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NJ Design Firm Executives Face Pay-to-Play Charges

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In an April 1 ruling, a U.S. bankruptcy judge in New Jersey is allowing Eatontown, N.J., engineer Birdsall Services Group to access $1.7 million of state-seized assets for operation and payroll, following the state's March 26 indictments of the firm and seven former executives.

They are charged with conspiracy and money-laundering in a six-year system of making large donations to public officials in both parties through small reimbursed employee outlays, says the indictment.

Despite state objections, Judge Michael Kaplan agreed that shutdown of the firm, which filed for Chapter 11 protection on March 29, would disrupt many municipal projects under contract and also harm employees.

A state spokesman confirms that Birdsall assets frozen total $41.6 million.

The state has filed a notice of appeal of that ruling and is seeking to have Birdsall's bankruptcy petition overturned. Judge Kaplan will hear the two sides' arguments at an April 8 hearing in Trenton, N.J.

The bankruptcy filing followed unsuccessful talks between Birdsall and the state attorney general on firm operations, according to the Newark, N.J.-based Star-Ledger.

"In order to ensure the best interests of our employees, our clients, and our ability to operate efficiently … this will better allow us to reorganize," said CEO Ralph Orlando in a statement. Birdsall ranks at No. 165 on ENR's list of the Top 500 Design Firms, with $61.6 million in 2011 revenue and about 325 employees.

Among those charged are brothers Howard and William Birdsall, former CEO and senior vice president, respectively. Howard Birdsall, a 55-year firm veteran, retired last year. Others indicted are retired or terminated. Two other former managers pleaded guilty to charges in February and last year, says the state.

"Irrespective of any pay-to-play issues, if New Jersey wants to be sure that firms are being selected on the merits, the Legislature should introduce the language of the federal Brooks Act to strengthen New Jersey's weak QBS [quality-based selection] law and extend it to every public entity, including counties, municipalities and school boards," says Joe Fiordaliso, president of the state American Council of Engineering Companies chapter.

"Owners soliciting professional services should have a published, transparent process for how they select professionals—that is the key," he adds. "When QBS has been artificially linked to 'no bid' and has come under scrutiny, it is usually attributable to ill-defined criteria by an owner."

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