by Brooke Williams | inewsource

Federal authorities are conducting a criminal investigation into two companies that charged the city of San Diego $9.4 million to haul away the charred remains of 112 Rancho Bernardo homes after the devastating wildfires two years ago.

The Office of the Inspector General for the U.S. Department of Homeland Security is handling the investigation, said Andrew Jones, an assistant city attorney who is in charge of the false claims lawsuit the city filed against the companies — A.J. Diani Construction Co. of Santa Maria and Watsonville-based Granite Construction Co.

The Inspector General’s Office investigates allegations of fraud, abuse, mismanagement and waste in Federal Emergency Management Agency projects. The city’s debris-removal program qualified for FEMA reimbursement, so if investigators find criminal fraud, taxpayers could recoup some of the money paid to Diani and Granite.

News of the federal criminal investigation was confirmed in reporting by The San Diego Union-Tribune and the inewsource, a nonprofit investigative reporting unit at San Diego State University.

The Union-Tribune investigated the debris removal program in mid-2008 after fire victims and private contractors complained that Diani and Granite charged the city far more than companies that homeowners hired on their own. In stories published over the course of more than a year, the Union-Tribune found that Diani and Granite removed questionable quantities of debris, overcharged for materials, billed for work they didn’t perform, provided receipts that didn’t back up their charges and cost the city millions more than stated in their contracts.

Possible criminal fraud and misuse of taxpayer money prompted FEMA to ask the Inspector General for an investigation, sources told the Union-Tribune in May.

In October 2008, the city sued Diani and Granite, alleging they knowingly overcharged for services and falsified records, and, as a result, owe more than $2 million. Jones said that case is now on hold.

“We will not be doing anything on the case until the criminal investigation is over,” he said.

Marty Metelko, a spokeswoman for the Inspector General, said the agency does not confirm investigations because “we never know how what we say will impact a case down the road.”

Of the 1,646 homes in San Diego County that were destroyed by the wildfires two years ago, 365 were in Rancho Bernardo. Of those, about one-third — 112 homeowners — used the city of San Diego’s program to clear debris and contamination from their lots.

Janis Rasmussen, outreach coordinator for RB United, one of seven nonprofit fire-recovery centers, said many of those homeowners came into her office in tears and outraged after they received bills from the city. Some lived in tract homes near neighbors who lost nearly identical houses but paid one-quarter of the price to remove the rubble.

More than two dozen of the bills for work done by Diani and Granite were six figures.

“Everybody had a sense that something was wrong,” Rasmussen said.

Diani and Granite charged the city by the ton, and the Union-Tribune’s analysis of thousands of records show that the companies charged for hauling away hundreds of tons more than privately retained contractors did from nearly identical lots. This was one reason for some huge discrepancies between the bills of homeowners who used the city’s cleanup program and those who hired private companies.

One example was on Aceituno Street on the east side of Interstate 15. Diani charged $224,506 to remove 897 tons from the remains of a 5,000-square-foot home and a private contractor billed $77,693 to haul 575 tons from the remains of a 7,000-square-foot home. Both burned to the ground.

The most expensive cleanup in the city’s program was at Jack Beren’s lot on Angosto Way in The Trails, a Rancho Bernardo community of large homes on spacious view lots. Diani charged $435,463 to clean up the remains of his home.

Beren received a voice-mail message from an investigator with the Department of Homeland Security but didn’t return the call. He hasn’t heard back from the investigators and wonders what will come of the probe.

“Are they doing it to pacify or have they really got their teeth in it?” Beren asked.

As a publicly traded company, Granite is subject to certain disclosure rules. In its quarterly report for the period ending in June, Granite informed its shareholders of the city’s lawsuit:

“(Granite) believes the allegations in the City’s complaint to be without factual or legal basis and, therefore, the City’s entitlement to relief sought under the California False Claims Act is remote,” the report states.

Granite spokeswoman Jacque Fourchy said in an e-mail that the company had not been “informed by any government agency that it is investigating Granite for our work related to the wildfire cleanup.”

Fourchy said, “We will cooperate as appropriate with any agency should we be contacted. Granite maintains the highest standards of integrity and ethics, and we are proud of the work we performed for the people of San Diego.”

Diani officials did not respond to requests for comment on the investigation.

In February, the Union-Tribune examined about 2,300 weight tickets from landfills, recycling centers and public scales that Diani submitted to document clearing 68 lots. The weight tickets and invoices for those lots didn’t match in a single instance.

Interviews with fire victims and an examination of e-mails among city officials have shown the discrepancies in billing extend beyond weight tickets.

For instance, Diani billed the city to remove debris from at least two swimming pools that didn’t exist. Granite charged to lay down fiber rolls, which are used to control erosion, on lots where homeowners said they received rolls for free and did the work themselves.

Rasmussen said RB United cooperated with the City Attorney’s Office in its investigation and isn’t surprised the federal government has stepped in.

“We were wondering if that was going to happen,” Rasmussen said. “I understand there is a special place in hell for those who take advantage of disaster victims.”

Background: The city of San Diego hired two private contractors after the 2007 wildfires to clear rubble from homes destroyed in Rancho Bernardo. Investigations by The San Diego Union-Tribune found discrepancies between the contractors’ records and their bills to the city. The city attorney sued the companies.

What’s happening: The federal Office of Inspector General is conducting a criminal investigation of the contractors, according to the assistant city attorney who is handling the city’s false claims lawsuit. That case is on hold until the federal inquiry is complete.

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