A former Hillsboro drywall contractor was sentenced in the U.S. District Court of Oregon on Friday for antitrust charges related to a project in Portland’s Pearl District.

Stephen Gregory Nagy, who formerly owned S&S Drywall, will spend 19 months in prison for racketeering and antitrust violations related to bid rigging on an undisclosed condominium project. He is scheduled to begin serving his sentence Dec. 2.

In July 2011, Nagy pled guilty in Washington County Circuit Court to antitrust and racketeering charges brought against him by the Oregon Department of Justice. He was sentenced to 30 days in jail and five years of supervision upon release.

The charges stemmed from Nagy’s participation in a bid-rigging scheme that resulted in his Hillsboro-based company receiving a $1.2 million contract for the $24 million condominium project.

An investigation by the DOJ revealed that in addition to bid rigging, Nagy “fraudulently induced” the state to issue unemployment benefits to employees at his company, and forced some of his workers, who were earning prevailing wage while working on the project, to return “larger percentages” of their pay to him, according to a DOJ press release.

As part of his punishment in 2011 for pleading guilty to the DOJ charges, Nagy was ordered to dissolve S&S Drywall. He also lost his state-issued contractor’s license (and cannot apply for another until 2031) and can only seek employment in the construction industry if he reveals his convictions to future employers.

Nagy’s sentence on Friday was related to similar charges brought against him at the federal level. Under the terms of the sentence given Friday, Nagy will spend three years under supervision once he is released from prison. He also must pay $481,000 to the Internal Revenue Service.

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The Oregon Department of Justice has announced a settlement with one of the state’s largest highway striping companies and a multinational conglomerate for allegedly engaging in illegal and anti-competitive practices on state highway projects.

Tualatin-based Specialized Pavement Marking Inc. and Maplewood, Minn.-based 3M have agreed to pay a combined total of $750,000 to the state of Oregon.

The two companies also will pay a combined total of $750,000 to the Oregon Department of Transportation, which will use the money as a credit for future projects and materials, according to the Justice Department.

The settlement followed an approximately two-year investigation by the Justice Department into suspected violations of state and federal antitrust laws. The Justice Department alleged that 3M and Specialized Pavement Marking exchanged information regarding bids, coordinated bids, allocated projects, and provided false certifications.

“The state’s competitive bidding process requires for the state to get the best deal,” said Michael Kron, a spokesman for the Justice Department. “We cannot have those submitting bids to be talking to each other. When they’re not competing honestly, that potentially causes the cost of contracts to go up.”

Specialized Pavement Marking has city, state and federal contracts in Oregon, Washington, Idaho, California, Alaska and Canada. 3M, which operates in 70 countries, was working in Oregon as a subcontractor and materials supplier. Both companies denied any wrongdoing.

“Although we don’t like to settle because the allegations are false, we agreed to settle because it was a prudent business decision,” Mark Price, Specialized Pavement Marking’s president, said. “The cost to continue would exceed the settlement.”

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(Editor’s note: This piece originally ran in the May 26, 2011, issue of the Briefly Legal PDX e-newsletter)

Liani Reeves wasn’t always sure she would become a lawyer, but she was certain she wanted to dedicate her career to public service. The North Bend native considers herself fortunate that her profession allows her to do both.

With bachelor’s and law degrees from Willamette University, Reeves has worked for the Oregon Department of Justice and served as a staff attorney for the National Crime Victim Law Institute. In January, Gov. John Kitzhaber appointed her as his general counsel.

A longtime co-chair of the Oregon Minority Lawyers Association, Reeves received Willamette University’s Reverend Martin Luther King, Jr. Award for her commitment to civil and human rights. She has co-taught Lewis & Clark Law School’s Crime Victim Litigation Clinic. In addition, Reeves mentors law students and has been named Mentor of the Year by both Willamette University and Lewis & Clark College.

Reeves recently shared the highlights and difficulties of her profession and what it’s like to serve as the Governor’s general counsel. Her responses have been edited for clarity and brevity.

Briefly Legal: What made you decide to become an attorney?

Liani Reeves: Law has always been interesting to me in the sense that it impacts everything that we do, from the way we drive and interact in the workplace to the trademarks and patents on our toothpaste. Having a law degree seemed like it would be both interesting and empowering because of the law’s impacts on our day-to-day lives and how it can be used to make change in a meaningful way.

BL: What do you enjoy most about it?

Reeves: The way I can directly impact people or state policies. I have great respect for our public employees. Sometimes there are a few who make a bad name for all of us, but my experience is that most people in public service are trying to do the right thing.

BL: What are some of the challenges?

Reeves: The challenge is the resource issue. With the substantial budget shortfall, sacrifices must be made. Working in the public sector allows you to see both the impact on state agencies and on public services. Trying to find the appropriate balance is challenging but rewarding.

BL: What have you learned through your years of co-chairing OMLA?

Reeves: The OMLA has provided a great network of people who have supported me throughout my career. As a new practicing attorney of color, I found myself feeling isolated in Oregon’s legal community. And as a woman, I had chosen a career that was still male dominated (litigation), so I felt isolated in that regard. I was looking for a support network to help me grow as an attorney and a place where I felt at home in the legal community. OMLA provided that.

BL: What do you do as the Governor’s general counsel?

Reeves: There are three main areas of work: day-to-day legal advice, programmatic areas assigned to the General Counsel’s office and policy work. The day-to-day legal advice includes things like public records, employment and government ethics matters, reviewing authority of boards and commissions, monitoring litigation involving the state or the Governor’s office, and reviewing bills for legal sufficiency.

As far as programmatic areas, the General Counsel’s office is in charge of processing extradition warrants and clemency applications, filling vacancies of Oregon’s judges and district attorneys, and negotiating gaming compacts with Oregon’s nine federally recognized tribal governments. The General Counsel’s office is also assigned policy portfolios relating to public safety and tribal issues.

BL: What has that experience been like so far?

Reeves: It’s been great. Most of the legal work is unique to the Governor’s office. For example, extradition and clemency matters and tribal gaming compacts are discrete areas of law; there aren’t very many places besides the Governor’s office where you would learn or be able to practice those areas of law or make that type of impact. That has made the transition intellectually challenging because of all the new areas of law to learn, but it has been interesting and rewarding. I also started in the middle of the legislative session, so diving into that process has been hectic but fun.

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(Editor’s note: This piece originally ran in the May 12, 2011, issue of the BrieflyLegal e-newsletter)

Today’s Briefly Legal is brought to you by the letter “G” – as in “guilty” and “gone.”

That’s the reality for soon-to-be-former Umatilla District Attorney Dean Gushwa, who submitted a to Gov. John Kitzhaber yesterday after being found guilty of official misconduct.

Gushwa first found himself in the hot seat in August of last year after two women in his office claimed he pressured them to have sexual relations with him, according to the Daily Prosecutor.

Oregon Department of Justice opened an investigation against Gushwa on referral from the Pendleton Police Department, Oregon Attorney General John Kroger said in a press release. Kim Hyde led the investigation, while Senior Assistant Attorneys General Erin Greenwald and Jennifer Gardiner prosecuted the case for the Justice Department.

Gushwa his right to a jury trial. His verdict was handed down by Circuit Court Judge Gregory Baxter after a stipulated facts trial. Baxter sentenced Gushwa to three years of probation and forbid Gushwa to hold public office during that time.

Gushwa’s last day as DA will be May 31. Even if the outcome had gone differently, he would still be leaving office as part of a pre-trial agreement, Kroger’s office said.

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Oregon state employees put on administrative leave nearly 10 months ago over questions surrounding a state Department of Energy contract have been reinstated.

The Oregon Department of Administrative Services announced today that an exhaustive investigation by an independent legal counsel has cleared four state employees of any wrongdoing. In question was a $200,000 federal Energy Assurance Grant that was given to the Seattle-based engineering and consulting firm R.W. Beck. Of that money, $60,000 was subcontracted to a firm co-owned by Cylvia Hayes, the companion of Gov. John Kitzhaber.

Whistle-blowers, who have not been named, had alleged the federal contract had been awarded unfairly considering Hayes’ relationship with the then-former governor.

The four employees on leave, those close to the grant, were Mark Long, Joan Fraser, Paul Seesing and Shelli Honeywell. Long was serving as the interim director of the Department of Energy when the contract was awarded.

The issue first arose last August when the Oregon Department of Justice announced an investigation into the department’s contracting practices following the allegations. Even though media initially reported the justice department had wanted to terminate the employees, the department determined in December that it wouldn’t charge the employees with official misconduct.

After the justice department decision, then-Gov. Ted Kulongoski, who first informed authorities of the allegations, decided to hire Malher County Circuit Court Judge Frank Yrauguen to review the case and make a recommendation. Yrauguen’s report was not released.

Then earlier this spring, after Kitzhaber took office, the state brought on the Portland law firm Barran Liebman to conduct an investigation into the matter. After conducting an investigation, the firm recommended that the state reinstate the four employees to their regular jobs and that they receive no formal discipline.

Moreover, the law firm recommended that the state offer to hold name-clearing hearings for all four even though none of them face charges.

State Chief Operating Officer Michael Jordan said today the state will release all relevant and releasable documents concerning the case, including the law firm’s full investigation. Documents will be released during the coming weeks.

Tony Green, spokesman for Attorney General John Kroger, who oversees the justice department, said the department looks forward to the release of the Yraguen’s independent report and all of the other records in this case.

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Under an Oregon statute established in 1993, certain violations of environmental laws and regulations can be treated as criminal violations as well as civil violations. Criminal penalties for misdemeanors can be as stiff as $25,000 per day, per violation, plus up to one year of jail time. Criminal penalties for felonies can be as stiff as $250,000, plus jail time of up to 10 years.

Historically, enforcement of environmental law has been left to local district attorneys. Primarily because of the complexity of environmental crimes, scarce resources, and prosecutorial priorities, local enforcement has been uneven over the years. The possibility of criminal penalties probably has not been an effective deterrent.

The Oregon Department of Justice Web site and Attorney General John Kroger note that while Oregon has been a national leader in environmental protection, every major river in Oregon fails federal and state water quality standards for at least one pollutant, and the concentration of toxic air pollutants in Portland’s air exceed federal standards. In noting these problems, ODOJ sees the historic lack of credible criminal enforcement as failure to use a tool to spur improvements in environmental quality.

To address these issues, Kroger and the Oregon Legislature have worked in concert to create and fund a state environmental crimes unit within ODOJ. The environmental crimes unit consists of two attorneys, Patrick Flannigan and Stephanie Parent, and an investigator yet to be hired.

The unit will investigate and prosecute environmental crimes, bolster civil and criminal enforcement, provide prosecutorial support to local district attorneys pursuing cases of environmental violations, and coordinate federal enforcement of environmental crimes with the Environmental Protection Agency.

Two types of cases will be prioritized for enforcement. The first category consists of cases where illegal conduct continues even after state or federal authorities notify an offender that its conduct violates an environmental law. The second category consists of cases where the violations at issue pose a threat to human and public health or to the environment.

ODOJ’s efforts to publicize this initiative have been noteworthy. Kroger has engaged in a series of informal meetings with law firms to connect with lawyers in private practice and to share ODOJ’s enforcement priorities. Additionally, the home page of ODOJ’s Web site now includes a sign-up button to “help fight environmental crime.” Through this effort, ODOJ is engaging in general public outreach to encourage awareness and reports of environmental crimes.

The creation of ODOJ’s environmental crimes unit and the corresponding efforts to raise awareness are significant for the business and real estate communities.

First, while the vast majority of businesses observe environmental laws, those that do not may gain an economic advantage as long as their violations go unpunished. Adding a serious threat of criminal enforcement should further deter any business that might otherwise decide to risk the consequences of civil enforcement.

Second, raising awareness and encouraging citizen reporting of potential environmental crimes is likely to change employee behavior. Employee-driven complaints related to environmental compliance – legitimate and illegitimate – are likely to increase given ODOJ’s efforts and policies.

Finally, enforcement decisions will routinely consider all alternatives, including criminal prosecution. There is an additional layer of concern for businesses with environmental permits or that engage in routine or ongoing activities associated with property management and operations that implicate environmental laws and regulations, violations or potential violations.

Seemingly routine activities – such as demolition or renovative projects where asbestos abatement is required – are likely to become a focus of criminal enforcement. There are two reasons for this.

First, the laws and regulations concerning these activities are so well known that it is relatively easy for prosecutors to prove that violations are “knowing” within the meaning of the environmental crimes statute. And second, the failure to comply can expose workers and building occupants to health hazards, making criminal enforcement a priority under ODOJ’s announced priorities.

Going forward, the business and real estate communities should be aware of ODOJ’s changes in enforcement and the possibility of an uptick in environmental enforcement activity. For the vast majority of businesses, the creation of ODOJ’s criminal enforcement unit will not affect day-to-day operations.

However, for businesses that might cut corners or that might engage in activities that implicate environmental requirements without taking appropriate steps to comply, the threat of criminal prosecution should be taken seriously. This threat should deter such businesses from risky behavior while encouraging reasonable and necessary compliance efforts at compliance.

Peter Sergienko is a partner in the Portland office of Davis Wright Tremaine. He specializes in environmental compliance issues. Contact him at 503-241-2300 or petersergienko@dwt.com.

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