Illegal labor practices alleged at costly San Jose wastewater plant

San Jose is pouring more money into upgrades for a costly wastewater treatment plant, even as evidence emerges that the construction company overseeing the project employed unlicensed and uninsured contractors.

In April, the City Council approved $14 million to cover new construction costs for an upgrade to the San Jose-Santa Clara Regional Wastewater Facility, the largest plant of its kind in the western U.S., servicing more than 1.4 million residents in eight cities. San Jose is responsible for the bulk of financing. According to a memo prepared for the City Council in March, the $14 million will cover additional work and delays encountered in the last two and a half years. The project is anticipated to wrap up later this year.

The city awarded the contract for the project—referred to in city documents as the Digester and Thickener Facilities Upgrade—to Walsh Construction, which agreed to do it in May 2016 for $107.9 million. With the recently approved capital, the total revised cost of the project rises to more than $175.4 million.

Some of that money flowed to contractors who appear to have worked illegally, according to Mauricio Velarde, compliance director for the South Bay Piping Industry. Velarde previously blew the whistle on wage theft and hazardous conditions at a San Jose homeless housing project.

Certified payroll records reviewed by San José Spotlight show that an unlicensed subcontractor worked on the upgrade project between January and May 2019. The company, McGeehan Portable Welding and Fabrication, is not licensed with the state. A search of the license number on the contractor’s certified payroll records leads to a different company.

The owner of the company, Michael McGeehan, told San José Spotlight he worked on the project for several months. He confirmed he doesn’t have a license with the Contractors State License Board due to an old felony conviction.

McGeehan says he’s normally able to work on construction projects despite his lack of license because companies hire him as an employee and draw up a service contract. But he said Walsh Construction didn’t do this. After being hired, McGeehan expected to be kicked off the project once the company learned about his lack of license, but this didn’t happen for several months.

A different subcontractor, Robert Litton Welding, claimed exemption from workers’ compensation insurance between September 2019 and January 2021, even though it reported employees on its certified payroll records. During the same period, the company reported at least three different employees working for it at various times. It does not appear the company is still working on the wastewater treatment plant.

Owner Robert Litton did not respond to a request for comment. San José Spotlight reached out to Walsh Construction, but the company did not provide a response in time for publication.

Velarde, who has fought to obtain records related to the digester upgrades since 2019, told San José Spotlight that the city is failing in its oversight of the project.

As an example, he said the public works department recently informed him it did not have billing invoices for the welding companies used by Walsh Construction for the project. In response to another records request, Velarde said the city did not have the contractor licenses or workers’ compensation insurance information for the welding companies.

“I can’t believe they put that in writing,” Velarde said. “How do you ask for (tens of millions of dollars), and justify it when you don’t have the invoices? What are you basing your arguments on?”

Velarde said there’s good reason to want detailed information about the invoicing from subcontractors: he pointed out that a lot of the contractor’s billing is going toward time-related overhead, including for subcontractors. A city memo showed that time-related overhead costs were $23,000 per day for 2017 and 2018, and those costs have grown to $38,413 per day.

“The council voted for the increase to avoid far greater overruns that would result if we halted all of the work mid-stream, because we have no alternative to getting the project built,” Mayor Sam Liccardo said in a statement.

Matt Cano, director of public works, told San José Spotlight he’s listened to Velarde’s concerns about the project.

“My team and I are performing our due diligence and are actively looking into these concerns,” Cano said. “We are in the preliminary phase of researching these concerns, so I am unable to provide further details at this point.”

Velarde isn’t the only person raising concerns about the wastewater project. Paul Resnikoff, vice mayor of Campbell and a member of the Treatment Plant Advisory Committee, was the sole vote against approving more funding for the plant during a meeting in April. Resnikoff told San José Spotlight he heard concerns about cost-overruns from the West Valley Sanitation District.

Jon Newby, district manager and engineer of the West Valley Sanitation District, told San José Spotlight he expressed concerns to local lawmakers about the growing costs of the project and the implications it could have for rate payers. Newby said upgrade costs increased several times, growing exponentially over the years on an already costly project.

“In my work here at the district,” he said, “I’ve never had a project that had that percent increase.”

Contact Eli Wolfe at [email protected] or @EliWolfe4 on Twitter.