Contract Dispute Stalls Renovation of Queen Mary

Renovation of the venerable Queen Mary in Long Beach remains at a near standstill amid allegations that the ocean liner’s operator owes the main contractor at least $2.6 million and has improperly diverted funds earmarked for the project.

The accusations are part of a bitter contract dispute in Long Beach Superior Court that threatens to erode the earnings of the city’s icon at a time when the attraction has reported several years of improving profits.

The conflict involves an $11-million restoration of the ship’s 365-room hotel as well as improvements in the vessel’s heating, air-conditioning and fire safety systems.

“The hotel work is delayed,” said Joseph F. Prevratil, president of RMS Foundation Inc., which operates the hotel and other attractions on the vessel. “We tried hard to settle this matter with the contractor. We think we treated him very fairly. But when you are 10 months behind schedule, we had no choice but to go to court.”

The developing court battle is the latest dispute in the checkered history of the tourist attraction since the city bought the 1,000-foot liner in 1967. Over the years, city and port officials have tried to sell the vessel because they considered it a drain on government funds. One former mayor even called it “a tombstone in a cemetery no one wants to visit.”

While some operators of the ship’s attractions say they have made money, others have not--such as the Walt Disney Co., which reported $10-million annual losses for four years until it abandoned the ship in 1993.

Two years ago, Long Beach, which owns and leases the former Cunard liner, provided $5 million for the renovation project. RMS pledged at least $6 million.

The RMS money was intended to refurbish the Queen Mary’s hotel, banquet facilities, lobbies and public passageways--the first phase of a $125-million plan to develop the ship and the surrounding 55 acres into a major tourist attraction. It hired Hospitality Furnishings International of Costa Mesa to perform the work.

Hospitality originally agreed to do the restoration for about $6 million. Because of change orders, the cost of the renovation has risen to about $8 million. Construction began in early 1999.

But in January, after about half of the rooms were remodeled, construction crews walked off the job, leaving 64 rooms gutted and unusable. The construction company immediately filed a claim against the city and five months later filed liens against the ship, alleging that RMS hadn’t paid its bills. The dispute, according to court records, has cost the Queen Mary at least $2 million in lost revenue so far.

Foundation attorneys fought back, filing a lawsuit in May accusing Hospitality Furnishings of being dilatory in its work, missing deadlines and abandoning the project in violation of its contracts. It is seeking to recover at least $2 million in lost revenue, attorneys fees, damages and the costs of having to start the restoration with another firm.

“We agreed to some delays, but the project was to be completed by February,” Prevratil said. “They kept getting further and further behind schedule. We just weren’t going to get done on time.”

But Hospitality Furnishings’ attorneys, including Robert Shapiro of the O.J. Simpson murder case, deny the allegations. The company filed a countersuit in late June accusing RMS and Prevratil of failure to pay $2.6 million for construction and materials, including $400,000 in custom carpets from England that match the Queen Mary’s originals.

“My client was contracted to make these staterooms into elegant accommodations,” said Peter Sheridan, one of Hospitality’s lawyers. “The work was well done and people love it. Now, they don’t want to pay him for it.”

Sheridan said the city is a defendant because it is the ship’s landlord and can be held responsible for the unpaid bills if the RMS Foundation cannot pay.

Henry Hass, the president of Hospitality Furnishings, also charges in the case that RMS has repeatedly issued bad checks to him--one that bounced and two others the bank rejected because they bore deliberately smudged signatures.

Although the drafts were eventually paid, Hass said, delays made it difficult for him to meet expenses on time.

Prevratil is “known throughout the industry as untrustworthy and unreliable,” the lawsuit states, adding that Hospitality Furnishings only took the job because the $11 million was pledged upfront.

Hass alleges that the delays in the project were caused by design changes and unforeseen difficulties in removing asbestos, a fire resistant material that can cause a potentially fatal lung ailment. According to the case, the schedule changes were approved by a supervisor partially paid by the city to oversee the project.

The countersuit also contends that Prevratil diverted some or all of his $6-million pledge offshore or used it for other pet projects such as Queen’s Seaport Development Inc., which is seeking to develop land near the Queen Mary.

Prevratil, who was named the 1999 Entrepreneur of the Year in Long Beach, denies any diversion of funds and said he was surprised by the contractor’s allegations, which he described as personal attacks.

“I don’t understand,” Prevratil said. “They are making some unfortunate statements and they are not true. They are absolutely inaccurate. The court will prove they are.”

He indicated that RMS may hire a new contractor in the next 30 to 40 days to resume the hotel renovation. Meanwhile, the city is trying to proceed with improvements to the Queen Mary’s air-conditioning, heating and ventilation systems.

Ronald A. Walker, a Long Beach special projects officer who oversees the city’s share of the restoration, said some progress is being made, but the work is going very slowly because the main contractor has not been replaced.

Prevratil, who took over the attractions when Disney left, says that the Queen Mary has become increasingly successful with reported profits rising from $500,000 in 1994 to $3.3 million last year. He contends that the ship has never been in better financial shape and should be able to withstand any court judgments against it.