Legal Cases

In summary, several cases were brought against the Bank Building & Equipment Corporation due to their lack of separation in being the architect and contractor of record in designing and building projects.  According to the American Institute of Architects, the architect is the agent of the client and is supposed to save that client money.  On the other hand, a contractor’s role is to make money.  When these two roles are combined, there is an inherent conflict of interest.

AIA

In general the American Institute of Architects (AIA) was displeased with the linking of the design-build process at the Bank Building & Equipment Corporation.  To them, the hand in pocket nature of architect and contractor was too close of a relationship where the flow of money had no separation.  However, to officials at the Bank Building & Equipment Corporation, strict separation between the people working in different departments of sales, conceptual design, architectural drawing, and construction management meant that the design-build process was handled by completely separate hands, though more efficiently within one company.

The AIA continued to disagree with this practice and local chapters brought numerous lawsuits against  Bank Building & Equipment Corporation on a state-by-state basis to ban them from working in certain places where this was vehemently frowned upon.  It should be noted that between then and now, the AIA has run “hot and cold” on this issue as design-build has become more the norm in today’s building standard and there are methods to legally resolve this practice within one company.

The following represents two such cases from Arkansas and Connecticut:

Arkansas State Board of Architects v. BB&ECA
January 30, 1956

In this case, the decision by the appellate court remanded an earlier decision back to the lower courts for judgment consistent with Arkansas state law regarding architectural practice in the state.  These laws stated that:

a) ". . . no person shall practice architecture in this State, or engage in preparing plans, specifications, or preliminary data for the erection or alteration of any building located within the boundaries of this State, or use the title `architect' . . . unless such person shall have secured from the Examining Body a certificate of registration and license in the manner hereinafter provided . . ."; and,

b) "No corporation shall be licensed or registered to practice architecture in this State unless the principal of such corporation whose name appears in the corporation's name is a registered architect, and providing also that each such principal is so registered."

In the case of the Bank Building & Equipment Corporation, W.G. Knoebel was the only architect at the time licensed in the state of Arkansas.  Declared during this case as Chief Architect of the BB&ECA, he oversaw an architectural staff of two hundred in the St. Louis office.  However, Knoebel was not directly responsible for preparing the plans, making the site visits, or meeting with the clients, and only occasionally was involved in the details of the projects.  In addition, he was not a principle of the company at the time and his name was obviously not included in the company’s name, as required by state statute.

The implications of this case were directly aimed at forcing the BB&ECA, the most successful design-build architectural firm in the country in the ten years prior, to curb their activities in Arkansas.  In turn, the Arkansas State Board of Architects believed that in-state firms would have a higher chance of receiving a commission for a bank or hotel, those projects previously targeted by the BB&ECA.

Connecticut State Architectural Examining Board v. BB&ECA

May 1, 1964

Architects in Connecticut took on a four year effort to prevent the BB&ECA to practice in the state that rose to the state Supreme Court.  At the central point of the argument was the state’s architectural practice law, adopted in the 1930s, which permits only individuals, not corporations, from practicing in the profession.  The suit was enjoined by the Connecticut Society of Architects, prohibiting the BB&ECA from offering “package” deals including architectural services to Connecticut banks.

The Architectural Examining Board noted that a corporation was not entitled to qualify for an architect’s license, or could not carry on the practice as paid employees of a corporation, as they would not be acting independently of that corporate entity.  However, the BB&ECA defended its position on the grounds that it handled all its architectural contracts through its chief architect, William F. Cann.  The society argued that this constituted circumvention of the law as Cann is a salaried employee and assigned all his architectural fees to the corporation.  The Architectural Examining Board ruled that the corporation could no longer provide services in the state under their current operation.

Bankruptcy

By 1989, the Bank Building & Equipment Corporation’s Loughman Division was the fourth largest architectural woodworking company in the nation.  This was the division that as cabinet makers, Gander and Orabka grew Bank Building & Equipment Corp. from a back alley into the largest design-build company in the United States.

On May 1, 1990, the shocking headline in the St. Louis Post-Dispatch read “Bank Building Corp. Files Bankruptcy.”   After losing $10.4 million in the last year, and with liabilities of $25.7 million and assets of only $19 million.  Much of that was attributed to falsified records that concealed losses at the Loughman Cabinet Co. division.  Though the company attempted to reorganize and correct the irregularities attributed to the division, it was not successful.  The loss had come on top of a weak reporting year in 1988 when the company’s net income was only $10,000 due to problems at Loughman; though in 1987 the net income was $2.8 million.

The company’s remaining projects and assets were eventually assumed by the company known today as NewGround.

More in this category: « Various Names and Divisions