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Consolidated Enterprises Inc. v. Housing Authority

Decided: April 25, 1978.


On appeal from the Superior Court, Law Division, Essex County.

Michels, Pressler and Bilder. Bilder, J.s.c. (temporarily assigned).


This is an appeal by a low bidder from an order of the Law Division upholding a decision by the Newark Housing Authority to reject its bid on the grounds of irresponsibility.

In September 1977 the Authority advertised for bids pursuant to the Local Public Contracts Law, N.J.S.A. 40A:11-1 et seq. , for the stabilization of a certain 40-acre tract of land located in Newark. The proposed contract involved moving earth fill already on the site, importing additional fill and installing test equipment for monitoring soil stability.

At the time set for the opening of bids, September 29, two bids were submitted -- a bid by appellant for $923,060.60 and by another for $1,286,060.

By letter of November 22, 1977 the Authority rejected appellant's bid, giving as the reason a pending suit in which the Attorney General of the State of New Jersey was seeking to impose a constructive trust against appellant for false billing on a public contract, and resultantly that it was not financially capable of carrying out the contract. This rejection led to the instant suit in which appellant sought to require the award of the bid to it.

At the initial hearing it appeared that the Authority had not afforded appellant an opportunity to be heard on the rejection, so the matter was remanded for such a hearing.

Following a hearing held on December 19, 1977 the Authority reaffirmed its rejection of appellant's bid, giving now as its reasons possible collusion, disparity of figures, possible criminal connections, lack of fixed assets and pending court actions which, taken together, "raise serious questions that remain unanswered." The Authority also noted at that time the appellant's refusal to testify at the hearing.

From a review of the record we are satisfied that the only reason given by the Authority which are supported by the record are those relating to appellant's moral responsibility -- and, more specifically, to the issues raised by the lawsuit and the questions raised by the apparent federal grand jury investigation. We find the other matters to be insubstantial (unidentified gossip of possible criminal connections), irrelevant (disparity in the amounts of the two submitted bids; lack of fixed assets) or unsupported by the record (collusion with other prospective bidders).

The Attorney General's Lawsuit

On September 28, 1977 the Attorney General of New Jersey instituted a civil suit against appellant and its president, Richard D'Agostino, as well as others, alleging among other matters, a fraudulent bill-padding scheme in

connection with a Passaic Valley Sewerage Commission sludge and waste removal contract.

In an Amended Verified Complaint filed on October 13, 1977 the Attorney General alleged [in count two]:

20. The defendants, Airport, Consolidated, D'Agostino, Fiumara and Ricci acted improperly in dealing with the P.V.S.C. because they were neither fair nor frank, they breached their fiduciary duties to the P.V.S.C. and they also acted in a fraudulent manner with intent to obtain benefits to which they were not entitled to under any contract or other business arrangement in connection with the P.V.S.C. project. The aforementioned breach of trust and fraud in the course of dealing with the P.V.S.C. is based on the fact that the defendant, D'Agostino, acting on behalf of Consolidated, during June, July, August and September, 1977, received inflated bills from Airport for work done by Consolidated in connection with the P.V.S.C. project. Consolidated submitted these bills to Vi-Con for payment. Consolidated in turn paid the inflated bills to Airport and Airport returned a percentage of the excess billing to Consolidated. In addition, during the same period of time, Consolidated submitted fraudulent worksheets to Airport for loads never taken from the P.V.S.C. project. Consolidated again submitted these bills to Vi-Con for payment and would subsequently pay Airport and receive a percentage of the fraudulent billings back from Airport. The monies paid by Vi-Con for these fraudulent billings were reimbursed by the P.V.S.C. At this time approximately $6,000.00 has been received by Consolidated pursuant to these fraudulent schemes.

In connection with the suit, the Attorney General had theretofore filed on September 28, 1977 (at the time of the original complaint) the following affidavit of one Patrick J. Kelly:

1. From December, 1976 until early September, 1977, I was manager of Alamo Transportation, Ltd. a firm that consisted entirely of State and Federal undercover agents except for myself.

2. Alamo Transportation, Ltd. was organized to infiltrate and investigate organized crime. It held itself out to be a firm engaged in the business of offering ...

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