Birdsall, state come to terms

April 15 agreement requires firm to forfeit $2.6M, allows employees to resume work

Staff Writer

 An agreement reached with the state will allow employees of Birdsall Services Group to return to work. An agreement reached with the state will allow employees of Birdsall Services Group to return to work. Birdsall Services Group (BSG) and the state Division of Criminal Justice reached a settlement Monday that requires the embattled engineering firm to forfeit $2.6 million to the state, but allows it to continue operating, according to the New Jersey Attorney General’s Office.

Under the terms of the agreement, Eatontown-based BSG must surrender $2.5 million to settle the state’s civil forfeiture action, which was filed after seven executives and shareholders were indicted for alleged violations of “pay-to-play” laws in late March. An additional $100,000 will go to cover the state’s fees for outside counsel in the firm’s ongoing Chapter 11 bankruptcy filing, according to a press release from the Attorney General’s Office. BSG must also set up a $1 million escrow account that would be reserved to pay “any fines, penalties and restitution that arise from the ongoing criminal action.”

In return, the state agreed to drop its civil forfeiture action, which had effectively tied up BSG’s operating capital and forced the company to furlough its roughly 300 employees on April 11.

“Through this settlement, the state has gained a substantial sum in civil forfeiture from Birdsall and has secured its right to seek significant additional criminal penalties,” Attorney General Jeffrey Chiesa said in the statement.

“At the same time, Birdsall can continue to operate, to perform its contracts and to pay its employees. Our goal has consistently been to punish the guilty and protect the state’s interests without needlessly harming innocent employees or those doing business with the firm,” Chiesa said.

Following the announcement of the agreement, BSG spokesman Joe Orlando said the firm would get back to work immediately.

“I am very pleased that we have come to an agreement with all parties concerning our current legal issues in a manner that allows us to continue operating our business, effectively service our clients and protect the interests of our employees,” he said in an April 15 email.

“The agreement also allows us to properly plan our next course of action with greater certainty. We believe that this is a fair settlement with regard to the current legal matter, and we look forward to proceeding with a business plan that continues to be in our best interests. Our employees have been notified to report back to work on [April 16].”

According to Bankruptcy Court filings, BSG has engaged in discussions regarding the possible sale of the company.

The settlement agreement has no impact on the pending criminal charges for the indicted BSG executives, according to Chiesa’s office.

BSG will fund the forfeiture primarily by cashing in a number of life insurance polices on current and former company officers, “many of whom have now been indicted,” according to the press release. Remaining funds would come from the company’s existing cash assets.

U.S. Bankruptcy Court Judge Michael Kaplan approved the agreement.

While BSG will now be allowed to fund its daily operations and re-employ employees furloughed last week, the company’s long-term viability is still uncertain. Already, a number of clients have cancelled existing contracts with BSG, Orlando has said.

New Jersey American Water Co. (NJAW), which contracted the firm to provide inspection and testing services for an ongoing, multimillion-dollar repair project for three collapsed water mains on Swimming River Road in Lincroft, switched contractors last week. While the testing services — which included vibration testing in earlier phases of the project — were completed, NJAW chose to find a new contractor to complete the inspection work, citing the BSG’s uncertain future.

“We did not want any of that uncertainty to hold up what is a critical project for the Monmouth County area … They [the new contractor] are actually out there today. We didn’t miss a step,” NJAW spokesman Peter Eschbach said in an April 15 interview.

Eschbach added that the decision to change contractors was not based on the work or services provided by BSG employees, who he said continued to show up to the job site after they were furloughed.

“It’s a shame that the company is in the situation it is in. To their credit, the folks we worked with were great. They showed up prepared to work, unpaid.”

The NJAW project involves installing new intake and delivery mains alongside the Swimming River Reservoir to replace the three that collapsed last summer, touching off a countywide water emergency. The work should be completed by late May or early June, Eschbach said.

As of April 12, BSG was also under contract to complete 10 projects for Monmouth County, totaling close to $1.6 million, according to county spokeswoman Laura Kirkpatrick. She did not respond to calls seeking comment on BSG’s future involvement with those projects prior to press time.

BSG filed for Chapter 11 bankruptcy on March 29, days after seven executives and major shareholders were indicted by the Attorney General’s Office on charges of allegedly making hundreds of thousands of dollars in illegal campaign contributions to local and county officials.

Following the indictments, the state seized $41.6 million in BSG assets, including nearly $5.5 million in cash, claiming they were the proceeds of “criminal activity.”

According to Orlando, every employee under indictment has either resigned or been terminated by BSG.

The state protested BSG’s bankruptcy filing, contending the company was trying to sidestep the legal ramifications of its alleged illegal practices.

On April 8, Judge Kaplan upheld BSG’s filing, saying the dissolution of the company could negatively impact towns trying to rebuild after superstorm Sandy.

“There is a lot of serious work that has to be done, both related to Sandy and not related to Sandy,” Kaplan said, following his ruling. “At this juncture, this court doesn’t view it appropriate to shutter this business.”

Kaplan also approved the release of more than $1 million in interim funding to help BSG finance its payroll, insurance and operational expenses while the federal government selects an independent trustee to oversee the company’s finances going forward.

The Attorney General’s Office filed an appeal with U.S. District Court immediately following Kaplan’s ruling, and on April 10 Judge Michael Shipp granted that appeal, issuing a temporary restraining order on the release of funding, pending a hearing.

Monday’s agreement made that hearing unnecessary, however, and effectively allowed the firm’s employees to return to work, Orlando said.