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Source of Forged Surety Bonds Remains Mysterious

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Courtesy of St. Mary's County, Md.
Architectural rendering of the future Patuxent Naval Air Station Museum.
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Federal investigators are reportedly trying to locate the source of fraudulent surety bonds provided to a small Maryland prime contactor for its work on a museum and visitor’s center at the Patuxent Naval Air Base in St. Mary’s County, Md. The county has taken steps to terminate the contractor, an action its attorneys say they are trying to prevent because their client has been the victim of a fraud and has lost $175,000 in premium paid for the bonds.

The performance bond covered the contractor’s work on the $4.7-million building project, which broke ground with an opening ceremony in October but is now stalled.

St. Mary’s County ordered the contractor, Baltimore-based Broughton Construction Co., to stop work December 7.

The stalled project recently came to public attention when the prime contractor was unable to satisfy the county with a replacement surety bond.

A unit of The Chubb Group, Warren, N.J.-based Pacific Indemnity Co., had informed St. Mary’s County that the payment and performance bonds provided by Broughton were forgeries, according to a letter by the county sent to Broughton. A spokesman for the Chubb Group declined to comment.

A St. Mary’s county spokesman refrained from commenting, too, citing pending litigation. In response to ENR's request, the county provided copies of bond documents and its letter to Broughton instructing the firm to supply a new bond.

To remedy the situation, the contractor had offered to provide 20% retainage to the county and new guarantees from an individual surety.

But the county rejected the substitute bonds provided by Broughton and threatened to terminate Broughton for default, according to Charles M. Asmar, a Washington, D.C.-based attorney who represents the contractor. Broughton's contract does not provide for termination for reasons beyond the contractor's control, says Asmar.

“Broughton bent over backwards,” but “the county rejected everything” and wanted a treasury-listed surety, adds Christopher Taggi, a partner of Asmar’s.

According to Asmar, the Federal Bureau of Investigation is among the agencies searching for the source of the forged payment and performance bonds provided to Broughton.

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