A Louisiana contractor now in bankruptcy has become caught in the crosshairs of an unusual state statute and was jailed late last month for allegedly not paying subcontractors on a small hospital project in the state. The legal brouhaha has cost him a Bush administration position as a U.S. health advisor in Iraq.

Joseph C. Whitaker, president and CEO of a third-generation construction firm in Shreveport, Whitaker Construction Co., was arrested July 16 by federal agents in El Paso, Texas, who were acting on a Louisiana parish warrant just hours before he was to leave for Iraq from nearby Ft. Bliss. "I’ve never seen anything like it,’’ says James Boren, Whitaker’s criminal attorney. The contractor, who was jailed until he could be returned to Louisiana, is now out on bond. His civil attorney claims "malicious prosecution’’ was involved in the arrest.

Whitaker Construction filed for Chapter 11 protection from creditors late last year. Fifteen subcontractors had filed liens against the company’s most recent project, a $7-million surgical center in Monroe, La., claiming that they were not paid for their work. The project is owned by a group of doctors.

Team? Shreveport stadiums's subcontractors are still owed money. (Photo courtesy of Sam Barnes/Louisiana contractor)

Under Louisiana law, a contractor, subcontractor or their agents who have received money as payment for a construction project can be fined and jailed for up to five years for not applying the funds to settle claims for materials and labor. Allison Jones, Whitaker’s Shreveport bankruptcy attorney, says there is no evidence that Whitaker personally took the funds. She says the statute was used to jail him to force creditor payments.

Sgt. Bob Morris of the Ouachita Parish Sheriff’s office says the surgery center owners filed the complaint. "The hospital did pay Whitaker Construction, and subcontractors were not paid," he says. "Someone has to be responsible. You can’t put a company in jail.’’ Morris says he was shocked to learn the project was not bonded.

Whitaker

Whitaker is charged with misapplying $1.4 million in surgery center funds. But Jones says that bankruptcy claims against his company are far less. "We are disputing the claim,’’ she says.

Whitaker Construction has fallen on hard times recently, says Mike Gibson, executive director of the Associated General Contractors’ Shreveport chapter. Whitaker resigned as chapter president at the time of the bankruptcy. "The company has a tremendous track record," says Gibson. "The quality of its work has never been questioned.’’

But Gibson, also a city councilman, speculates that large projects Whitaker formerly managed, such as a $12.5-million portion of the city’s Independence Stadium, may have overwhelmed the firm’s capabilities. "If you don’t have the experience, it can come back to haunt you,’’ Gibson says. Records from that project have been turned over to authorities. "It’s a tough business," says Gibson.

Whitaker also was forced to give up a $71-million contract as construction manager for a new Shreveport convention center. The city has hired Barton Malow, Detroit, to work with SAFECO Insurance Co., the bonding agent, to complete the project.

A spokesman for the U.S. Defense Dept., which hired Whitaker to work with Iraq’s Ministry of Health, would not comment. But Whitaker’s attorney says he was "terminated." Jones says Whitaker was appointed because he is a registered nurse and has experience building health-care facilities, "He was perfect for the position,’’ she says. But others speculate that political ties played a key role, including $38,000 in donations to the Republican Party and its federal and state candidates since 2000, according to Federal Election Commission records.

The Louisiana law at issue was passed a decade ago and was the subject of a bitter fight between general contractors and subcontractors, says Jack Donahue, president of Donahue-Favret Contractors, Mandeville, La., and former president of the state chapter of the Associated Builders and Contractors. Whitaker’s arrest may be the first. "I think it might be time to take another look at this,’’ he says.