Hanford contractor declares bankruptcy

This story was published Tue, May 15, 2001

By John Stang and Mary Hopkin
Herald staff writers

Washington Group International - a major player at Hanford's waste glassification project and the Umatilla Chemical Depot - filed for Chapter 11 bankruptcy Monday to try regain its financial footing.

The Chapter 11 reorganization is not expected to affect Hanford's glassification project nor the construction of Umatilla's nerve gas incinerator, said corporate and federal officials.

Boise-based Washington Group announced Monday that it had filed the petition to restructure itself in U.S. Bankruptcy Court in Reno, Nev.

The corporation is one of the nation's largest construction firms with 17,821 employees in 97 subsidiaries plus 68 limited and joint ventures, according to its bankruptcy filing. It began in 1964 as a three-person highway construction company in Missoula, Mont.

Employee salaries and benefits at both Mid-Columbia projects will be protected under the reorganization, said Washington Group spokesman Jack Herman.

Washington Group is the chief Hanford subcontractor for Bechtel National, which is in charge of designing, building and testing Hanford's top-priority glassification project through 2011. The facility is supposed to convert at least 10 percent of the site's 53 million gallons of radioactive tank wastes into glass by 2018.

The bankruptcy proceedings will not affect ongoing hiring at the glassification project nor the pace of its construction, said Bechtel spokesman John Britton. The project currently employs 950 people with 110 working for Washington Group. It is supposed to employ about 4,400 people - mostly short-term construction workers under Bechtel - by 2004.

Washington Group's role in the project is to provide technical expertise from glassification projects at Savannah River, S.C., and West Valley, N.Y. Washington Group absorbed those projects in 1999 when it bought them from Westinghouse Electric Co.

Washington Group's problems should not affect its role under Bechtel, nor Bechtel's contract with the Department of Energy, said Britton, Herman and DOE spokesman Erik Olds.

Washington Group also is in charge of building and operating an incinerator to destroy 7.4 million pounds of deadly nerve and mustard gas agents at the Army's chemical depot in Umatilla. The company took over the project when it bought Raytheon Engineers & Constructors from Raytheon Co. in July 2000.

In Umatilla, Washington Group employs about 500 workers. Incineration is supposed to begin in 2002, and the bankruptcy filing won't affect that deadline, said Chris Early, a Washington Group spokesman in Umatilla.

"We have no reason to believe that the project won't continue and be completed," said Army spokeswoman Mary Binder.

In its bankruptcy filings, Washington Group blamed Raytheon for its financial woes.

On March 8, Washington Group filed a lawsuit in U.S. District Court in Idaho, alleging Raytheon committed fraud when it sold Raytheon Engineers & Constructors' about 200 projects to Washington Group. Washington Group paid $53 million to Raytheon and assumed about $450 million in liabilities.

Washington Group claims Raytheon did not disclose all of its liabilities on the projects it sold. That led to huge cash-flow problems for Washington Group, the company's court filings said. Herman said Raytheon's Umatilla project did not contribute to those troubles.

Raytheon claims it was frank with Washington Group about its finances, that Washington Group fumbled in obtaining all pertinent information and that Washington Group tried to absorb more than it could handle with the purchase.

The Securities and Exchange Commission is looking into the transaction.

Herman said most of Washington Group's managers and corporate structure will remain in place.

The changes will be in Washington Group's power-production businesses, with two New England gas-fired power plant projects potentially facing shutdown.

Under the proposed reorganization, Washington Group's creditors effectively will become the corporation's stockholders. The reorganization could take about four months, Herman said. The reorganization will set aside $20 million to pursue the litigation against Raytheon.

On Monday, the New York Stock Exchange removed Washington Group's stock from its listing.

In the mid-1990s, then Washington Construction Co. began an expansion that included a push into federal radioactive waste cleanup.

The company merged with bankrupt Boise-based Morrison Knudsen Co. in 1996, keeping the Morrison Knudsen name.

In 1999, Morrison Knudsen bought the Westinghouse segment that handled DOE contracts at West Valley, Savannah River and the underground national radioactive waste storage site at Carlsbad, N.M.

In July 2000, Morrison Knudsen bought and merged with the Raytheon subsidiary, Raytheon Engineers & Constructors - becoming Washington Group International.

 

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