April 3, 2004 – The 3rd Circuit Court of Appeals has upheld District Judge Thomas K. Moore's March 2003 ruling ordering the Turnbull administration not to revive its multimillion-dollar contract for St. Croix sewage system repairs awarded without bidding to a start-up company in which government officials were involved.
The three-judge appellate panel, in a ruling filed on Friday, rejected the V.I. government's arguments that Moore lacked jurisdiction and/or exceeded his jurisdiction in ordering the administration not to reinstitute the contract with Global Resource Management, setting deadlines for certain sewage system repairs, and elaborating future procedures regarding the declaration of emergencies and the awarding of contracts thereunder.
The one area of the appeal which the panel found to have merit was Moore's order that the government deposit into a trust fund $4 million above and beyond the amount previously estimated as the cost of complying with his December 19, 2001, order to complete certain sewage system repairs and projects by certain deadlines. The appellate court sent the deposit requirement back to District Court, ordering that it "make findings of fact and conclusions of law which may (or may not) support the $4 million increase."
The V.I. government's appeal was of the decision Moore issued a year ago in which he found "the reek of politics and political influence, and quite possibly of political corruption" in the government's contract with Global Resources Management. See "Judge finds 'reek of politics' in sewage contract".) Arguments in the appeal were presented last Dec. 9.
The appellate court opinion traces federal efforts to bring the territory's wastewater collection system into compliance with the Clean Water Act, beginning in 1985, when the U.S. and V.I. governments entered into a consent decree whereby the territory agreed to make improvements.
Despite having entered into an amended decree in 1996, the opinion states, the V.I. government "continued repeatedly to violate CWA effluent limitations due to its failure to properly operate and maintain its wastewater treatment plants. In addition, there were persistent pump station failures and broken sewer lines, particularly on St. Croix."
After documenting a series of District Court orders and extensions in 1999, 2000 and 2001, the opinion cites a September 2001 hearing on an earlier order to the V.I. government to show why it should not be held in contempt "for its continued and flagrant failure" to comply with various decree and court orders.
The court then issued further orders, the opinion states, and "the governor of the Virgin Islands responded to these orders by declaring a state of emergency" which allowed it to award contracts "by negotiation rather than by competitive bidding. During the proclaimed state of emergency, the [government] entered into a negotiated contract with a company called Global Resources Management ('GRM'), which was to provide the services necessary to achieve compliance.
"After further hearings the District Court found that the process leading to the GRM contract was likely tainted by political corruption, and that GRM itself was a start-up company with no equipment, assets, or experience in construction."
Further, the appeals panel's opinion states, "The District Court found that the final contract was stripped of [Public Works'] attached specifications for the work, contained no firm deadlines for the included projects, and had no effective liquidated damages clause to enforce compliance with the vague deadlines that were included. In addition, the court found that the contract contained an open-ended provision for cost overruns that was added after Ashley Andrews, an influential lawyer and also a GRM principal, proposed such a provision directly to the governor."
Federal jurisdiction upheld
In its appeal, the V.I. government argued that the District Court lacked jurisdiction on grounds of mootness to enjoin the contract because the governor had terminated it voluntarily two days before a hearing on a motion by the U.S. Justice Department to show cause why the contract should not be enjoined.
The appellate judges rejected the government's contention "because it is well established that the voluntary cessation of a challenged practice will not automatically render a case moot, unless subsequent events make it absolutely clear that the wrongful behavior will not recur, a test not met here."
For one thing, they pointed out, in District Court, representatives of the Attorney General's Office "proffered numerous factual findings to the effect that the contract was a 'good deal,' reasonable in price and scope of work, not untimely given the pressures of the GVI, and entered into in a legal manner. This stance does not bespeak of a genuine belief that the contract was of a type that would not be contemplated again."
The appeal also contended that the District Court exceeded its jurisdiction in entering an injunction requiring the V.I. government to comply with territorial law in contracting for the sewage system repairs. While the U.S. Justice Department challenged the contention, it also argued that the V.I. government had consented to enforcement in 1996 by entering into an amended version of the 1985 consent decree.
"The order that the District Court enforced is a federal decree implementing a federal statute," the appellate opinion states. "The enforcement order … was intended to vindicate an agreement made by territorial officials to comply with federal law."
Further, it says, Moore's March 2003 order "was entirely warranted by the court's findings that the procedures used by the GVI to negotiate contracts for projects required by the December 2001 order were likely to frustrate compliance with that order."
The appellate judges also concluded that "in view of the long and sorry history of noncompliance and the seamy circumstances of the GRM contract," Moore did not abuse his discretion "in enjoining the GRM contract or in ordering the GVI to comply with the territorial competitive bidding law in future contracts under the amended decree or December 2001 order."
What constitutes an emergency
The appellate judges at one point apply a light touch in their opinion. Having noted that territorial law was not the basis of Moore's injunction, they state, "the GVI's contentions about the emergency nature of the proclamation are not technically material to our determination of the effect of the GRM contract on the consent decree. However, to avoid the risk of staging Hamlet without the Prince, and to clarify the law for future reference, we dispose of (and reject) the GVI's contentions about the emergency …"
Assuming that an emergency is "an unforeseen combination of circumstances that calls for immediate action," they state: "The conditions here were hardly 'unexpected'; rather they were the result of nearly 20 years of neglect and noncompliance with court orders to fix the growing problems in the Virgin Islands wastewater system. It was therefore not an 'emergency' that led to the proclamation of the state of emergency and to the contract with GRM."
In a marginal note, the appeals judges also "note in passing" the February federal grand jury indictments of five figures, three of them former public officials, in connection with the GRM contract deal.
The indictment alleges that Ohanio Harris, former special assistant to Gov. Charles W. Turnbull; former Sen. Alicia "Chucky" Hansen; Campbell Malone, post auditor of the 23rd Legislature; attorney Ashley Andrews; and Hansen's husband, Esdel Hansen, conspired to form GRM in order to obtain the multim
illion dollar sewer repair contract and, in establishing the company, made "corrupt arrangements" to obtain performance bonds and licenses. (See "5 indicted for conspiracy in sewage contract".) All have entered pleas of innocent to the charges.
The money matter
With regard to Moore's directive concerning the deposit of money into a trust account, the issue for the appellate court was "whether the District Court abused its discretion in requiring the GVI to deposit an additional $7.4 million into the District Court's wastewater repair account."
The requirement had to do with an earlier order directing the government to complete compliance with provisions of the December 2001 order and requiring the government to deposit into the trust fund "the amount needed to implement the projects listed in an exhibit attached to the order," the appellate opinion states. "The GVI did not appeal the December 2001 order then, and it does not challenge its validity now, and hence it is bound by the order."
However, the opinion notes, "the $7.4 million consists of $4 million more than had previously been estimated or required (to cover additional projects and increased costs for projects not included in the original estimates), and the record seems devoid of any explanation of why the $4 increase was necessary. We will therefore vacate that portion of the order and remand so that the District Court can make findings of fact as to whether the $4 million increase is actually justified and conclusions or law as to whether it is proper."
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