Lyon’s bribery admission raises more questions
by Giff Johnson, The Marshall Islands Journal, February 22, 2019
A 2014 FSM government claim against Lyon Associates Inc. for over $4.6 million for ”errors and omissions” in the designs for a road and sewer project in Chuuk State raises additional questions about the company’s involvement in the FSM in the wake of its President James ‘Jim’ Lyon pleading guilty last month to bribing officials in the FSM government and the state of Hawaii to gain multi-million dollar contracts.
Lyon pleaded guilty in Honolulu federal court in late January to one felony count of ”Conspiracy to Violate the Foreign Corrupt Practices Act and to Pay a Bribe to an Agent of an Organization Receiving Federal Funds.”
But legal experts in Hawaii believe Lyon’s agreement to cooperate with Justice Department prosecutors shows the initial charge may be the tip of a much wider bribery scandal related to US federally-funded projects, reported Honolulu Civil Beat.
On April 26, 2014, the FSM government issued formal notice to Lyon of its claim against his engineering company for over $4.6 million in damages because of what it said were faulty designs for the Weno, Chuuk road and sewer project, which caused numerous delays and required costly change orders.
It also notified Lyon that it was initiating the ”alternative dispute resolution process” to engage in mediation over the claim.
At the time the road and sewer project was awarded to Pacific International Inc. of Majuro in 2009, the $25.9 million price tag made it the biggest-ever US-funded infrastructure project in the Federated States of Micronesia. In late 2013, the FSM terminated PII’s contract with an estimated 90 percent of the work complete. A costly legal battle between PII and the FSM government has ensued, now moving into an arbitration phase.
Lyon Associates Inc. was originally hired in 2009 to prepare design and construction plans and provide construction management services for the Chuuk road, drainage and utilities upgrade.
The 11-page notice to Lyon issued by FSM Project Management Unit Contracting Officer Bruce E. Howell in 2014 details 18 instances of ”errors and omissions" that the FSM government claims cost it at least $4.6 million. Before PII even began construction work in late 2009, its surveyors discovered the elevation in the existing sewer line linking to the treatment plant was five feet higher than shown in the Lyon design plans. Although Lyon denied responsibility for this, several re-designs followed to address the situation and meet contract standards.
Lyon’s ”final design solution…required an additional lift station for the system which committed Chuuk Public Utilities Corporation and its rate payers to substantial additional operational and maintenances costs for the entire life of the facility,” said the FSM government’s claim against Lyon.
Prior to starting work in September 2009, PII questioned ”the failure of the design plans to identify customer connections to the new sewer lines.” The FSM Project Management Unit was blunt in its statement to Lyon in August 2009 about this omission, saying that building a new sewer line with no customers connected ”is not only pointless, but may render the system unusable.”
In several places in the 11-page claim against Lyon, the FSM points out that ”had designers con-ducted a site visit,” problems could have been avoided.
Although there is no indication the FSM Project Management Unit’s claim against Lyon Associates moved beyond the issuance of the claim notice in 2014, the FSM President’s Office’s Public Information Officer Richard Clark told the Journal last week: ”Yes, the claim against Lyon’s was pursued, where it remains an active and ongoing case.”
In July 2015, however, the FSM government awarded Lyon Associates Inc. the contract to manage the Project Management Unit -- the agency which had issued the complaint against Lyon Associates the year before. The US federal bribery charge that Lyon pled guilty to in late January included bribery of two high-level FSM officials between 2006 and 2016 so Lyon could gain $7.8 million in US-funded engineering contracts in the FSM.
In addition to cash bribes, Lyon also said he purchased vehicles, paid for a trip to Las Vegas, and paid tuition at the University of Hawaii for a relative of the FSM official he was bribing.