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. "Ive never seen anything like it,
says James Boren, Whitakers 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 companys
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.
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, Whitakers 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 Sheriffs 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 cant put a company in jail.
Morris says he was shocked to learn the project was not bonded.
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
But Gibson, also a city councilman,
speculates that large projects Whitaker formerly managed,
such as a $12.5-million portion of the citys Independence
Stadium, may have overwhelmed the firms capabilities.
"If you dont have the experience, it can come back
to haunt you, Gibson says. Records from that project
have been turned over to authorities. "Its 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 Iraqs Ministry
of Health, would not comment. But Whitakers 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. Whitakers arrest may be the
first. "I think it might be time to take another look
at this, he says.