SPANISH FORT, Alabama – According to a lawsuit filed in a U.S. District Court in Dallas, Tex. in February, two subcontractors of the Spanish Fort Town Center defrauded developer Cypress/Spanish Fort “out of tens of millions of dollars through false representations and omissions” concerning initial site work at the center. The lawsuit claims that Professional Service Industries Inc., of Oakbrook Terrace, Ill., conspired with W.S. Newell & Sons, Inc. of Montgomery, Ala., to falsify the results of thousands of soil compaction tests at the site. As a result of the fraud, Cypress claimed, there have been eight documented “slope failures” at the center since Nov. 2007, leaving the project “in precarious, if not ruinous, financial condition.”

The scheme was so blatant and organized, apparently, that Cypress determined it was a violation of the Racketeer Influenced Corrupt Organizations Act (RICO). The 40-page complaint includes scathing dispositions in which former employees of PSI accuse managers at the project of intimidation and coercion. It outlines the manager’s intentions to defraud the developer by concealing failing test results, recording passing results for areas that were never tested, masking failing areas with additional fill material, and instructing technicians not to disclose their conduct to anyone at Cypress.

The lawsuit claims that a lead supervisor on the job, who has since died, was “routinely seen drinking from a small flask while on site at the Project, and was often visibly intoxicated.” Further investigation revealed that during the time the compaction tests were being conducted, the supervisor’s drivers’ license was revoked for an accumulation of offenses including driving under the influence of alcohol with a minor in the vehicle, driving with a suspended license and driving under the influence while causing property damage. In one instance during a drunken tirade, the supervisor slammed a radioactive nuclear density gauge on the ground, “jeopardizing the health and safety of all those around them.”

The supervisor was one of two PSI managers who oversaw compaction testing on the project, and the lawsuit claims both accepted gifts and cash from W.S. Newell & Sons during the work.

The lawsuit is the result of failures at the site since 2009, which were attributed by an independent accounting firm to “widespread falsification of compaction test reports by multiple PSI technicians.” According to an audit of the tests in 2008, nearly 60 percent of the 12,560 reported compaction tests were exact duplications of passing tests.

In areas where there was supposed to a maximum of 12 inches of fill, auditors found as much as 36 inches. In some cases, slopes were filled with debris such as tires, dead tree limbs and trash from the construction site, according to the lawsuit. Practices such as these would allow the subcontractor to finish the work faster and increase profits.

As of February, there have been a dozen areas around the site that have either failed or been vulnerable to failure, with slopes being washed out after heavy rains, jeopardizing some of the basic infrastructure at the center.

The revelation of shoddy groundwork is the latest in a series of setbacks for the development, which is governed by a cooperative improvement district grappling to pay more than $80 million in bond debt. Recently, an attorney from Hand Arendall withdrew as legal counsel for the district based on a conflict of interest. The district’s new attorney is Richard Davis of Davis and Fields P.C. in Daphne. This week, Davis said he was not in a position to comment on the settlement. The bulletin has not been able to confirm the amount of the settlement, but Cypress sought damages in excess of $21 million.