In a 22-page response and countersuit to a lawsuit filed by Siemens Industry, Inc. against the city of Monticello, the city claims the company fraudulently induced the city into entering into a $10 million contract, then breached that contract.

Through its attorney, Cliff Gibson of Monticello, the city says Siemens Industry and Siemens AG solicited the city to hire it to replace all of the city’s water meters and a part of the city’s water mains/lines. As part of that solicitation, Siemens’ representative Tony Ardillo represented to the Monticello City Council that Siemens is the 4th largest company in the world – an obvious reference to the international conglomerate Siemens AG, not Siemens Industry, according to the city’s response to the Siemens lawsuit.

“However, when the contract form was submitted to the City same recited that it was with Siemens Industry and made no mention of Siemens AG, and with the sleight of hand arising from the deceptive similarity of names of Siemens Industry and Siemens AG the 4th largest company in the world that the City thought it was dealing with on the project was not included as a party to the contract submitted to the City for approval,” the city’s response to the lawsuit reads. “That is fraud in the inducement.”

The city also claims that Siemens misrepresented the accuracy of the city’s existing water meters in order to induce the city to enter into a $10 million contract with them to replace all of the city’s existing water meters and to contract with them to replace a part of the city’s existing water mains/lines, according to the city’s response to Siemens’ lawsuit.

Additionally, the city recently discovered that neither Siemens Industry nor Siemens AG nor their subcontractors are properly licensed by the State of Arkansas Contractors Licensing Board to perform the municipal and utility construction work or the specialty contractor work of meter installation and service covered by the contract, according to the city’s countersuit.

“Simply put, it has been unlawful from the beginning for Siemens Industry and Siemens AG to do the work it has done under the contract, and Siemens Industry and Siemens AG may not lawfully engage to do the work remaining to be done under the contract, and under (state law), neither the unlicensed Siemens Industry nor the unlicensed Siemens AG may bring an action to enforce the contract against the City, and they are further barred from seeking a quantum meruit recovery relative to the contract for any work done or materials supplied by them under the contract,” the city’s response to the Siemens lawsuit reads.

The city makes the following additional claims against Siemens:

• defective performance of work;

• breach of warranty of good workmanship under the contract;

• failure to provide the water meters specified by the contract;

• failure to timely provide legally required performance and payment bonds covering the work under the contract, and later falsely stating that those bonds had been delivered in 2013 when they knew that they had not been so delivered;

• failure to provide the legally required proper financial assurance that they will pay the city shortages in promised efficiency savings from the new water meters, water mains/lines, and other
improvements covered by the contract, including, without limitation, a letter of
credit for the 10-year life of the contract, cash in escrow, multi-year surety bond, and/or a third-party credit rating agency verified investment grade corporate guarantee, as required by Arkansas law;

• failure of the contract submitted by Siemens Industry and Siemens AG to the city to contain the statutorily required terms that they provide the financial assurances of the promised efficiency savings as required by Arkansas law, including without limitation a Letter of Credit for the 10-year life of the contract, cash in escrow, multi-year surety bond, and/or a third-party credit rating agency verified investment grade corporate guarantee;

• failure to timely provide proper warranties issued by the manufacturer to the city on the new water meters installed in the city, and the continuing failure to provide any direct written acknowledgment of the manufacturer that the meters actually supplied to the city are covered by warranty;

• failure to timely provide manufacturer recommendations/instructions on the new water meters installed in the city;

• took unfair advantage of the city in the days and weeks following the untimely death of the city’s mayor by (a) demanding over $4.8 million in city taxpayer funds before any work or material had been provided to the city and then obtaining that payment of over $4.8 million by wire transfer from Union Bank of Monticello on the day of the mayor’s funeral (b) waiting until after the mayor died to switch the water meters from the contract-specified meters to another brand that subsequently caused the city numerous problems; and (c) milking the city for another almost $2 million in payment from a temporary appointed mayor;

• falsely representing to the city that “Siemens stands behind the products it supplies” when in truth and in fact the contract provided by them to the city expressly disclaims any warranty on the products they supply;

• preparing and submitting plans to the city for complete replacement of water mains/lines in an area of the city where there was no need for such, all of which was contrary to the representations and agreements of Siemens Industry and Siemens AG that water main/line replacement would be done in the “core” of the old part of the City where leaking water mains/lines was an issue; and

• causing the meter testing company, Fluid Meter of Austin, Texas, to not share the results of its testing of the city’s existing water meters with the city.

The city further claims:

• the contract is illegal and void because the construction work and materials covered by the contract was not advertised for bid and Siemens is not properly licensed by the Arkansas Contractors Licensing Board to perform the work covered by the contract;

• Siemens falsely represented to the Monticello City Council that the contract would engage and be performed and backed by the financial strength and ability of the large multi-national conglomerate corporation Siemens AG, not a Delaware corporation of still unknown financial strength that goes by the name Siemens Industry; and

• Siemens fraudulently misrepresented meter test results. During their solicitation of the city to engage them on the meter and water main/line projects, representatives of Siemens represented to the city that the city’s existing water meters were only 53.58 percent accurate. That representation was false, and known to be false by Siemens and was made to induce the city to enter into a $10 million contract with them to replace all of the city’s existing water meters and replace a part of the city’s existing water mains/lines. Siemens subsequently raised to 84.6 percent its representations relative to the accuracy rate of the city’s existing water meters, but concealed from the Monticello City Council that the most recent sampling and testing of the city’s existing water meters had an accuracy rate of 95.2 for the obvious reason that such a good accuracy rate would reveal that replacement of the city’s existing water meters was not economically justified and should not be done.

The city also alleges that Siemens breached the terms of the contract when it supplied the wrong water meters, improperly installed those meters and failed to provide the city with a manufacturer’s warranty of the meters. The city further claims that Siemens breached the covenant of good faith and fair dealing.

The city is asking for the return of all city funds paid to Siemens (plus prejudgment and post judgment interest), punitive damages, attorney fees, litigation expenses, costs, and judgment for damages reportedly sustained by the city as a result of Siemens’ alleged breaches of contract and fraud, according to the city’s countersuit.

The city has asked that the case be tried by a jury.

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