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MARTHA COAKLEY

ATTORNEY GENERAL

November 14, 2008 - For immediate release:

Attorney General’s Office Enters into Settlement Agreement with Modern Continental in Connection with Big Dig

BOSTON – The Massachusetts Attorney General’s Office, on behalf of the Commonwealth and the Massachusetts Turnpike Authority (MTA), has entered into a comprehensive settlement agreement with Modern Continental Construction Co. (“Modern”) and Modern’s sureties, Travelers Insurance Co. (“Travelers”) and Fireman’s Fund Insurance Co., that will compensate the Commonwealth $21 million for damages resulting from the I-90 connector tunnel ceiling collapse on July 10, 2006.  Under the terms of the settlement agreement, Modern will not perform any further work on the Central Artery Tunnel Project, known as the Big Dig.  In addition, approximately $2 billion in performance bonds on the Modern contracts will be extended for six years and will be available to pay for costs that the MTA incurs, above certain thresholds, that are the result of latent defects in Modern’s work.  Since Modern has filed for bankruptcy, the settlement agreement must be approved by the Bankruptcy Court before it is effective. 

If approved by the Bankruptcy Court, the settlement will also resolve tens of millions of dollars in claims that Modern and the MTA have against each other arising out of  Modern’s 14 remaining Big Dig construction contracts and will close out those contracts.  The claims include various construction contract claims by Modern and back-charges by the MTA, including claims concerning the cost to repair leaks, as well as a reconciliation of contract payment issues.  Under the settlement agreement, Moderns’ and the MTA’s claims against each other are resolved in large part through a set-off.

“Today’s settlement marks another step toward resolving the remaining outstanding claims related to problems in the Big Dug tunnels,” said Attorney General Martha Coakley.  “By reaching a settlement with Modern resolving these claims, we will save the Commonwealth hundreds of thousands of dollars in litigation costs.  We hope that the Bankruptcy Court views this as a fair and reasonable resolution.”

The settlement agreement provides that the MTA will reimburse Travelers for work performed on the Big Dig by Modern’s subcontractors that Travelers has paid  in the first instance. 

In a related agreement, contingent upon the Bankruptcy Court’s approval of the Modern settlement, the Commonwealth and the MTA have entered into a settlement agreement with Newman Associates, Inc. (“Newman”), and their related companies, also to resolve a claim relative to the ceiling tunnel collapse. Newman Associates purchased the epoxy involved in the ceiling collapse from Powers Fasteners, Inc. and sold it to Modern.  Under that settlement agreement, Newman has settled for $5 million for damages resulting from the ceiling collapse.  These funds will be used to reimburse Travelers for work performed on the Big Dig by Modern’s subcontractors that Travelers  has paid in the first instance. 

In January 2008, the Attorney General’s Office reached a $458 million settlement with Bechtel/Parsons Brinkerhoff and other designers involved in the Big Dig.  Bechtel/Parsons Brinkerhoff, the joint venture that served as project manager for the Big Dig, agreed to pay over $407 million to resolve its criminal and civil liabilities in connection with the collapse of part of the I-90 Connector Tunnel ceiling and defects in the slurry walls of the Tip O’Neill tunnel. In addition, 24 Section Design Consultants—other contractors who worked on various parts of the project—agreed to pay an additional $51 million to resolve certain cost recovery issues associated with the design of the Big Dig.  A majority of the $458 million was placed into a Repair and Maintenance Trust Fund to provide for future non-routine repairs and maintenance of the Big Dig.  In addition, in August 2007, Powers Fasteners, Inc. (Powers), the Brewster, NY-based company that marketed and distributed the epoxy anchor bolt system used in portions of the I-90 Connector Tunnel, was indicted on one count of involuntary manslaughter in connection with the fatal ceiling collapse. The criminal case against Powers remains ongoing at this time.

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