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Topic: racial preferences or frauds

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El Supremo

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Abusers of minority programs beware - Hartford Business Journal
Apr 28, 2014 - This is one of the oldest games in town, and one of the most common abuses of DBE and Minority Business Enterprise (MBE) programs inside and outside of federal contracting. A pass-through occurs when a subcontractor, usually a DBE, a MBE or a Women Business Enterprise, is used by a prime ...

Abusers of minority programs beware

Vindictiveness is not a characteristic that is appealing to most, nor is kicking someone while they are down. But at the risk of sullying perceptions of my character, there was an important decision announced by the U.S. Attorney's office recently that deserves additional exposure, not for the sake of further embarrassing the company that suffered this public and financial humiliation, but because it should provide a strong teaching lesson to other companies that have also committed or contemplated similar acts. The incident I am speaking about is the $2.4 million fine imposed on the Plainville-based construction company Manafort Brothers.

Manafort Brothers agreed to the fine and changes in its management team and structure in response to their admission of fraud related to a federally funded construction project in Connecticut. The details of this incident have not been totally revealed in the press release issued by the Federal Bureau of Investigation, but it is known that Manafort Brothers' behavior involved the misuse of the Disadvantaged Business Enterprise (DBE) program.

The DBE is a program that certifies businesses based on economic disadvantage for contracts funded by the U.S. Department of Transportation and managed by state departments of transportation. The purpose of the DBE program is to increase economic opportunity and participation by disadvantaged businesses on federal contracts.

In 2007, Manafort Brothers was the lowest responsible bidder on a $40 million contract to improve some roads in Connecticut. Part of their contract submission included the use of a specific DBE. This DBE was a subcontractor on the job. However, the investigation by the FBI, the DOT and several other agencies indicated that the DBE was simply a "pass-through" that allowed Manafort Brothers to continue using subcontractors other than the DBE of record.

This is one of the oldest games in town, and one of the most common abuses of DBE and Minority Business Enterprise (MBE) programs inside and outside of federal contracting. A pass-through occurs when a subcontractor, usually a DBE, a MBE or a Women Business Enterprise, is used by a prime contractor whereby the prime agrees to pay the pass-through firm as a subcontractor, but the subcontractor agrees to subcontract the work to non-diverse firms.

The "benefit" to the prime contractor is that they get to continue working with companies they want to work with while appearing to be in compliance with the goals of the diverse program, in this case the DBE program of the U.S. Department of Transportation. But make no mistake this is an abuse that takes place in the private and public sector, and not just in the DBE program. In pass-through contracts, very little employment or wealth is created in minority firms or minority communities.

The purpose of these fines and other resolutions is to send a strong and unequivocal message to the offending company, but also to send a shot across the bow of other companies contemplating similar abuses of the law. One aspect of the settlement that Manafort Brothers agreed to was to implement changes in their procurement practices and to bring in independent outside experts to educate senior management on DBE compliance.

For other federal contractors, this fine and settlement should serve as an important reminder that laws intended to promote economic inclusion of DBEs, MBEs, WBEs and others are there for a reason and attempts to avoid, skirt, and abuse such laws occasionally have significant financial and criminal consequences.

As the president and CEO of the Greater New England Minority Supplier Development Council, I think this is the most important legal action taken in support of minority business in the history of our organization here in Connecticut. Laws and policies without consequences and enforcement are soon ignored. It is about time and long overdue that the legitimate diverse business community has had the support of the federal government in this regard. For the abusers of the law who have not been caught, now is the time to review your own actions. The authorities are watching.

At the end of the day, the DBE and diverse business programs are in place to spread the wealth to people, businesses and communities who for reasons of history have not been included in the creation of wealth, particularly when it comes to public dollars. These programs are needed today at least as much as when they were first created.

And part of the reason why they are needed today is that there has not been the enforcement behind the intent of these laws. There is now an optimism and an opportunity for us to reach the goals of this program so that at some point in the future we can wind down these programs.

But now is not even close to the time when we can contemplate this eventuality. However, because of the recent actions of the Federal government we are closer to that day.

Dr. Fred McKinney is president and CEO of the Greater New England Minority
Post Sat Feb 03, 2018 8:49 am 
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El Supremo

When the media reported vandalism against the black female minority company W. T. Stevens, it soon became obvious that in order to perform the contract that two white sub contractors were performing a great deal of the work.

Since W. T. Stevens got the largest share of that round of the pipeline work, the vandalism raises the spectre of a reaction against a perceived fraud. Comments on M-Live and even in city council meeting about the company not being able to meet the benchmarks and yet avoiding fines in prior rounds increased dissent in some portions of the community.

Kudos to the white sub contractors for using minority trainees, however the preference given to a minority company is nullified when two-thirds of the work is performed by a non-minority company but billed by a minority company it smells of political corruption.
Post Sat Feb 03, 2018 9:09 am 
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El Supremo

Next City
Inspiring Better Cities

Sham Minority Contractors Have Been Hired in Your City, Probably

Contractors at work on an environmental restoration project in Philadelphia. Credit: U.S. Army Corps of Engineers

Philadelphia Inspector General Amy Kurland announced last week that local contractors have used sham minority subcontractors on 19 projects to skirt antidiscrimination requirements.

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In New York, investigations into fraudulent hiring of minority- and women-owned subcontractors are so common that they have become something of a specialty for local prosecutors. The most recent instance was a $10 million settlement reached with Siemens Electrical.

The story is the same in Chicago, Seattle and Dallas. And thats just in the last few years. Go back further, and its the rare city or state that hasnt endured a scandal or four tied to well-intentioned minority contracting regulations.

The particulars of the rules vary from city to city and state to state, but the objective is always the same: Foster economic development in minority communities by requiring (or strongly encouraging) companies awarded public contracts to hire subcontractors owned by minorities or women.

Its a laudable goal, as business ownership in America remains largely the domain of white men. Of the 4.65 million privately held firms in the nation with more than one paid employee, 89 percent are run by white principals and 62 percent are owned by men, according to U.S. Census data. (Women own 18 percent on their own, while another 20 percent of firms are owned jointly by men and women.)

Government contracting requirements are designed to reduce that imbalance, and they can work. The federal governments version of the program, called the 8(a) Business Development Program, is designed to help minority-owned businesses build their competitive and institutional know-how.

This is how its supposed to work. Minority-owned companies register with local agencies that certify both their capability and the makeup of their ownership. In some cases, contracts are set aside for minority-owned businesses. In others, companies with large contracts are expected to subcontract out some percentage of the work to minority-owned subcontractors.

But thats where things can get sticky. In a large number of cases across the country, contractors have taken to using sham minority subcontractors shell companies owned by minorities that dont have the actual capacity to perform the work in question. These faux contracting operations can make it look as though real work and real cash is flowing to minority-owned businesses, when in fact the money is really being passed through.

Another version of the same scandal features politically connected minority business owners, who use their juice to ensure their companies receive a big slice of the set-aside contracts, as was the case in Philadelphia in past years.

What is it about minority contracting programs that makes them such persistent sources of fraud and corruption?

The answer depends on whom you ask. Some non-minority contractors suggest privately that the root of the problem is a genuine lack of capable minority-owned firms in their industry or city, a state of affairs that can lead less scrupulous contractors to look for shortcuts to satisfy municipal requirements.

Others suggest that affirmative action in contracting is vulnerable to fraud because all parties are eager to welcome good news. Politicians sometimes embrace stats that reflect climbing rates of minority participation in contracting, even when the firms driving those spikes are shams.

Back in Philadelphia, Kurland doesnt accept the premise that minority contracting programs are inherently prone to corruption. Rather, she said that for a variety of reasons, they just do not get the scrutiny they need.

These programs can be effectively policed, Kurland said. And the press were getting on this can have a huge deterrent effect.


Patrick Kerkstra has covered Philadelphia and the region for 12 years, including a decade at the Philadelphia Inquirer, where his beats ranged from City Hall to real estate development and the Iraq war. Now a freelancer, Patrick is a writer at large for Philadelphia Magazine, a special projects reporter for PlanPhilly and a guest columnist at the Inquirer, where he writes about urban affairs.
Post Sat Feb 03, 2018 9:21 am 
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El Supremo

The kwame Kilpatrick federal case in Detroit showed many instances of manipulation of fraudulent minority contractors in government contracts. Anthony Soave was very up front about giving a minority a contract although they were a novice and had noemployees or equipment.

Yet in Flint when legitimate minority contractors were used in Smith Village, they were mistreated and forced to make complaints over payment issues. For years the local Minority Contractors Association fought against restrictive impediments to their ability to bid on contracts. I have had minority contractors tell me they had to leave Genesee County in order to get jobs.
Post Sat Feb 03, 2018 9:31 am 
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El Supremo

Department of Justice
Office of Public Affairs
Thursday, January 9, 2014
Michigan Companies to Pay $3.8 Million to Resolve Allegations of Falsely Claiming Disadvantaged Business Credits

The Justice Department announced today that two related entities, Michigan-based Cadillac Asphalt LLC (Cadillac) and Michigan Paving and Materials Co. (MPM), have agreed to pay $3.8 million to resolve allegations that they falsely claimed Disadvantaged Business Enterprise (DBE) credits on a number of federally funded transportation projects. Both Cadillac and MPM are subsidiaries of Oldcastle Materials Inc., a construction material and services provider based in Atlanta.

The Disadvantaged Business Enterprise program helps businesses owned by minorities and women to work on federally funded projects, said Assistant Attorney General for the Justice Departments Civil Division Stuart F. Delery. Those who falsely claim credits under the program to obtain federal funds victimize both the taxpayers and the businesses that the program is designed to assist.

The U.S. Attorneys Office works with the Civil Division in Washington to use civil enforcement to recover funds for taxpayers, said U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade. In this case, civil attorneys were able to recover more than $3 million that was obtained through false claims.

The settlement announced today resolves allegations that Cadillac and MPM knowingly and falsely claimed DBE credit for asphalt purportedly supplied by a DBE known as BN&M Trucking Inc. As a condition of federal funding, contractors, such as Cadillac and MPM, working on a federally funded project must make a good-faith attempt to meet DBE participation goals. For the contractors to meet their DBE participation goal, a DBE employed by the contractors must be independently responsible for performing a portion of the work with its own employees and equipment. Allegedly, BN&M Trucking was merely a pass-through company that did not supply any asphalt or perform any other commercially useful function.

We remain steadfast in our commitment to maintaining the integrity of the U.S. Department of Transportations (USDOT) Disadvantaged Business Enterprise program, said regional Special Agent-in-Charge of USDOTs Office of Inspector General Michelle T. McVicker. Working with the Secretary of Transportation, other DOT leaders and our law enforcement colleagues, we will continue to protect the taxpayers investment in our nations infrastructure from fraud, waste, abuse and violations of law.

The allegations resolved by the settlement involved numerous federally funded transportation projects in Michigan between 2006 and 2010, including a project to construct a new runway at Detroit Metropolitan Wayne County Airport in 2008 and 2009. In November 2010, two other entities, John Carlo Inc. and Angelo Iafrate Construction Co. Inc., paid more than $1 million to resolve similar allegations related to the airport runway project.

This case was handled by the Justice Departments Civil Division, Commercial Litigation Branch, the U.S. Attorneys Office for the Eastern District of Michigan and the Department of Transportation Office of Inspector General. The claims settled in this case are allegations only; there has been no determination of liability.

Civil Division
Press Release Number:
Updated September 15, 2014
Department of Justice Seal - Department of Justice Action Center
Post Sat Feb 03, 2018 9:54 am 
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