AVI STEINHARDT/Courier-Post Because of the poor sewer system, cracks have formed on parts of Ramona Gonzalez Street in Camden.

Officials pocket cash as sewer crumbles

By CLINT RILEY
Courier-Post staff
CAMDEN

The brick sewer main running beneath Howard Archie's street is crumbling.

Archie, a 42-year-old forklift operator, worries the 1880s-era brick row-home in which he has lived his entire life might collapse with the street.

He points to sinking slate curbs, front steps separating from homes and a three-foot hole that has grown since March, when the 1000 block of Ramona Gonzalez Street itself began to collapse. He and his neighbors call the city, but residents say workers simply dump a pile of asphalt in the latest hole - or don't bother showing up at all.

"We're constantly getting sinkholes because the sewers are decayed underground," Archie says. "I just want my street fixed so my house don't fall in."

But he must wait.

Archie's street is but one in a city where 144 miles of sewer lines have been permitted to decay for more than 30 years. Repairs to the century-old brick system have been rare and piecemeal, at best.

And repairs that have taken place in recent years are now suspect - perhaps part of a "contracts for cash" arrangement inside City Hall.

On Monday, inside a U.S. District courtroom in Camden, Mayor Milton Milan will begin to defend himself against allegations that he, among other things, personally accepted cash and gifts from city vendors and the Philadelphia-South Jersey Mafia in exchange for directing public contracts their way. Milan also is accused of extorting a $5,000 political contribution from an appointee in exchange for reappointment to a city job. Milan denies any wrongdoing.

But the case against Milan - which led the state to take almost complete control of Camden's government - may only be the beginning of a widening federal investigation of contracts-for-cash practices in communities throughout New Jersey.

One figure in that investigation is Jerry Free, the former vice president for sales of United Gunite Construction Co., an Irvington, Essex County-based sewer contractor.

Since 1997, taxpayers have paid United Gunite $1.65 million to reline crumbling brick sewers in North and South Camden with reinforced concrete.

The company was originally awarded a contract in 1998 for $500,000 of sewer repairs. However, internal city records show Camden paid the company more than $1 million by the time the job was finished. Ultimately, the company received at least 50 percent more than allocated under two contracts city leaders approved in February 1997 and February 1999.

What's more, inspection of the company's work by an engineer revealed that United Gunite failed to reinforce the sewer pipes with all the materials agreed to under the original contract, which likely will result in a much shorter lifespan for the work and the pipes.

Until recently, United Gunite's point man in Camden was Free.

He and other company executives have remained regular contributors to political funds in the city and across the state, including those controlled by Milan and former Camden Mayor Arnold Webster.

Free is regarded as a wheeler-dealer who has wined and dined with everyone from Milan to President Clinton.

The 61-year-old Free developed a reputation that made him particularly attractive to Democratic politicians and their fund-raisers. The former Tennessean made sure his company and his friends spread around lots of cash.

Since 1996, campaign records show, United Gunite, its top executives, their family members and friends contributed more than $137,000 to federal and state candidates and party political funds.

Two presidential candidates, a Democratic gubernatorial hopeful, two congressmen, eight state legislators and four New Jersey mayors have benefited.

Milan, for example, and campaign accounts connected to him received $12,900 from United Gunite over three years.

At the same time, Free's company received millions of dollars in government contracts to rehabilitate sewer lines in Camden and some of the state's other old, cash-strapped cities.

Free already is cooperating with the FBI as it looks into the relationship between Paterson Mayor Marty Barnes and lucrative, no-bid contracts United Gunite and other sewer companies received from the distressed Passaic County city.

City records show that, since 1997, United Gunite has received $6.9 million for sewer-related work in Paterson, much of it through no-bid emergency contracts. At the same time, campaign records show Barnes received $31,600 from contributors associated with the company.

John D. Arseneault, Barnes' lawyer, said Free has been cooperating with federal investigators for months. Arseneault said he believes prosecutors have taped conversations between Barnes and Free and that the former United Gunite executive is exaggerating their relationship to save his own skin.

"His (Barnes') intention was always to protect Paterson taxpayer dollars," Arseneault said.

Michael Drewniak, a spokesman for the U.S. Attorney's Office in Newark, refused to comment on the government's investigation of Free or whether Free is cooperating with investigators looking into Milan, Barnes and alleged campaign finance abuses in New Jersey. He cited Justice Department policy that bars officials from naming informants or acknowledging whether an investigation exists.

W. Steven Carroll, president of United Gunite, did not return several telephone messages left at the company's office.

And reached by telephone, Free - who left United Gunite earlier this year - refused to talk about his time with the company or whether he is assisting government investigators.

He also would not discuss the extent of the relationships he developed with Milan, Barnes and other public officials across the state.

It is not illegal in New Jersey for a corporation, businessman or labor union to directly give money or in- kind services to a political candidate who controls government contracts. For a crime to be committed, prosecutors must prove a contribution was given specifically to influence an elected decision-maker - a charge rarely brought in New Jersey.

But the reality is: Existing state laws regarding campaign finance, public contracts and government ethics are doing little to stop the person with the fattest wallet from influencing and profiting from municipal decisions, the Courier-Post has found. In fact, the various laws appear to be working in concert to contribute to Camden's decay while rewarding New Jersey's political money men, the newspaper's investigation shows. "It doesn't get better in Camden because this city has become nothing but a whore, and you've got everybody pimping her,'' said Michael Edwards, a 35-year-old tailor who lives in the city's Whitman Park section with his wife and 6-year-old son. "Most of the people doing it don't live in the city."

When the call goes out for campaign funding in such cities, Free and other businessmen willingly answer. In return, they hope to receive special access to municipal and state leaders when the time comes to build or repair public roads, schools and sewers. It's a way of doing business that is legally sanctioned in New Jersey by a series of laws allowing corporations and businessmen to receive unlimited amounts of taxpayer money - in the form of work contracts - from elected officials to whom they provide gifts or thousands of dollars in campaign cash.

It's only illegal if a quid pro quo - an agreement to exchange contracts for campaign cash or other favors - can be proven.

State Sen. Bill Schluter, R-Mercer, chairman of the Legislature's Joint Committee on Ethical Standards, said the record amounts of money sought by state and local leaders from corporations, unions and individuals with interests before them has tainted the political process and eroded public trust.

"The system is so sophisticated, you just need a nod and a wink and everything is understood," Schluter said. "The system is so sophisticated, they don't need the quid pro quo."

So when it came time to celebrate Milan's mayoral victory in June 1997, Free was there. United Gunite paid $1, 500 for a full-page ad on the back cover of Milan's commemorative Inaugural Gala book. Inside the book, titled " Camden's Open For Business," is a photograph of Free, his wife and Milan smiling for the camera at the New Jersey State Aquarium.

The event included a political "who's who" of Camden County. Also present that night were numerous city vendors and a reputed mob associate, Daniel Daidone, from whom the mayor would later be accused of accepting gifts and cash in exchange for directing city contracts to Mafia-run companies.

Free often kept company with Democratic power brokers. The United Gunite executive and developer was a regular on the Democratic fund-raising circuit, where he earned a reputation as a personality who could command the attention of a room full of people.

Milan said he first met Free at a fund-raiser, although he would not provide further details.

"There are hundreds of Jerry Frees out there," Milan said, when asked about his relationship with the man who directed thousands of dollars in campaign contributions his way.

A polished salesman, Free often bragged to municipal officials he met around the state about the access he had to powerful people in New Jersey and Washington, D.C. Free, the company's former top salesman, was a man on the move, traveling the country and the world, sometimes in the company of public officials.

One New Jersey municipal official who traveled with Free was Mayor Barnes of Paterson. Barnes traveled to Rio de Janeiro, Brazil, on Jan. 17, 1998, and spent six nights there, according to city and state records. The trip was paid for by the Rio Business Consortium and United Gunite. The mayor said in a letter that he went to Brazil to foster economic relationships and to attempt to set up a foreign trade zone in Paterson.

Since becoming mayor three years ago, Barnes has traveled to Brazil, Switzerland, the Dominican Republic, Puerto Rico, Russia's Caucasus Mountains and Turkey. Those travels are being scrutinized by federal investigators, officials familiar with the investigation have confirmed. Barnes has said the trips were paid for by a combination of personal funds and business and governmental groups who asked him to visit.

Like Barnes, Milan also traveled to Puerto Rico and the Dominican Republic. One of the criminal charges Milan faces is that he illegally ordered the diversion of $7,500 from a campaign fund in 1997 to help pay for a celebratory trip to Puerto Rico for more than a dozen of his supporters and himself.

While there is no evidence Milan ever traveled with Free, the FBI has copies of two airline tickets Free purchased in late 1997 for Milan and another top Camden city official to travel with him to Rio de Janeiro, according to two government officials who spoke on the condition they would not be named. For an unknown reason, Milan and the city official never took the trip.

Milan denied knowing anything about the airline ticket purchased for him by Free. He is not charged with any wrongdoing involving Free or United Gunite. Neither the company nor Free is charged with any wrongdoing.

Documents and several city officials say Free often would invoke the name of the mayor to get things moving - particularly collecting payments for his company.

Even before Milan became mayor in May 1997, United Gunite supported Milan financially.

Campaign records show Milan received his first political contribution from United Gunite in late January 1997, a $1, 000 check made out to his mayoral campaign fund.

The donation arrived two months after Milan, then City Council president, signed a resolution supporting a $500, 000 sewer contract to United Gunite to shore up a section of the city's aging brick sewer system.

Less than a month after the company gave to Milan, United Gunite and its executives gave $5,400 to the re- election campaign fund of Webster, Milan's mayoral opponent. Four days later, Webster's administration signed the $500,000 contract with United Gunite.

United Gunite gave Webster and Milan less than 1 percent of what taxpayers eventually paid the company under that contract. By the time United Gunite completed the low-bid repair job in 1998, internal city records show Camden had paid the company $1.1 million - more than twice the amount City Council originally approved.

As the company continued to collect from the city, political funds connected to Milan received thousands of dollars in campaign contributions from United Gunite.

State election records show that from January 1997 through this year, campaign accounts connected to Milan received $12,900 from contributors associated with United Gunite.

Five thousand dollars of that money went in April 1998 to Businesses for a Better Government, a political action committee controlled by Milan fund-raisers Carlos Morcate and Joseph Caruso. The contribution coincided with Free's attempt to settle a possible breach of contract by his company on the city sewer project started in early 1997.

Under its contract, United Gunite was supposed to apply a three-inch concrete lining, reinforced with steel, to sewer lines in Camden - a measure designed to increase by 50 years the longevity of its sewer pipes on Front Street in North Camden.

City records show sections of the repairs on Front Street - made with the concrete compound, gunite - were not reinforced with steel, and the concrete was 15 percent less than the required thickness, leaving the repaired sewer pipes with a shortened lifespan.

The shortcoming was not discovered by city administrators until after United Gunite had billed the city an extra $105,000 for clearing a sewer cave-in on Front Street that occurred while the company was working, and for an additional $504,000 worth of sewer rehabilitation work along Front Street.

Then-City Attorney John A. Misci, in a Jan. 16, 1998, memorandum to city Finance Director Robert Law, said that because United Gunite already had begun the extra work, the city may pay the company the additional $504,000.

"However, the required increase should have been authorized by City Council prior to the performance of the work," Misci noted.

Three months later, the city's Purchasing Review Committee directed then-Director of Utilities Ivan Saldana to ask council to retroactively approve paying United Gunite the extra $504,000 under its original contract.

He also was authorized to accept a $50,000 settlement from United Gunite for shorting the city on materials used in the project.

City records show council members did approve paying United Gunite $105,317.84 for clearing the sewer collapse on Front Street. Council also later amended United Gunite's original $500,000 contract on Sept. 29, 1998. However, records show council approved paying the company only an an additional $114,982.90 - not $504,000.

Nevertheless, city records show, the sewer contractor received $1.059 million by the end of 1998 - $338,699.26 of it never authorized by City Council.

Ultimately, United Gunite received at least 50 percent more money than approved.

It is illegal under state public contract law for a vendor to receive more than 20 percent above the original contract price set by a municipality or agency.

Ulrich "Al" Steinberg, director of the state Division of Local Government Services and head of the state oversight team in Camden, said he wasn't surprised by what happened in Camden with United Gunite.

"During the time we have been there, we have noticed some deficiencies in purchasing procedures in the city," Steinberg said. "Purchasing procedures are commonly circumvented in Camden."

But the law sometimes has shortcomings, too. Despite large cost overruns and documented problems with United Gunite's performance, city leaders authorized a second $600, 000 contract with United Gunite in February 1999 to clean and rehabilitate additional sewer lines in the city after the company submitted the lowest bid for the job.

Until state law changed in April, municipalities could not refuse work to companies which submitted the lowest bid, even if officials could document the company had breached its contract on previous government jobs. Today, they can.

But some state lawmakers and government watchdogs say more reforms are needed.

"The state of things is that there is a very high correlation between success in obtaining local business and contributions made to local elected candidates, particularly involving professional services," said Mercer County attorney Michael Pane, former deputy counsel to the New Jersey League of Municipalities and former president of the New Jersey Institute of Municipal Attorneys.

As a result, huge law and lobbying firms, engineering companies, accounting firms, developers and construction companies - each capable of spreading around hundreds of thousands of dollars to candidates - increasingly have become the lifeblood of political fund-raisers and politicians in Camden, the surrounding county and across New Jersey.

And rarely anymore do companies and businessmen place all their political bets on one party or one candidate. Most give contributions to both parties.

Most who contribute don't give out of party loyalty, but rather to gain access to political policymakers and the gatekeepers of millions of dollars in government contracts, political observers argue.

"How far would a guy like Abe Lincoln get today?" asks Larry Makinson, executive director of the Center for Responsive Politics in Washington, D.C., a nonprofit political watchdog group, which tracks the effects of money in politics.

"As long as the cash constituents are as important as the voting constituents," Makinson said, "the system is going to do nothing but get worse. The dirty little secret is it is much worse at the local level, in your own back yard."

Carl Mayer, a former Princeton committeeman and current Green Party congressional candidate, is among a group of reformers who say the rules New Jersey's political game is being played by today are having an impact not only on the pocketbooks of taxpayers, but perhaps more importantly on their trust in government.

Mayer said New Jersey has a legally sanctioned "cash for contracts" atmosphere that amounts to nothing more than a " shakedown tax" that citizens unknowingly pay. Campaign contributions made by corporations or firms are simply factored into the price they charge government for work they do.

"It's an unholy alliance that fleeces every taxpayer in New Jersey," Mayer said. "It's probably the highest tax New Jerseyans pay."