Marshall Islands Correspondent

MAJURO, Marshall Islands — A 2014 Federated States of Micronesia government claim against Lyon Associates Inc. for over $4.6 million for “errors and omissions” in the designs for a road and sewer project in Chuuk State raises additional questions about the company’s involvement in the FSM in the wake of its President, James “Jim” Lyon, pleading guilty last month to bribing officials in the FSM government and the state of Hawaii to gain multi-million dollar contracts.

Lyon pleaded guilty in Honolulu federal court in late January to one felony count of “Conspiracy to Violate the Foreign Corrupt Practices Act and to Pay a Bribe to an Agent of an Organization Receiving Federal Funds.”

On April 26, 2014, the FSM government issued formal notice to Lyon of its claim against his engineering company for over $4.6 million in damages because of what it said were design problems that caused numerous delays and required costly change orders. The FSM also notified Lyon that it was initiating the “alternative dispute resolution process” to engage in mediation over the claim.

At the time the road and sewer project was awarded to Pacific International Inc. of Majuro in early 2009, the $25.9 million price tag made it the biggest-ever U.S.-funded infrastructure project in the FSM. In late 2013, the FSM terminated PII’s contract with an estimated 90% of the work complete. A costly legal battle between PII and the FSM government has ensued that is now moving into arbitration.

Lyon Associates Inc. was originally hired in 2009 to prepare design and construction plans and provide construction management services for the Chuuk road, drainage and utilities upgrade.

The 11-page notice to Lyon issued by FSM Project Management Unit Contracting Officer Bruce E. Howell in 2014 details 18 instances of “errors and omissions” that the FSM government claims cost it at least $4.6 million. Before PII even began construction work in late 2009, its surveyors discovered the elevation in the existing sewer line linking to the treatment plant was five feet higher than shown in the Lyon design plans. Although Lyon denied responsibility for this problem, several re-designs ensued to address the situation. Lyon’s “final design solution … required an additional lift station for the system which committed Chuuk Public Utilities Corporation and its rate payers to substantial additional operational and maintenances costs for the entire life of the facility,” said the FSM government’s claim against Lyon.

Prior to starting work in September 2009, PII questioned “the failure of the design plans to identify customer connections to the new sewer lines.” The FSM Project Management Unit was blunt in its statement to Lyon in August 2009 about this omission, saying that building a new sewer line with no customers connected “is not only pointless, but may render the system unusable.”

While there has been no result from FSM government’s claim against Lyon Associates issued nearly five years ago, the President’s Office Public Information Officer Richard Clark said, “The claim against Lyon was pursued, where it remains an active and ongoing case.”

The U.S. federal bribery charge that Lyon pled guilty to in late January included bribery of two high-level FSM officials between 2006 and 2016 so Lyon could gain $7.8 million in U.S.-funded engineering contracts in the FSM.

“The FSM National Government has officially requested the support and cooperation of the United States Government in the form of any amplifying information and details that may be shared or provided to the FSM Department of Justice, particularly as it pertains to the alleged FSM involvement,” the FSM President’s Office said in a statement issued in late January in response to the bribery charge against Lyon in Honolulu federal court. mbj