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April 20, 2013

Lawsuit alleges 200 false claims paid in buyout

Defendants accused of exploiting ‘good ole boy network’

TULSA, Okla. — A lawsuit has been filed in federal court by two whistle-blowers against trustees of the Lead-Impacted Communities Relocation Assistance Trust and four other entities, alleging a “sophisticated conspiracy’’ in which more than 200 false claims were presented for payment with federal money.

The claims were submitted in connection with the demolition and removal of homes and businesses that were acquired by the trust in the federally funded buyout of Picher.

The lawsuit says an example of one of those false claims is the “Mickey Mantle Marriage House” at 462 S. Emily St. in Picher, where Mantle married Merlyn Johnson on Dec. 23, 1951. The house was acquired from the trust by the Commerce Sports Authority for preservation in early 2011. It exists today in Commerce.

The lawsuit alleges that a contractor working for the trust successfully billed the federal government for demolition of the house.

The contractual relationships between the trust and those who oversaw the demolition and removal of the structures also are being

 examined in an investigative audit by the Oklahoma State Auditor and Investigator’s Office.

That audit was requested in April 2011 by Oklahoma Attorney General Scott Pruitt after his office received “a large quantity of documents’’ from the office of U.S. Sen. Tom Coburn, R-Okla., that pertained to the trust’s handling of the demolition projects.

Pruitt identified 17 questions for the audit to address that relate to specific activities involving the trust and the cleanup project.

Gary Jones, state auditor, said the audit, when it is completed, will be turned over to Pruitt. Its contents will be confidential until released by the attorney general, Jones said.

The trustees, who have been in charge of the buyout and relocation of residents from the former mining communities of Picher, Cardin and Hockerville since 2006, voted in November 2011 to hire the law firm of Lester, Loving & Davies, of Edmond, to represent them in connection with the audit.

On March 29, the trust hired the firm to represent it in connection with the federal lawsuit that was filed by the whistle-blowers under the False Claims Act and the Fraud Enforcement Recovery Act of 2009. Andy Lester, attorney for the trust, could not be reached for comment.

Named as defendants are Dr. Mark Osborn, Jim Thompson, Mike Sexton and Virgil Jurgensmeyer, all members of the trust. Also named are CWF Enterprises Inc., of Grove; Vision Construction and Project Management, of Grove; its owner, Chris White, a resident of Delaware County; Miami Engineering Service, of North Miami; and its owner, Jack Dalrymple, a resident of Ottawa County.

The lawsuit alleges that the defendants relied on and exploited “the good ole boy network’’ in Ottawa County and that LICRAT members placed friends in key positions to facilitate the scheme.

The lawsuit alleges LICRAT trustees retained Miami Engineering to serve as its engineering consultant and that it rigged the bidding process to contract with Stone’s Backhoe, Dozer and Trucking to perform the work. When the bidding process was bungled, the contract with Stone was declared void.

LICRAT trustees with Dalrymple’s assistance, according to the suit, conspired and agreed to pay federal funds to Visions and CWF for the work Stone performed under the void contract. Because LICRAT and Dalrymple were without a contractor performing work pursuant to a valid contract, they again rigged the bidding process to award CWF a contract for the remaining remediation work.

“Once CWF was hired, the pieces of the puzzle were in place and the parties worked in concert with one another to increase the contract value from $1,701,752 to $3,050,785,” the lawsuit alleges. “The defendants then pursued a course of submitting numerous false claims for payment in an effort to extract federal funds.’’

The defendants, the lawsuit alleges, often failed to perform the work and failed to enforce terms of the contract.

The lawsuit, which requests a jury trial, states the whistle-blowers filed the action to recoup all federal funds wrongfully taken by the defendants. If they win the lawsuit, the whistle-blowers could receive a 30 percent cut of the recovered money.

The suit seeks a judgment in excess of $75,000 against the defendants and three times the amount of damages sustained by the United States. It also seeks a civil penalty of $10,000 for each false claim.

On April 23, 2009, the U.S. Environmental Protection Agency granted an award of $15.76 million to the Oklahoma Department of Environmental Quality to fund LICRAT for the buyout, the lawsuit states. The money was part of the American Recovery and Reinvestment Act of 2009.

The department advanced the money to LICRAT for deposit in a bank account at 1st National Bank and Trust Co., of Miami. The lawsuit alleges that all checks written against that account were issued by LICRAT trustees Mike Sexton and Mark Osborn, and that included in those payments were more than 200 false claims for mobilization, bonds and insurance, demolition, asbestos removal, seeding, sorting metal, transportation of salvage and landfill dumping fees.

The lawsuit, unsealed March 5 in U.S. District Court for the Western District of Oklahoma, was filed by Billy Freeman Jr. and Joe Crawford, of Ottawa County, on behalf of the federal government. Crawford is a former commissioner of Ottawa County.

Neither Freeman nor Crawford could be reached for comment. Their attorney, Zachary Barron, with Gibbon, Barron & Barron, of Tulsa, could not be reached for comment.

The lawsuit was unsealed after Ronald Gallegos, assistant U.S. attorney in Oklahoma City, declined federal intervention.

Bob Troester, spokesman for Gallegos, said federal statute permits federal authorities to review a case and decide whether to intervene and take over the case or decline and allow the plaintiffs to proceed.

“But we can intervene at any time,” Troester said. “Though we are not actively involved, we will monitor the litigation, and at any point we could jump back in.’’

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