New Jersey Loses Millions in Settlement on E-ZPass

New York Times, Sept. 17, 2003

NEWARK, Sept. 17 — State transportation officials said today that they hoped an investigation into the early days of the E-ZPass system in New Jersey would show why it was such a debacle and why the state lost millions in a forced settlement of claims against the system's original contractor.

State officials revealed this week that they had settled their $402 million lawsuit against the owner of the bankrupt company that originally operated the state E-ZPass system for $10.4 million, or a paltry two cents on the dollar.

In revealing the settlement, McGreevey adminstration officials attributed the small size of the settlement to mistakes by their predecessors in Gov. Christie Whitman's administration, particularly their failure in 2001 to challenge a ruling by a Nebraska bankruptcy court judge that prevented the state from pursuing claims predating that ruling.

"I don't know if we will ever understand what happened because this was a house of cards that took years to build," said Michael LaPolla, executive director of the New Jersey Turnpike Authority, which has administered the program from the start.

Despite the legal missteps,the chairman of the Assembly Transportation Committee, John Wisniewski, a Democrat from Middlesex, praised Mr. LaPolla and others for realizing anything at all from the lawsuit. Prior administrations were "asleep at the wheel" he said, and the lost revenue from the $402 million suit was "the last positing of the debts of the Whitman administration."

Meanwhile, a former official of the Whitman administration, responding to charges by Mr. LaPolla and other Democrats, pointed out that the crucial 2001 failure to challenge the court ruling in Nebraska came under Ms. Whitman's successor, Gov. Donald DiFrancesco.

Pete McDonough, Mrs. Whitman's former communications director, noted that the judge's ruling in the bankruptcy case of Adesta Communications as they were about to be acquired by WorldCom came in December 2001, a full 10 months after Mrs. Whitman had resigned to lead the Environmental Protection Administration in the Bush administration.

There was no response to a phone message left yesterday afternoon at the office of Mr. McDonough's counterpart in the DiFrancesco administration, Tom Wilson.

Mr. LaPolla still insisted that the Whitman administration was responsible for the flawed E-ZPass contract. The McGreevey administration, they said, inherited a program that Whitman administration officials had promised would pay for itself partly with the proceeds from toll violation fines. Not only was that never realized, said Mr. LaPolla, but the Whitman administration staved off the day of reckoning by using the revenue from the sale of excess capacity on the E-ZPass fiber-optic network to companies needing data lines.

Mr. McDonough said that the Whitman administration had always intended to cover much of the system's costs from violation fines and the sale of excess capacity on its fiber optic network.

"We were victims of our own success," he said, referring to the popularity of the program and the apparent honesty of the state's drivers.