he'd earned, he was on his own.

When Braunstein first filed suit, he was serving as his own lawyer, something that's reflected in his initial complaint. The lawsuit is relentlessly logical.

Instead of legal mumbo jumbo, his lawsuit is the work of an engineer laying out the facts in careful pieces, certain that anyone who looked at them would surely know that somewhere in the litany lay a problem that someone needed to fix.

His logic was simple, if not legally profound.

"Jimenez, DMJM, and Aztec have ALL VIOLATED PUBLIC POLICY," Braunstein explained. "Jimenez, Aztec, and DMJM must be aware that the letting of public contracts should be above favoritism . . ."

Braunstein also named the Arizona Department of Transportation in the suit, claiming breach of contract.

In court filings, the parties each denied the charges. DMJM and Aztec basically argued that there was no collusion on their part; they were only following ADOT's orders. And ADOT argued that it was permitted to make the switch, and had done so for reasons of efficiency. (Never mind, of course, Vana's deposition, which stated it was less efficient to switch companies.)

It wasn't until Braunstein had been attempting to hold his own, legally, for a year, that acquaintances put him in touch with Suzanne Dallimore. Dallimore, who'd been one of the star white-collar-crime prosecutors under Arizona Attorney General Grant Woods, had a one-woman practice in Tempe and a zest for public corruption. She agreed to take on Braunstein as a client.

Dallimore declined comment, referring any questions to the court docket.

Unlike her legally naive client, Dallimore obviously understood that the problem wasn't quite as vague as "VIOLATING PUBLIC POLICY." She had to have known that most state agencies are subject to very particular purchase laws, laws that ensure fair competition.

Under normal circumstances, if they could prove ADOT had violated those guidelines, Braunstein would have a case.

The problem, as Dallimore must have learned quickly, is that the situation was far more complicated.

Most agencies in Arizona government are governed by the state procurement code, which mandates rules aimed at getting taxpayers the lowest price.

For ADOT, things are different. No one wants their highway overpass done on the cheap. Taking a shortcut to save a few bucks on a bridge, for example, could be fatal, and ADOT didn't want to encourage companies to undercut each other just to get jobs.

And so, when the Legislature enacted the state procurement code in 1984, ADOT was officially exempted.

But oddly enough, the agency never bothered to draft a different set of purchasing rules based on quality.

(Elters, the state engineer, says ADOT has a "system in place that has evolved over the years," although he's not sure if it's specifically codified. In court filings, Dallimore states that it is not.)

A lack of formal rules might not be so bad under normal circumstances. The Federal Highways Administration requires state departments of transportation to use its funding regulations -- known as the Brooks Act -- any time they use federal money. Those quality-based recommendations are extremely detailed.

In deposition, ADOT's contract administrator for engineering consultants, Susan Tellez, initially claimed that the agency followed federal rules even on projects that don't use federal money.

"We follow federal guidelines even for state funded," she said, according to the deposition.

But that, ADOT would soon admit, wasn't true.

When federal funds were involved, ADOT later argued in court filings, it was careful to follow the Brooks Act.

But the on-call contract that was the subject of the lawsuit wasn't paid with federal funds, ADOT officials said. Later, officials would also explain that they weren't using any federal money for design of the Proposition 400 work, even though the contracts could eventually total $500 million.

And so they had no rules.

In a world without rules, friendship can be much more important than good work.

And that, Braunstein believes, is the case with Aztec. Patel, its owner, has made a practice of hiring people with connections to the government agencies where he seeks to do business. At the time the company was vying for the designating work, it employed two retired ADOT engineers -- including, of course, Terry Bourland, who started working for Aztec only three days after leaving state employment.

At some point, Aztec also employed a young woman named Audrey Romero, Patel confirms. Divorce records from Wyoming's First District Court show that Audrey Romero, now 26, is the daughter of ADOT deputy manager Jim Romero.

Romero's younger daughter -- 22-year-old April, an ASU engineering student -- works part-time for Aztec today.

Patel defends the arrangement: "You cannot find engineers today." He also says he's trying to help a young woman succeed in a field that's typically dominated by men.

Neither Audrey nor April Romero is accused of any wrongdoing.

Patel takes umbrage at Braunstein's claims. "It's been very, very frustrating," he says. "I feel like I've done everything by the book."

At minimum, though, the fact of April Romero's employment raises some questions. Until recently, Jim Romero was supervised directly by Jimenez, according to records.

The two worked together in Valley Project Management, which, again, has only 11 employees.

They definitely know each other. And with two Romero daughters working at Aztec, one after another, it's hard to argue that they didn't know Aztec.

As depositions in the case later made clear, that may not have been Aztec's only hold on the department.

Under sharp questioning from attorney Dallimore, Steven Jimenez admitted that he had taken gifts from companies that work for ADOT. He'd accepted baseball tickets, lunches, a pocket knife, and Suns tickets from DMJM. He'd accepted breakfast, several times, from Hemant Patel and his underlings.

It wasn't anything huge, of course. But it still raises questions.

"People try to dismiss these things as trivial," says Hogan, the public interest lawyer. "They say, 'I can't be bought for that.' But it seems like the simpler course is just to say no."

ADOT has a policy preventing staffers from accepting "anything with more than a nominal value" from people who do business with them. But, though Dallimore and Braunstein pushed for an official explanation, ADOT seemed to shrug.

Indeed, in January 2005, the department asked one of its internal affairs investigators to follow up on Braunstein's allegation that Jimenez had taken gifts from contractors. Two months later, the investigator, Jeff Himmelstein, filed a cursory report.

"There was no evidence and/or information to indicate that Steven Jimenez nor [his department] were involved in any misconduct and all addressed allegations were unfounded," Himmelstein wrote.

Himmelstein offered no supporting documentation. A few months later, when Dallimore got the investigator under oath in a deposition, it became clear why.

Himmelstein said he had focused his investigation solely on whether Jimenez accepted gifts from people doing business with the state. But though Jimenez admitted to accepting baseball tickets, the investigator wasn't sure how many times it had happened. He'd never bothered to check the value of the tickets, either.

"My findings were that he took baseball tickets from a friend," he told Dallimore.

"The friend was a vendor to the state?" Dallimore asked.

"In that situation, yes," Himmelstein said. "But he took them as a friend."

Himmelstein also had to admit that he didn't even know that Jimenez had admitted that DMJM gave him a pocket knife. Naturally, he didn't check the value of that, either, nor did he find out more information about how many meals he'd accepted.

Instead, Himmelstein told Dallimore, he'd concluded that Jimenez and the DMJM project manager, Thomas Monchak, "were good friends."

And that, to him, made everything okay.

DMJM's initial ADOT contract was inked in 1995. It was supposed to last up to five years. But, records show, Jimenez made the decision to extend the contract another five years without letting anyone else apply to do the work.

The extension was worth several million dollars, as Jimenez acknowledged in his deposition. And Jimenez also expanded the contract's scope, according to his deposition, adding design work to what was supposed to be a management contract.

(Because the matter is under litigation, DMJM Harris spokesman Paul Gennaro said he can't comment on any specifics. He noted only that DMJM "takes great pride in our superior reputation, which is built on corporate integrity.")

After he wrapped up his investigation, Himmelstein said, he erased the tape of his interview with Jimenez.

ADOT refused to release Jimenez's personnel file or any records showing performance reviews or disciplinary action. Records show he received a 9.9 percent raise in March, boosting his salary from $88,250 to almost $97,000.

Just eight months after Dallimore took over as Braunstein's lawyer, Maricopa County Superior Court Judge Helene Abrams issued her ruling. She granted summary judgment to DMJM and Aztec.

Braunstein, she decreed, couldn't possibly prove they'd been responsible for ADOT's, and Jimenez's, actions.

Braunstein eventually would be required to pay Patel $60,000 to cover some of Patel's legal fees.

But Judge Abrams did not toss out Braunstein's case against ADOT. Two months later, with a trial date looming, the agency settled with Braunstein, according to court records.

ADOT had to pay Braunstein $910,000 to settle the claim. (At that point, Braunstein agreed to drop his case against Jimenez, too.)

It was $910,000 of taxpayer money, all to repair Jimenez's "contract amendment."

That should have been the end of it.

It wasn't.

Because, by that point, ADOT was already mired in a selection process for the Proposition 400 money -- a process that would make Jimenez's Aztec switcheroo look like chump change.

The first hint of trouble on the horizon came while Braunstein's first suit was still pending.

It was August 2004, about four months after Dallimore had come on as Braunstein's attorney. She was fighting Braunstein's case even as Maricopa County officials were gearing to urge voters to pass Proposition 400, the extension of the half-cent sales tax.

Even though Prop 400 money is, technically, county funds, it's ADOT that does the spending. (It's the roadway expert, after all.)

That month, Dallimore took the deposition of Susan Tellez, contract administrator for ADOT's engineering consultant section.

Tellez's testimony didn't shed much light on Braunstein's claims. She hadn't talked to Jimenez about switching to Aztec until he'd already made the move, she said. And while she personally wouldn't accept gifts from contractors, she didn't exactly come down hard on the ADOT employees who did.

But when Dallimore asked when Tellez had last talked to Jimenez, she gave an answer that Dallimore pounced on immediately.

They'd talked just the week before, Tellez said, about organizing a meeting.

"About what?" Dallimore asked.

"On the possibility of using management consultants, if the half-cent went through," Tellez replied.

As Dallimore soon learned, even before voters approved the sales tax renewal, ADOT was planning a meeting with local engineers to discuss how the contracts would be awarded.

Though the meeting couldn't have been a big secret, ADOT's attorney, assistant attorney general Joe Acosta, was so eager to keep it under wraps that he made sure Paul Braunstein left the deposition room before letting Tellez talk about it.

Regardless, ADOT convened the meeting August 12, 2004, records show. In it, according to testimony and records, ADOT officials explained to the engineers in attendance how they hoped to dole out the freeway work: They'd hire management consultants, and those consultants would have to pick the smaller companies they wanted to work with.

To get the job, management consultants would present an ADOT panel with their qualifications and the list of subs they wanted to use. And though the feds don't like set-asides, ADOT would also require that they give 6 percent of work to disadvantaged business enterprises, or DBEs.

Braunstein was not at the meeting. (He says he wasn't invited.) But word spread quickly about a second part of ADOT's plan.

The contracts wouldn't be the typical five-year length.

Instead, the companies hired would get the work for a full 20 years: One year plus up to 19 extensions, all without another round of competition.

State law -- the law from which ADOT has a special exemption -- says contracts should be no longer than five years. Federal guidelines urge the same.

Elters, the state engineer, says the longer-term contract was for the sake of efficiency. "We can be consistent from the beginning of these projects to the end."

But within two weeks after the meeting, two curious things happened.

First, a trio of co-workers quit their jobs at an established engineering firm and filed paperwork with the state to start a new firm: NFra, Inc.

In court filings, Braunstein has alleged that the new company's president, Dale F. Schaub, is close friends with Jim Romero. He claims they've gone on fishing trips together.

Schaub did not return calls for comment. He is not accused of any wrongdoing.

In court filings, ADOT's lawyers call the allegations "conspiracy theory" without "credible support."

Daniel Lance, who is a deputy state engineer for ADOT, stated in deposition that Schaub belongs to ADOT's golf league, which plays on Wednesdays during the spring and summer. "They are acquaintances, and both enjoy the hobby of golf, so . . . ," Lance said.

Lance said he didn't know if Schaub had ever paid for Romero's golf.

In his application to qualify for ADOT contracts, Schaub listed Romero as a reference, along with five other agency employees.

"Although we are a newly formed private entity, NFra's staff is very well known throughout ADOT," Schaub wrote in his application, submitted August 30.

The second curious thing involved a Tucson firm called Alpha Engineering. Like Aztec, Alpha is owned by a man of Indian descent, according to state records, and had gotten started with the "disadvantaged business enterprise" label.

Sometime in 2004, however, Alpha opened a Phoenix office, according to records the company filed with the state.

The building was owned by Hemant Patel. Two of the engineers who started working in the new office had been recently employed by Patel's company, Aztec.

And, two weeks after the August 12 meeting, records show that it was Patel who registered Alpha's Web site.

(Patel says the arrangement is aboveboard and has ADOT's blessing. He says he's trying to "mentor" a fellow Southeast Asian, and that it's cost him more money than not.)

In January 2005, when the firms vying to get the multimillion-dollar management contracts submitted their proposals, Aztec was on the list for three of the six firms. So was NFra.

As a "disadvantaged" entity, Alpha did even better: It made it onto five of the six companies' proposals.

Later that month, a panel of ADOT employees, including Jim Romero, evaluated the proposals.

They recommended DMJM, HDR, and Parsons Brinckerhoff Quade & Douglas.

The three firms had all chosen to work with Aztec, Alpha, and NFra.

Since work began last July, ADOT records show that the companies have made some serious money.

While NFra has yet to bill for much work on the contracts, Aztec has billed for $1.09 million. Alpha has billed for $594,000.

And, of the thousand-plus hours of work for which Alpha has billed the state, records show that one-third were actually subcontracted to current Aztec employees.

The ADOT staffer who coordinates the agency's mentor-protégé program was on vacation last week and couldn't be reached for comment.

But the agency's DBE guidelines seem to indicate that even if Aztec and Alpha share a formal relationship through the program, Alpha's reliance on Aztec employees may be a problem in the future.

The guidelines warn that "long term, continual, or repetitive use by a protégé of personnel primarily employed by the mentor will be construed as an attempt to artificially inflate DBE participation" -- and can lead to the termination of a firm's "disadvantaged" status.

Braunstein filed suit against ADOT, Jimenez, Romero, and Aztec in May 2005, before the freeway design work had even begun.

He'd tried to protest the contract internally, but didn't get anywhere. In the end, the agency told him he couldn't appeal formally because he didn't actually submit his qualifications for the work.

He couldn't do that. Only the big nationals had the qualifications. But that didn't seem to matter.

So Braunstein's second suit focused less on his own qualifications and more on ADOT's lack of internal controls.

The suit asked Judge Marc Aceto to look at the big picture: ADOT was immune from the state procurement code. If it didn't use federal funds, it didn't have to follow the federal rules.

So what rules did it follow? Didn't the agency have to have some rules to govern the contracts it awarded?

He also sued the department and three of its staffers for allegedly violating the state's conflict-of-interest statutes, as well as antitrust laws.

So far, Aceto has not been especially sympathetic, but he hasn't tossed the suit out, either. The litigation continues.

But ADOT finally may be forced to address the situation. Romero's daughters' employment may well be, legally, the most serious matter facing the department.

After all, Romero sat on the selection panel, and helped award contracts, to a company that employs his daughter. That action doesn't just look bad -- it may violate the law.

After New Times requested Romero's personnel file and began making inquiries, the longtime employee abruptly left ADOT on May 15.

Romero's lawyer, James Belanger, chairs the white collar and corporate criminal defense group for the downtown powerhouse firm Lewis and Roca. (He also has an extensive practice in bankruptcy and corporate compliance.)

Belanger said it would not be appropriate to comment on Romero's departure from ADOT. In a written statement, he called his client "a good guy who has gone through a rough patch" and noted that the legal questions are more complicated than they first appear.

"The issue isn't simply whether or not his daughter had a job; it's whether there was a non-remote, substantial interest. Those are terms of art that are very specifically defined in the statutes. The bottom line is that Jim is defending the lawsuit. He absolutely believes he has done nothing wrong and he expects to prevail on the merits."

Romero had worked for the state almost 21 years.

In five years, he would have been eligible for 91 percent of his state retirement benefits, according to state records.

By retiring this month, he will receive nothing for five years. It will take him another 14 years to get full benefits.

There is yet one more oddity in the contracts that ADOT approved for Proposition 400 money. Once again, it involves utility locating.

The second phase of locating work is called "potholing": That's where they actually dig the holes to make sure the maps are correct. Very rote stuff, but again, a good, steady source of money.

Because potholing is a manual process, the state requires any firm doing the work to have a license with the Arizona Registrar of Contractors. That requirement caused a minor flap during Braunstein's first lawsuit, when he discovered that Aztec didn't even have the license until three months after Jimenez decided to give the company ADOT work.

But the requirement cropped up again as ADOT set the scope for the design/management contracts in the fall of 2004.

Firms like DMJM don't have contracting licenses. And the law was clear: They couldn't win contracts that include potholing, even if they planned to use licensed subcontractors.

Even if everything else was getting bundled, ADOT would have to handle the potholing as a separate contract, like it used to do.

The agency made its intent clear. At a pre-submittal meeting, James Romero himself specifically told the companies in attendance that potholing would not be part of the bundled work, according to an audio tape of the meeting.

Just one day before the national management companies' proposals on the bundled work were due, ADOT faxed over an amendment.

Potholing would be included. They were pushing through a new state law that would make it okay. (State Engineer Elters, who joined ADOT after the contracts were inked, says he's not familiar with the details of why the amendment was made, although he says the decision was not unusual.)

It was, of course, far too late for any companies with potholing experience to get themselves added to the management firms' proposals.

"We were told this wouldn't be a part of the contract," says one engineering company employee, who asked not to be identified because he fears it would hurt his firm. "When we got the amendment, we contacted everybody, but they'd already contracted with people who could do the work. We basically got screwed.

"It had a huge impact on the people who weren't already on the teams," the employee adds. "It's a weird way to do business."

Paul Braunstein, too, lost his chance to get any potholing work. But ADOT's last-minute change did benefit one firm.

One firm, after all, was already on the list for all three winners. And, by that time, the firm had its potholing license.

Aztec Engineering wouldn't have to compete through the normal process. Aztec, after all, had connections, and at ADOT, that can mean everything.

Unless, of course, Paul Braunstein gets his way.

Keep Phoenix New Times Free... Since we started Phoenix New Times, it has been defined as the free, independent voice of Phoenix, and we would like to keep it that way. Offering our readers free access to incisive coverage of local news, food and culture. Producing stories on everything from political scandals to the hottest new bands, with gutsy reporting, stylish writing, and staffers who've won everything from the Society of Professional Journalists' Sigma Delta Chi feature-writing award to the Casey Medal for Meritorious Journalism. But with local journalism's existence under siege and advertising revenue setbacks having a larger impact, it is important now more than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" membership program, allowing us to keep covering Phoenix with no paywalls.

We use cookies to collect and analyze information on site performance and usage, and to enhance and customize content and advertisements. By clicking 'X' or continuing to use the site, you agree to allow cookies to be placed. To find out more, visit our cookies policy and our privacy policy.


Join the New Times community and help support independent local journalism in Phoenix.


Join the New Times community and help support independent local journalism in Phoenix.