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Part One
-Accounting tricks hid huge Big Dig overruns

-US audit says Big Dig is 'bankrupt'

Part Two
-Big Dig's insurance program unravels

-As his stock sings, Kerasiotes remains resolute

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The Boston Globe OnlineBoston.com Boston Globe Online / City & Region

As his stock sinks, Kerasiotes remains resolute

By Thomas Farragher, Globe Staff, 04/10/00

James J. Kerasiotes, the blunt and blustery champion of the nation's most expensive urban highway work, has become its chief liability.

Part One
-Accounting tricks hid huge Big Dig overruns

-US audit says Big Dig is 'bankrupt'

Part Two
-Big Dig's insurance program unravels

-As his stock sings, Kerasiotes remains resolute

Scores of auditors, lawyers, accountants, and federal securities investigators now pore over the Big Dig books and blueprints convinced that its managers deliberately misled state and federal officials who monitor the $13.1 billion project.

Perhaps most remarkably, Kerasiotes, the self-styled avatar of less-is-more government, has accomplished something no subordinate with similar political baggage ever could: He has kept his job. So far.

A federal audit report due to be released as early as tomorrow is expected to contain evidence that the Big Dig's budget has ballooned to as high as $13.6 billion, fueling the fire for Kerasiotes's dismissal.

``It's not that people have to like you, but they do have to be reasonably confident that you're telling the truth,'' said Frederick P. Salvucci, the Big Dig's progenitor under former governor Michael S. Dukakis and perhaps Kerasiotes's most caustic critic. ``And, for whatever reason, the truth wasn't told here.''

Still, as criticism grows and Kerasiotes engages in a hair-shirt tour of public contrition and political apologies, he remains doggedly determined to finish the job he once believed would be sterling testament to solid management.

``What I need to do is I need to deliver the product,'' a chastened Kerasiotes said in a recent interview. ``And then history can judge whether my credibility was recovered or not. But I've been delivering this product from Day One. I've been delivering it in a very aggressive, forceful, effective, and efficient style.''

Staunchly defended until recent days by Governor Paul Cellucci, who had credited him with steely stewardship over a mind-numbingly complex building program, Kerasiotes is regarded by a series of supporters as just what the state needs atop the Big Dig's organizational chart: A tough guy for a tough job.

``If we didn't have a Jim Kerasiotes to manage this project, we'd have to invent one,'' said Charles D. Baker, a former top finance aide to Cellucci and his predecessor, Governor William F. Weld.

``He made the decision to take this thing on and own it,'' said Baker. ``And most people in this town were OK with that. There weren't a lot of people stepping forward and taking on the political risks of managing that project. And he did.''

With Kerasiotes came his to-the-barricades style of management, captured aptly by the hard-hatted bromide: ``My way or the highway.''

That swashbuckling persona and a polished penchant for exaggeration and self-promotion helped propel him from the opaque corridors of the state's transportation building to a marquee name in state government. He quickly became known as the bully of bureaucracy.

``It was no small thing that when Jimmy said he was going to get something done, he got it done,'' said Martin Linsky, Weld's chief secretary from 1992-95. ``I don't think the governor was able to have that confidence in everybody by any means.'' Political career launched during King administration James John Kerasiotes, 46, is the youngest child and only son of a Peekskill, N.Y., restaurateur who ran a bar and grill there after immigrating from Sparta, Greece, in 1919.

The Hudson River Valley town (pop. 20,000) holds childhood memories of stickball games and summertime vigils kept by neighborhood boys, straining for a glimpse of Peekskill's newest sensation: Joe Namath, the flashy football quarterback in town to attend the New York Jets' rookie camp there.

But the small town could not hold Kerasiotes, who, after graduating in 1975 from the State University of New York at New Paltz, headed for Boston and Northeastern University. He studied politics and government, skills he would soon test on Beacon Hill after Edward J. King ousted Dukakis from the corner office of the State House in 1978.

``The Ed King stump speech, every time I heard it, the chord struck all the way through,'' said Kerasiotes.

His longtime business mentor and political godfather in the King administration was James F. Carlin, King's commerce commissioner, who manufactured the Make It In Massachusetts catch phrase.

``I had a constituency of one,'' Kerasiotes said of his early political life. ``What I said to myself early on was: I don't see anybody in this group that really is invested in Carlin's success. And so I said to myself: What I'm going to do is I'm going to invest myself in his success.''

That disciplined loyalty and single-mindedness of purpose paid handsome dividends for Kerasiotes. Carlin oversaw Kerasiotes's swift promotion within the King administration and, when Dukakis exacted political revenge in 1982, helped bankroll Kerasiotes's new career as publisher of NewsWest, a free weekly tabloid with 102,000 readers in 15 communities west of Boston.

Carlin lost $2 million on that deal, eventually selling the papers to Tabloid Newspaper Publishers Inc. of Newton in 1989, but it taught him two valuable lessons: Newspapering is a tough business, and Jim Kerasiotes is a no-holds-barred manager.

``You either produced for Jim or you got a new job,'' said Carlin. ``He doesn't suffer fools very well. If you lie to him, you pay a price for lying to him. If you play him for a fool, there's a price to be paid.''

Had Kerasiotes's professional path diverged slightly, he could have been counting his millions at a warm-climate estate instead of explaining his Big Dig misfortunes. He was an early and active investor of Adion Inc., the ad agency in which he once held a 20-percent share. Adion's sale made Kerasiotes financially secure. But he missed a later bonanza. Adion morphed into the hugely successful Monster.com, now the world's largest careers Web site, a Maynard-based Internet behemoth worth billions.

``Contrary to his reputation, Jim's just a really good person,'' said Jeff Taylor, Monster.com's chief executive. ``He's incredibly detailed oriented. He's a get-it-done person.'' Given a second chance, Kerasiotes cleans house It was that make-it-happen reputation and his Carlin connection that led him back to government after Weld ushered his libertarian-tinged blend of Republicanism into the governor's office in 1991.

Before Weld was sworn in, he and Carlin conferred over appointments at the governor-elect's law office. Within weeks Kerasiotes had his job as public works commissioner.

``My guess is that he went in there with a lot of bravado and said, `The game's over guys. I'm in charge. Screw around with me and there's going to be a price to pay,' '' said Carlin, who once predicted Kerasiotes would some day be governor himself.

Indeed, the first of many unshakable images of Kerasiotes took shape in that dawn of the Weld administration. Kerasiotes, who kept a shiny hatchet on his desk, swept through the DPW office suite, weeding out Dukakis holdovers. He told the agency's general counsel: ``I don't know you. I don't know if you are capable or not capable. But I don't care.''

The man was fired. So was John McDermott, a Democratic appointee in the DPW's public information office.

``Kerasiotes came into the office,'' McDermott, now with a Boston public relations firm, recalled. ``He had this little hatchet in his hand, which we had seen on his desk, and he said: `This is nothing personal, but I suppose you know what this means.' And he waved the little hatchet. He had a smirk on his face. He relished the idea of being a bully and he was a bully.''

Kerasiotes said the episode did not happen that way, explaining the hatchet was a gag gift from a friend. ``Firing people was not anything I ever really wanted to do in the first place,'' he said, noting that political appointees naturally come and go as administrations change.

But the tough-guy image stuck and the story has become part of the Kerasiotes folklore. It's a tale of a man of ample ego and a volcanic temperament; a manager who intimidates foes and rigidly controls public information; an administrator who follows orders, gets things done, and worries little about making friends along the way.

Linsky, the former GOP gubernatorial aide, authored a memo to Weld marked ``very confidential'' in August 1992 that described Kerasiotes as ``scary'' and ``intimidating.'' Nevertheless, Linsky said in an interview, Kerasiotes's worth was unmistakable.

``What distinguished him from a lot of people is that he's willing to do things and say things that other people shy away from,'' Linsky said. ``He's willing to take heat for making people really unhappy. And many people in state government, in organizations generally, are unwilling to take that heat.''

As Kerasiotes roared around and ascended through the state's transportation bureaucracy with white-hot intensity, he trimmed deadwood from the state's payroll, enraged unions by privatizing some highway maintenance work, and made sure he became the personification of the departments he led.

While a review of his record suggests he is more the incrementalist than the revolutionary he makes himself out to be, there is no doubt Kerasiotes shook things up and cut bloat.

``His management style is basically to figure out where we're going and to get there by the most expedient means,'' said James Radley, a former member of the MBTA's board of directors. ``He doesn't always seek consensus, but the guy's right an awful lot more times than he's wrong.''

John R. McCarthy, a former Everett mayor and former chairman of the MBTA's Advisory Committee, said when Kerasiotes was secretary of transportation and chairman of the T from 1992-97, he conducted public business as if it were a private enterprise - a covert approach for which he is now being assailed by Big Dig critics.

``He told you what he wanted to tell you,'' McCarthy said. ``You got what his answer was and no further questions, thank you. One of those deals. This was the word coming down from above and that's the way it is. He was ego. Absolutely ego. The great `I am.' People are afraid of him. He thinks everybody is afraid of him.'' Critics excoriated from bully pulpit He may have been right.

Before the Big Dig budget debacle exploded statewide on Feb. 2, few officials in Massachusetts were given the wide berth enjoyed by Kerasiotes, who answers to no voter.

When the state auditor issued critical reports, he ridiculed him and dismissed his findings as faulty or illogical.

When State Treasurer Joe Malone, then a GOP gubernatorial candidate, challenged Cellucci's campaign pledge that the project was on a sound fiscal course, Kerasiotes confronted him on a radio talk show, bullying Malone into hanging up into a huff of dead air.

When US Representative James McGovern, a member of the congressional transportation committee, criticized the project's directors for being reckless with taxpayer funds, Kerasiotes fired off a nasty-gram to the Worcester Democrat. ``Jim, stop whining,'' it read.

When the Big Dig's chief consultant, Theodore G. ``Tad'' Weigle Jr., hinted that Kerasiotes's promise to deliver the project at no more than $10.4 billion was impossible to guarantee, he was fired.

Even when the governor's office itself called, asking for information, it had to make a good case for it to Kerasiotes. ``At the end of the day, I got most of the information I was looking for, but I had to be willing to work for it,'' said Baker, the former gubernatorial finance chief.

The Big Dig was on time and on budget, Kerasiotes kept insisting. It was safe. It was relatively free of corruption. It was the toast of the engineering world. For Kerasiotes, who saw the project as his legacy, all that meant was he had ample room to operate.

So last fall - years after Kerasiotes began a secret struggle to plug the holes in a budget badly leaking red ink - when the federal inspector general suggested the project was $942 million over budget, Kerasiotes moved his big rhetorical guns into position once again.

In a petulant, patronizing letter to Inspector General Kenneth Mead, Big Dig project director Patrick J. Moynihan, a superloyal Kerasiotes aide, scolded the federal oversight agency, concluding: ``We need constructive, sound criticism that will help us manage the work carefully. Unfortunately, the dated and inaccurate review you have produced does not fall into that category.''

When it turned out Mead's review had actually underestimated the size of the problem, Kerasiotes launched a public tour of apologies and explanation that his critics call an empty exercise.

``I'm sorry people believe that we've misled them,'' Kerasiotes said in the recent Globe interview. ``That wasn't what we were trying to do. That isn't who I am. I'm not Svengali. I'm not a sorcerer. I'm not Oz. I'm not that person. I'm just trying to get to an end. I'm trying to protect this project every step along the way.''

Kerasiotes should have been accumulating a reservoir of good will that could have been drawn upon when the project skidded darkly into trouble, critics say. Instead, they charge, he has detonated his bridges, not built them.

`` [Serbian President Slobodan] Milosevic is more popular in Washington than the Big Dig,'' said McGovern.

``If you tell a guy who's investigating you, `You're full of [expletive]. You don't know what you're talking about,' all he's going to do is sharpen his pencil,'' added US Representative J. Joseph Moakley. ``It doesn't make any sense.'' Style a lightning rod to project's critics Kerasiotes's ability so far to survive such disastrous news has made his future grist for drive-time talk radio and fodder for jokes at politicians' breakfasts.

``It does flabbergast me,'' said Steve Adams, who used to track Big Dig costs for the Massachusetts Taxpayers Foundation and now works for a nonprofit economic development group. ``He's totally unaccountable to anybody so he faces no consequences. He has wiped out any hope that anybody would go to the mat for us. A lot of people have almost personal reasons to tank this project because of his style.''

But others suggest a practical reason for Kerasiotes's against-the-odds longevity: His people skills aside, the man has been the project's singular driving force.

Carlin said the Big Dig has avoided nearly any taint of corruption not simply by happenstance. ``You want to know why there hasn't been any corruption?'' asked Carlin. ``Because he'd put the son of a bitch in jail.... You can send up all the Dale Carnegie courses you want to, and Jim's going to be Jim.''

And that has been part of the bargain all along, even some critics acknowledge. The mammoth project was never going to happen with Caspar Milquetoast at the helm.

``Everybody knew what they were getting when they got Kerasiotes,'' said Michael Goldman, a Democratic political consultant. ``They weren't getting Mr. Rogers.''

State Senator Robert A. Havern, cochairman of the Legislature's Transportation Committee, said the public was romanced by Kerasiotes's ``Patton-esque'' approach to the job. And, to some extent, so were his legislative overseers.

``We let him go. We're in this, too,'' said Havern. ``We watched him tell us this was on budget. I mean, 15 percent over budget. That's where we sit today. The governor says that's worst-case and nobody believes him.''

Havern said the state should have insisted that Kerasiotes hire an outside expert to monitor its in-house consultant, Bechtel/Parsons Brinckerhoff.

``We should have had someone on board who had done big-foot, mega-construction projects so they could look Bechtel in the eye and say: `Is this an overrun or is this a design failure?' That's what we're missing,'' said Havern. ``We only pay them (Bechtel/Parsons) like $1.5 billion. Holy God! It's in their best interests to call almost everything a cost overrun.

``And Jim Kerasiotes and I wouldn't know from third base whether what was true or not.... I think somewhere between the general public's feeling that he's a failure and his feelings that he's the greatest manager of all time is the truth.''

For his part, Kerasiotes says simply he was the project's biggest cheerleader and most aggressive defender. If he hadn't been, he argues, the project would be either stuck in the mud or long ago gone off track.

As he maintains flatly that he did not lie about Big Dig budgets, Kerasiotes is working furiously to hold on to his post overseeing the nation's marquee construction project.

Before news leaked out last week that federal auditors have found even bigger holes in Kerasiotes's budget, he predicted there would be cries for his scalp.

``No I don't [feel threatened],'' he said then. ``It is what it is. It is what it is. And why am I in a tenuous position just because somebody said it's going to be more? That doesn't mean it is going to be more. That's the reality. People can say a lot of stuff. In the end, they have to prove it.''

As that proof arrives, perhaps as soon as tomorrow, Kerasiotes, in an interview Friday, said he's not going anywhere. ``Nothing has changed,'' he said.

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