Report criticizes mismanagement of E-ZPass launch

State investigators said the statewide system's financial collapse after 1998 was unsurprising.

By Jennifer Moroz

Inquirer Staff Writer
Philadelphia Inquirer, June 30, 2004

The process that brought E-ZPass to New Jersey was tainted by mismanagement, manipulation, lack of oversight, and apparent conflicts of interest, and set the stage for the project's failure, state investigators said yesterday.

In an extremely critical 150-page report, the State Commission on Investigation took Whitman administration officials to task for not-so-blindly leading the state into "an administrative and financial debacle of immense proportions."

"The financial collapse should have come as a surprise to no one, least of all those in charge of orchestrating it," the report said. "Normal and reasonable due diligence was obstructed or avoided altogether, known risks were minimized, warnings of financial fiscal peril were set aside, and key personnel were ignored."

Investigators said events leading up to the state's 1998 contract with a group led by MFS Technologies of Nebraska "strongly suggest malfeasance," and they called for major changes in the way the state awards and oversees large-scale contracts.

Whether the findings warrant criminal prosecution is up to the state Attorney General's Office, which is reviewing the report.

MFS was hired to set up and operate the regional electronic toll-collection system on the New Jersey Turnpike, Garden State Parkway, and Atlantic City Expressway. (E-ZPass on the Delaware River Port Authority's four bridges is a separate operation.) Meant to pay for itself or even make money through fines from toll cheats, the statewide system instead hemorrhaged an estimated $470 million. It also spit out thousands of faulty violations a month before the McGreevey administration began overhauling the system in 2002.

The report found that project officials, led by former Transportation Commissioner Frank Wilson, had not sought an independent review to determine whether the self-funding would succeed. The officials further kept key financial staff out of the loop, and ignored warnings that the financial projections were unrealistic, investigators said.

Officials also sidestepped the typical competitive-bidding process, instead scoring contractors on various criteria. Investigators pointed out that MFS had no specific expertise in electronic toll systems, and said the company's score had been altered at the last minute to beat out Lockheed Martin's.

Figuring prominently in the report is Wilson, the transportation commissioner when E-ZPass talks started in 1995. Investigators found that even though the New Jersey Turnpike Authority had been designated the lead agency in negotiating the contract, Wilson in many ways commandeered the project, handpicking deputies to head up the process.

The report further concluded that Wilson, who was interviewing for jobs in the private sector, did not fully recuse himself from dealings between the state and some of his prospective employers.

Wilson went on in late 1996 to work at DMJM + Harris, part of the same corporate family as Frederic R. Harris Inc. The latter was an original member of the team assembled by MFS to bring E-ZPass to New Jersey.

Contacted yesterday at the offices of the Houston transit authority, which he has headed since last month, Wilson called the report "an inaccurate representation of the situation." He questioned how the contract could have been manipulated when 35 officials in five agencies had a hand in overseeing the process.

"How much more transparent can you get?" he said.

Wilson, whose 18-page defense was attached to the report, said he had left his state position 15 months before the contract was completed. He also pointed out that the state's Executive Commission on Ethical Standards in 1997 found that he had no conflict of interest in the E-ZPass case.

A spokeswoman for MCI, the successor to Worldcom and parent company to MFS, said company officials had not read the report and could not comment. A spokesman for Christie Whitman said the former governor was traveling and had not read the report.

The report offered vindication to Democrats in the McGreevey administration, who have long criticized the Republicans' handling of the project, and touted their cleanup job since entering office. Officials in 2002 fired MFS and hired a contractor to overhaul the system. To make repairs and pay for operating costs, officials have restructured debt, eliminated toll discounts, and increased fees for E-ZPass users.

"When we got here, we knew there was a mess beyond description, and this report helps connect the dots as to how it got to that point," said Michael LaPolla, who heads the New Jersey Turnpike Authority.

To prevent future disasters, the report suggested creating a task force to study how best to handle large, complex, technological contracts. The commission also recommended stricter oversight of all state contract finances.

Assemblyman John Wisniewski (D., Middlesex), chairman of the Transportation Committee, said he would support the recommendations made by the commission, which started looking into E-ZPass soon after his committee held hearings on the matter two years ago.

"I think the report pretty much was a confirmation of the suspicions we developed in taking the testimony that we did," Wisniewski said.

Brian Nelson, executive director of the GOP state committee, said he had not read the report. But he said the events it examined were a part of history, one in which most current Republican leaders did not take part.

Contact staff writer Jennifer Moroz at 856-779-3810 or