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Firms that broke law still get tax dollars

By Drew Griffin, CNN
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Stimulus money for firm with history of misconduct
  • Companies that broke the law still getting federal tax dollars
  • One company is getting taxpayer money after paying $50 million in fines for fraud
  • Massachusetts says settlement allowed the company to continue to get government contracts
  • See if you can have any say on where your tax dollars go on AC 360 at 10 p.m. ET Monday

Why is your money going to companies that broke the law, and can you do anything to stop it? Get answers on a weeklong special report,"The Stimulus Project," on AC 360 at 10 p.m. ET Monday.

Boston, Massachusetts (CNN) -- The federal stimulus program is funding roadway construction in many Massachusetts towns. But more than half of the companies that have received taxpayer dollars to perform the work have a history of breaking the law.

According to an investigation by Boston University's New England Center for Investigative Reporting, more than half the companies given stimulus contracts have histories of defrauding taxpayers.

Using funds from the $787 billion American Recovery and Reinvestment Act, the Massachusetts Highway Division has awarded nearly $54 million in contracts for highway improvements. One company, Aggregate Industries Northeast Inc., based in Saugus, Massachusetts, was awarded two stimulus contracts totaling $8.9 million for roadwork in the state.

Aggregate Industries is one of the largest producers of aggregate, asphalt and ready-mixed concrete in New England. But Aggregate Industries has a record of misconduct, and six of its former managers pleaded guilty or were convicted of defrauding the government.

The company supplied thousands of truckloads of substandard concrete to Boston's "Big Dig" project. The "Big Dig," which cost $22 billion and was the most expensive highway project in the U.S., rerouted Interstate 93 underneath the center of Boston. The project was plagued with problems, mainly due to shoddy construction and inferior materials.

In 2007, the state of Massachusetts announced a fraud settlement against Aggregate Industries, alleging that for years the company had supplied defective concrete to the "Big Dig" project. According to the settlement, the quality of the concrete was so poor that it wouldn't set properly, which led to cracking, leaking and other defects.

The company agreed to pay $50 million in fines, and this past summer six of the company's former managers pleaded guilty or were convicted of defrauding the government.

Video: Earl Devaney, stimulus watchdog

But two years later, Aggregate is using taxpayer dollars to perform roadwork in Harvard, Littleton, Avon and Stoughton, Massachusetts.

Luisa Paiewonsky is the Highway Division administrator for the Massachusetts Department of Transportation, which is responsible for allocating stimulus funds for transportation projects.

Asked why the department continues to work with companies that have defrauded the state in the past, Paiewonsky replied, "We do have a history of referring contractors to the attorney general's office, and we have suspended contractors in the past."

But Aggregate isn't alone. The New England Center for Investigative Reporting found that 13 of the 21 companies that got federal transportation money have a history of misconduct. Aggregate is just one of the most glaring examples.

Paiewonsky said she can only follow the law with Aggregate Industries -- the law laid out in its settlement.

Under that agreement finalized by the U.S. attorney, the Massachusetts attorney general and the U.S. Department of Transportation, Aggregate Industries paid a $50 million fine and was put on probation overseen by a federal monitor, who was to ensure the company abided by federal and state rules. The settlement also stipulated that Aggregate Industries would not be cut off from government contracts.

Nancy Sterling, a spokeswoman for Aggregate Industries, said the company learned its lesson.

"The company took it extremely seriously. It's a very different company prior to the 'Big Dig.' There are new managers, new owners and a whole new corporate ethics and compliance policy in place."

Sterling said Aggregate Industries had lived up to the terms of the settlement and is not doing anything wrong.

"We paid the fine, and part of the reason we agreed to settle was we would be allowed to continue to do work for the government," she said.

But even Paiewonsky admits she had a visceral reaction when the state Department of Transportation gave another contract to the company.

"I have to follow the law, and I can only go as far as the law will allow me to go. We punished them as far as we could. They're back," Paiewonsky said.

Aggregate Industries Northeast is part of a major multinational corporation. It has spent thousands of dollars on lobbying and political donations over the years, according to federal election records.

One state official told CNN the company is such a huge contractor in New England that many projects would not be accomplished without it.

So even after selling bad concrete that caused a $22 billion highway project to leak excessively, the state of Massachusetts has re-contracted Aggregate for another project and is using federal taxpayer dollars to fund it.

CNN's Eliza Browning contributed to this report.