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Topic: What about minority passthroughs?
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untanglingwebs
El Supremo

Governments Struggle to Root Out Fake Minority Contractors
States and cities want to support women- and minority-owned businesses. But they often dont know who theyre really paying.
BY MATTIE QUINN | APRIL 2016

(Shutterstock)
Margie Sollinger knew something wasnt right about the companies doing business with Portland, Ore. As the citys ombudsman, Sollinger had for some time been hearing from business owners about fraud in the citys minority- and women-owned contracting program. But it wasnt until she received a specific complaint in 2013 -- about a certified minority-owned construction firm doing work for Portlands housing authority -- that she decided to take action. According to the complaint, the firm was merely acting as a pass-through, winning valuable city contracts and then subcontracting the work out to nonminority companies.

Like many cities and states, Portland has a program allowing it to give special consideration to women- and minority-owned companies when handing out government contracts. The goal, of course, is to help support traditionally disadvantaged companies by giving them a leg up. But as Sollinger began to discover, the city wasnt necessarily helping the firms it thought it was.

When she first started looking into the housing contract complaint, she wasnt sure where to turn. As ombudsman, the most I can really do is make recommendations, she says. But even still, I reached a lot of dead ends. According to state law, the city of Portland wasnt allowed to take action against minority-owned firms it believed to be fraudulent; those complaints had to be referred to the state. But Sollinger says the state Office of Minority, Women and Emerging Small Businesses initially shrugged her off. So she referred the case to the Oregon Department of Justice, where the investigation continued for nearly two years. Ultimately, the contracting firm was forced to relinquish its minority certification and pay $15,000 to the state. State legislators took an interest in the issue, and last year passed legislation allowing all public agencies in the state to conduct their own investigations into future allegations of minority contract fraud.

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The fact is, says Sollinger, its not hard to figure out whos actually doing the work on contracts like these. Simple city inspections to make sure the awarded company is showing up to perform the job would have caught past violators. But cities and states across the country are struggling to provide sufficient oversight when it comes to minority- and women-owned firms, also known as disadvantaged business enterprises, or DBEs. As a result, much of the money thats targeted to help these businesses doesnt really go where governments want it to.

Its a problem thats shown up all over the place. In Louisville, Ky., the metro sewer district banned two minority businesses from receiving future contracts after it was discovered that they were subcontracting with nonminority-owned businesses. An audit in Pittsburgh found the city didnt even have a way to track how much work was going to DBEs. The city of Denver has also been dealt a blow by contracting scandals in recent years. In 2014, the city proudly touted a new contract for mechanical work at Denver International Airport that had been awarded to a company owned by an African-American woman; at $39.6 million, it was the citys largest-ever minority contract. But it later became clear that the company was subcontracting more than $23 million of the work to a different firm, one that didnt qualify as a minority contractor. That December, a city audit declared that Denvers minority contracting program was failing. This program is broken, and the city is breaking its word to those it has promised to help, City Auditor Dennis Gallagher said at the time. It troubles me that stakeholders, including the public and firms in the construction and professional services industries, do not know whether this program is working.

Nationwide data on DBE contracting programs is spotty. The National Association of State Procurement Officials doesnt monitor them, and relies on state offices to track fraud and abuse. But states efforts vary widely. A report from the U.S. Government Accountability Office (GAO) in 2011 found that the Federal Highway Administration did not have the right tools to properly monitor states DBE programs for transportation construction. The GAO has published a smattering of reports over the past 25 years on women- and minority-owned contracting programs with two main conclusions: More information was needed, and the contracting world in general lacks women and minorities.

Boosting their ranks is an important goal for government, says Wendell Stemley, president of the board of the National Association of Minority Contractors. Cities and states owe it to their residents to help minority firms, he says, and that begins with tighter oversight. The faces of these businesses should reflect how diverse the locality actually is, Stemley says. And if a state has lax compliance standards, then of course there are going to be firms willing and able to game the system.

Ensuring that a minority contracting program is functioning properly takes a lot of work. Just ask Minnesota state Sen. Scott Dibble. As the chairman of the Transportation and Public Safety Committee, Dibble has been leading the charge to overhaul minority contracting ever since a 2013 internal audit by the Minnesota Department of Transportation found extensive problems with its DBE program, ranging from mismanagement and weak oversight to outright fraud. The audit had come at a time when the state was aggressively ramping up construction projects, thanks to rebounding post-recession revenues. Officials were trying to include more women- and minority-owned companies, but it wasnt working. We just werent seeing a lot of success, and we were even having protests outside the state Department of Transportation office, says Dibble. The scathing audit highlighted millions of dollars that had been passed through to non-DBEs and a consistent failure to meet the states own DBE goals. But the key finding, says Dibble, was from the state Office of Civil Rights. There were some serious concerns within that office that numbers were fudged, he says. Basically, our program was a mess.

Since then, the state has made several reforms to its contracting program. Leadership within the office has been cleared out. DBE mentoring programs -- in which a certified disadvantaged business enters a three-year partnership with an established company to help hone business practices to better compete in the marketplace -- have been put in place. This year a consortium of state agencies will be working together to develop more objective criteria for what really qualifies as a disadvantaged business. Perhaps most important, Dibble says, the effort has raised awareness among lawmakers of the need for intense oversight. In order to remedy age-old injustices against disadvantaged firms, he says, it requires proactive action, not passive acceptance.

The state has seen some successes. For 2015, the transportation department announced that 7.3 percent of its contracts were awarded to DBEs, a significant step toward its goal of 10.3 percent. While we made some progress over the last half of the fiscal year, we are not pleased with this number, Transportation Commissioner Charlie Zelle said when he announced the new figures. The state DOT has laid out specific goals that Zelle hopes will help it hit its goal for this year. Those benchmarks include finding businesses that qualify as DBEs and getting them certified, providing them with tools to help with bids, and ensuring consistent contracting practices. Statewide, the Minnesota purchasing office has begun more intensive outreach to identify and certify DBEs, which has resulted in a 13 percent increase in minority-owned businesses registered with the state.

Still, theres an inherent challenge when a state endeavors to mix bureaucracy with complicated social problems, says Dibble. Its a problem, and I dont really know how to solve it.

Another place thats taking on contract reform is New Orleans. The city has long had a minority contracting program in place, but when construction projects ramped up as the city rebuilt after Hurricane Katrina, it became clear the program had extensive problems. There was a two-year backlog of companies waiting to be certified as minority- or women-owned businesses, and the city had virtually no record-keeping or monitoring processes in place. The hurdles for disadvantaged businesses reflected larger socioeconomic realities, says Ashleigh Gardere, director of the Network for Economic Opportunity in the mayors office. New Orleans is a city all about relationships, and its also a segregated one. Women and minorities who owned businesses just didnt know the right people, so the opportunities werent there. In 2010, there were 200 certified DBEs in New Orleans, but thats an insufficient number considering the scope of the rebuilding work being done, Gardere says.



New Orleans is a city all about relationships, says Ashleigh Gardere. Women and minorities who owned businesses just didnt know the right people.

In 2013, Mayor Mitch Landrieu introduced a set of proposals to raise the profile of the program. These reforms focused mostly on outreach and oversight of public contracts -- regulations that would hold the city accountable for making sure DBEs were earning city contracts. The certification process now takes 45 days, and the city wants to ultimately reduce that to 15 business days. Cutting down that wait time is crucial, says Gardere, because previously people didnt even want to become DBE-certified because it was just such a cumbersome effort. The efforts have helped lead to a dramatic improvement in DBE participation. Minority- and women-owned firms made up 16 percent of city contracts in 2011. By 2014, that number jumped to 37 percent -- exceeding the citys goal of 35 percent.

Last fall the city implemented a second wave of regulations, focused more on enforcement and compliance. Now, when fraudulent activity is discovered, the city can withhold payments and exclude that particular firm from future contracts. The city has also introduced new technology tools to monitor existing contracts and payments. (As a side benefit, the technology will allow subcontractors to see when a primary contractor gets paid, adding another level of transparency to the entire contracting process.)

In order to fully enforce these new changes, the city needed to invest in more people. When Landrieu took office in 2010, the Office of Supplier Diversity was made up of one person. But thanks to a local millage, the city was able to budget $700,000 to beef up staffing. Now theres a staff of seven people, many of whom have a background in construction. There is also a dedicated staff focused on compliance, making sure companies that are awarded contracts are the ones showing up to do the job.

Its too soon to know how effective the new technology and compliance measures will be; the city only began training employees on them in February. But its a testament to the importance of political leadership in prioritizing minority contract programs, says Gardere. Get local government officials talking to your local NAACP, Urban League, your local inspector general. But as those conversations are happening, she says, start testing out solutions.

Overhauls like the ones in New Orleans and Minnesota are cause for optimism, says the National Association of Minority Contractors Stemley. And while he says theres plenty of room for improvement in DBE programs across the country, he believes the high-profile cases of fraud and noncompliance are the exception to the rule. Still, he says, the onus is on states and cities to step up their efforts to attract more minority- and women-owned businesses. We need to be trying harder to make sure we have workforce diversity in the contracting community, he says. We cant ignore these underserved communities that need jobs.


Mattie Quinn | Staff Writer | mquinn@governing.com | @mattiekquinn
Post Wed Feb 21, 2018 1:26 pm 
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untanglingwebs
El Supremo

In June of 2000 the Pittsburgh Post Gazette printed several articles relating to minority and women owned contractors operating as pass throughs.

"Pass through contracts that flow from minority and women businesses to firms owned and managed by white males are a 'sham" that threatens the economic vitality of the Black community."

This was a statement of Pittsburgh NAACP President and seven other Alleghany NAACP chapters on June 13, 2000 as they were seeking a federal investigation into construction contracts.
Post Wed Feb 21, 2018 1:40 pm 
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untanglingwebs
El Supremo

See the damage done by vandals to water service line equipment in Flint
www.mlive.com/news/flint/index.ssf/2017/.../see_the_damage_done_by_vandals.html
May 12, 2017 - Flint Mayor Karen Weaver said a crew with WT Stevens Construction Inc. discovered a burned truck and damage dome to other equipment when they showed up ... The crew was preparing to work on water service line replacements, part of a massive effort to replace 6,000 of the connector pipes this year.
Post Wed Feb 21, 2018 1:45 pm 
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untanglingwebs
El Supremo

FLINT NEWS

See the damage done by vandals to water service line equipment in Flint
Posted May 12, 2017 at 01:47 PM | Updated May 12, 2017 at 01:47 PM



'It's unbelievable, and it's sad'
Flint Mayor Karen Weaver said a crew with WT Stevens Construction Inc. discovered a burned truck and damage dome to other equipment when they showed up at a staging area where equipment had been left in a parking lot behind the shuttered Bryant Elementary School on Friday, May 12.

The crew was preparing to work on water service line replacements, part of a massive effort to replace 6,000 of the connector pipes this year.

"I don't know what a motive could be," Weaver said at the site on East Pierson Road in Flint's 1st Ward. "When they are caught, they will be prosecuted to the fullest extent of the law."

"It's unbelievable, and it's sad," she said.



Contractor says work has been slowed but won't stop
Jeffrey Grayer, part owner and project manager for Stevens, said the company is committed to completing its work in Flint.

The city is using federal funds in an effort to remove and replace lead and galvanized service lines, which were damaged by corrosive water, leaching lead into the city's water supply.

"I'm really sad and displeased, and a little confused as to why," Grayer said of the damage done to equipment. "This, of course, is my hometown. I take much pride in the city itself and the residents and people who live here.


A Michigan State Police fire inspector rakes through the interior of a work truck destroyed by fire in the parking lot of Bryant.

Police are investigating the vandalism, and Weaver said they "have some information that leads us to believe" adults were responsible.

"That makes it worse that adults would do something like this -- that anybody would prevent us from getting clean water when we've been dealing with this for three years now...," Weaver said.

"To do this to people who are here to help us, you know, you have to hope the contractors don't say, 'I don't want to be bothered by this.

"If you all want to destroy yourselves (that's one thing, but) I don't have to be bothered with this' "the mayor said. "It's not fair to the contractors who are here to help us, and its not fair to the people."

Equipment from two subcontractors of Stevens was damaged in the vandalism. The subcontractors are Hard Rock Drilling & Excavating and Gustafson Excavating, according to the city.

Stevens has the largest contract with the city for replacing service lines -- up to 2,700 lines in five different wards in Flint.

Its contract is for $10.9 million.


"We don't know how far behind this will put us," Weaver said the destruction.

Flint just started an ambitious program to replace 6,000 service lines in 2017. So far, only about 950 service lines have been replaced in the city, and this year's effort just started late last month.

Companies awarded city contracts to do the service line work are Stevens, Goyette Mechanical Co., Lang Constructors, and Waldorf and Sons Inc.



'
"I don't know what a motive could be," Weaver said of the vandalism. "It's (done by) a special kind of person. Special is a bad way."

Police "are trying to look at some video" that could be helpful in their investigation, she said.


Ron Fonger | rfonger1@mlive.com
Moving forward
Grayer said every piece of equipment on the site was damaged in some way.

"It was a huge setback for us," he said, but the company is "committed to making this happen. It's not going to stop us.
Post Wed Feb 21, 2018 1:49 pm 
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untanglingwebs
El Supremo

Equipment from two subcontractors of Stevens was damaged in the vandalism. The subcontractors are Hard Rock Drilling & Excavating and Gustafson Excavating, according to the city.'
Post Wed Feb 21, 2018 1:57 pm 
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untanglingwebs
El Supremo

Meeting held for contractors who want to work on Flint's lead service ...
www.abc12.com/.../Meeting-held-for-contractors-who-want-to-work-on-Flints-lead-se...
Jun 13, 2016 - FLINT (WJRT) - (06/08/16) - A mandatory 10 a.m. meeting was held at Flint City Hall on Wednesday for contractors who want to be part of fixing the city's tainted lead service lines. Flint Mayor Karen Weaver says she plans to have five to eight small firms replace the pipes. There are about 70 people in city ...
Post Wed Feb 21, 2018 2:00 pm 
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untanglingwebs
El Supremo

ABC12 WJRT | Flint, Michigan | News, Weather, Sports




Home Flint Water Emergency Article
Meeting held for contractors who want to work on Flints lead service lines

By Natalie Zarowny | Posted: Wed 12:09 PM, Jun 08, 2016 | Updated: Mon 2:25 PM, Jun 13, 2016

FLINT (WJRT) - (06/08/16) - A mandatory 10 a.m. meeting was held at Flint City Hall on Wednesday for contractors who want to be part of fixing the city's tainted lead service lines.

Flint Mayor Karen Weaver says she plans to have five to eight small firms replace the pipes.

There are about 70 people in city council chambers, although that's not necessarily how many contractors are there. They're all trying to get part of the job of replacing Flints pipes.

Flint has about $2 million to start replacing about 500 pipes.

Wednesdays meeting was for contractors to present their bid to city leaders.

Based on research done by the University of Michigan-Flint and others, a map of where lead lines are has been created. City planners want to start with some areas that have the highest lead levels in pipes.

A plumbers and pipefitters union leader had some issues with the city's proposal document, or RFP.

The RFP outlines the specifications contractors have to meet when they bid for work replacing Flint's pipes.

The union leader with local 370 says he's a little disappointed certain issues weren't addressed in it.


"There should have been some provision for city residents, definitely a provision for prevailing wage. Now is not that time to disband the prevailing wage, said Ben Ranger, with Local 370.

Prevailing wage is the idea that if the city decides to go with non-union workers, they'll have to make the same amount as a union worker. It's a way of leveling the playing field.

Prevailing wage is actually part of the city's RFP, but at the meeting Wednesday, city leaders mentioned it could be taken out. After an uproar from union leaders and contractors, some of who walked out of the meeting, prevailing wage is staying in.

"Really the sole purpose of a pre-proposal meeting is to listen to the questions and concerns of the contractors. And for us, as the city, to look back and see what we're going to do, said Derrick Jones, purchasing manager for the city of Flint. Hell be part of the team that chooses which contractors get the job.

The RFP also outlines they'll use multiple contractors for the first 500 pipe replacements in an effort to get more people working. In some cases, preference is also given to local companies, which sits well with many contractors.


"I liked what I heard today, said Matt Helmer, with Waldorf & Sons, Inc., out of Mount Morris.

Right now, the city has set next Thursday, June 16 as the deadline for contractors to get their bids in, but after the possibility of some changes to the proposal, that date could also change.
Post Wed Feb 21, 2018 2:04 pm 
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untanglingwebs
El Supremo

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Flint calls for bids for more pipe replacement work
Nicquel Terry and Jacob Carah Published 11:30 p.m. ET May 31, 2016 | Updated 12:06 a.m. ET June 1, 2016

Flint The city is preparing for the next phase of a $55 million lead-pipe replacement effort.

Mayor Karen Weavers office announced Tuesday with the release of a Request for Proposals that businesses interested in doing the work have until June 16 to submit proposals. Pipe replacement would begin shortly after, she said.

Flint is working to repair damage to its water system that went on for 18 months when the city stopped getting water from Detroits water system and began drawing its water from the Flint River. The city failed to treat Flint River water with corrosion controls, which launched the citys contaminated water crisis.

Conditions have slowly improved since October, when Flint began getting its water again from the Detroit-based Great Lakes Water Authority.

Water experts delivered a report Tuesday offering evidence that the citys water is becoming healthier for all uses.

Earlier this year, Weaver launched the lead pipe removal plan, the FAST Start initiative, with the goal of replacing an estimated 15,000 service lines with copper in the next year at no cost to homeowners.


The upcoming phase will be funded with $2 million the city received from the state as reimbursement for paying to switch back to the Detroit water system. The city plans to replace 550 miles of iron pipes containing lead.

We hope this project also will help revive our economy by getting the people of Flint back to work in one of the most important jobs there is right now, removing lead-tainted service lines leading to homes to help Flint recover from this man-made water disaster, Weaver said in a statement.

The latest request for bids is designed to attract local contractors, said Derrick Jones, head of the Purchasing Department, at a town hall meeting in Flint on Tuesday. He said the bids are targeted to make it easier for smaller companies to handle the contract.

Adjustments for smaller, local contractors will be made after a preproposal meeting. The mandatory meeting for potential contractors is at 10 a.m. June 8 in Flints City Hall Council Chambers. Potential vendors will meet with the citys Purchasing Department and Utilities Division.

If there has to be some tweaking or if there are some questions that the city can not answer at that time, then we will get those answered and post an addendum to the citys website, Jones said.

He reiterated what Weaver has said about the lines replacement: It can be an educational initiative for youths who want to learn a craft and boost local employment.

In the pilot phase of the FAST Start initiative, lead pipes to 33 homes were removed, according to the city. The number of pipes replaced in this phase is contingent on bids granted. The city said contractors will do the work in sections of 50 or 100 houses.

Weaver said she asked the City Council to waive permit fees for line replacements but members rejected the idea. Flint, she said, is already cash-strapped and the council wants to avoid putting the city in a bind.

Weaver has called on state and federal lawmakers to fund the entire cost of the FAST Start program.

I know things arent happening as fast as many would like, they arent happening as fast as I would like, Weaver said. But we arent going to stop until we get the lead out of Flint. Thats my top priority and I hope our state and federal legislators will show its theirs as well, by providing the funds needed in the city of Flint to recover from this water crisis.

Harold Harrington, business manager of United Association Local 370, who has been leading the Fast Start efforts, voiced his concerns about what he said was the lack of funding for the initiative.

We need to be able to do a whole block at a time and not jump from east side to the west side, he said. We need to be able to get in there, line up and do a whole street a time ...

Harrington said apprentices could accompany licensed journeymen on the site to train Flint residents so they have a trade at the end of this, but you dont want a bunch of people in there who dont know what theyre doing.

The Flint plumber spoke of the complications of working with the dated, incomplete records of residential lines in the city. Theyre talking 500 (lines) for $2 million, I dont think youll get 500 for that, not the way the first 30 went.

Harrington said the complications from the variety of lines into homes poses a problem for line removal and installation.

Theyre all different, he said. You got an inch-and-a-half lines, you got 1 inch lines, and three-quarter lines, you have them 8 foot deep, or in clay, or you cant pull them, he said.

nterry@detroitnews.com

(313) 222-6793

@NicquelTerry
Post Wed Feb 21, 2018 2:08 pm 
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untanglingwebs
El Supremo

Flint calls for bids for more pipe replacement work
Nicquel Terry and Jacob Carah Published 11:30 p.m. ET May 31, 2016 | Updated 12:06 a.m. ET June 1, 2016


@NicquelTerry


Last edited by untanglingwebs on Thu Feb 22, 2018 7:23 am; edited 1 time in total
Post Wed Feb 21, 2018 2:08 pm 
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untanglingwebs
El Supremo

http://flinttalk.com/viewtopic.php?p=80206Flint Talk Forums View topic - Why vandalize water line companies?
flinttalk.com Political Talk
May 14, 2017 - "I would like a written rationale into legal, a written rationale for this pipe rebid," she said. ... -$9,148,500: Goyette Mechanical for up to 2,100 residential water line replacements in Zones 2, 3, 6, and 8 .... Those issues are frequently brought up in the M-Live comments on stories involving the pipelines.
Post Wed Feb 21, 2018 2:13 pm 
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untanglingwebs
El Supremo

In my opinion W T Stevens was incapable of handling the largest portion of the contracts. That belief is supported by the fact that the company had to use sub contractors to get the work done. The company moved into the Oak Park incubator, which cannot store a significant amount of equipment. Alao other companies and citizens demanded to know why the company was not penalized for their failure to meet their benchmarks in their initial contracts.

Fairfield Village residents were pleased with the work of Gustafson and helped the company protect their equipment. There were no broken gas lines and other problems encountered by some contractors. They also had two minority apprentices.

Mayor Weaver had to be aware of the contract issues as she kept referring to the damaged vehicles as belonging to W T Stevens company. She had to know that was untrue as most interviews focused on interviews with the two white subcontractors.


Last edited by untanglingwebs on Thu Feb 22, 2018 8:02 am; edited 1 time in total
Post Wed Feb 21, 2018 2:39 pm 
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untanglingwebs
El Supremo

S

Federal Bureau of InvestigationFederal Bureau of InvestigationFederal Bureau of Investigation

Home Chicago Press Releases 2012 Two Area Contractors Charged with Fraud Involving Minority and Women Set-Asides for Government Construction Contracts...
Info


Two Area Contractors Charged with Fraud Involving Minority and Women Set-Asides for Government Construction Contracts
U.S. Attorneys Office
February 14, 2012

Northern District of Illinois
(312) 353-5300
CHICAGOTwo owners of area construction businesses are facing federal charges for allegedly using companies they controlled to fraudulently obtain government contracts set aside for owners of minority, women, and disadvantaged business enterprises (M/W/DBEs). The charges in two separate cases made public today stem from an ongoing public corruption investigation by federal, state, and local authorities of alleged fraud by businesses falsely purporting to be minority- or women-owned, or by legitimate non-majority businesses being used as sham pass-through sub-contractors on public works projects.

In one case, the owner of two Lockport construction companies certified as woman-owned and/or disadvantaged businesses was charged with fraudulently using her companies as sham pass-through sub-contractors as part of a scheme to help prime contractors meet the City of Chicago and other local governments set-aside requirements for construction contracts. The defendant, Elizabeth Perino, owner of Perdel Contracting Company and Accurate Steel Installers, Inc., allegedly acted as a sham pass-through on contracts with Prime Contractor A, a construction firm with billions of dollars worth of government and private contracts, as well as with the owner of Prime Contractor B, who was cooperating with law enforcement.

As far back as 2006, Perdel Contracting, which specializes in concrete and carpentry, and Accurate Steel (ASI) allegedly acted as sham WBE sub-contractors for Prime Contractor A on Chicagos North Avenue bridge reconstruction project. In addition, Perinos companies allegedly acted as fraudulent pass-through WBE sub-contractors for Prime Contractor A on the Red Line and Brown Line projects for the Chicago Transit Authority, and Perdel Contracting is a DBE sub-contractor on Prime Contractor As Wacker Drive reconstruction project.

Perino, 57, of Willowbrook, was charged with mail fraud in a criminal complaint that was unsealed today. She was released on her own recognizance after appearing this morning before U.S. Magistrate Judge Maria Valdez in U.S. District Court. Both of her companies have been certified as a WBE and a DBE by government entities, including the City of Chicago and the Illinois Department of Transportation. Perino has served on IDOTs Task Force for DBE Regulations.

In the second case, Anthony Cappello, 48, of Homer Glen, the owner of Diamond Coring, Inc., a Chicago concrete sawing and drilling company, was charged with one count of mail fraud in a criminal information filed today in Federal Court. Cappello allegedly obtained contracts worth more than $2.3 million by operating the Stealth Group, Inc., also known as SGI, as a fraudulently certified WBE and DBE. He will be arraigned at a later date in U.S. District Court. Cappello allegedly sought millions of dollars of sub-contracts, and fraudulently obtained more than $2.3 million, from the City of Chicago, Cook County, and the State of Illinois between 1999 and 2006.

Illegally using companies to obtain work set aside for businesses owned by women or minorities cheats not only the governments that provide opportunities to bid on public contracts, but it also prevents legitimate minority- and women-owned businesses from competing to obtain work on such projects, said Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois.

Mr. Fitzgerald announced the charges with Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; Michelle McVicker, Special Agent in Charge of the U.S. Department of Transportation Office of Inspector General in Chicago; James Vanderberg, Special Agent in Charge of the U.S. Department of Labor Office of Inspector General in Chicago; Joseph Ferguson, Inspector General for the City of Chicago; and Illinois Attorney General Lisa Madigan. The City of Chicagos Department of Procurement Services assisted the investigation, which is continuing, the officials said.

United States v. Perino

The complaint alleges various instances in which Perino allegedly falsely represented to government entities that her companies were performing legitimate services on public works projects when, in fact, they were often acting only in a pass-through capacity, enabling prime and sub-contractors to secure large government contracts and avoid requirements intended to benefit women- or minority-owned and disadvantaged business enterprises.

According to the complaint affidavit, Perino acted as a pass-through on contracts with Prime Contractor A by billing for work that her companies did not perform, manage or supervise. In fact, Prime Contractor A negotiated prices with Perdel Contracting and ASI sub-contractors, determined quantity and quality of material, ordered the material, and installed the material. Perino and Prime Contractor A certified to the various government entities that Perino had performed work and Prime Contractor A took credit for pass-through payments made to Perino so that Prime Contractor A could meet its DBE goals.

The complaint charges that Perino engaged in a fraudulent scheme with an individual identified as CW1, who owns a company identified as Prime Contractor B that performs work for the City of Chicago and other government entities. CW1, who was cooperating with law enforcement at the time, had Prime Contractor B bid on a June 2011 city contract that required five percent WBE participation. At the direction of law enforcement, CW1 met with Perino to determine whether Perino would agree to use Perdel Contracting as a pass-through WBE for CW1 and Prime Contractor Bs bid on the June 2011 contract, which was worth $9 million the last time the city awarded a similar contract.

Perino and Individual A, an employee of her companies, allegedly agreed to have Perdel Contracting act as a pass-through WBE by performing street sweeping work normally done by Prime Contractor B by placing Prime Contractor Bs employees on its payroll to do the work; using Prime Contractor Bs equipment to perform the work; entering into a sham contract to purchase the street sweeping equipment from Prime Contractor B; titling the equipment in Perdel Contractings name; and having a side agreement to give the equipment back to Prime Contractor B for $1 when the contract ended. CW1 told Perino that he listed Perdel Contracting in his bid as $225,000 WBE sub-contractor. CW1 later told Perino that CW1 was the only bidder on the city contract.

In a conversation on June 27, 2011, CW1 told Perino that the city was conducting a compliance audit on a previous contract and that CW1 had to provide the city with information about MBE and WBE participation, stating that he had not met his goals. Two days later, CW1 met with Perino and her employee and told them that he needed to make-up approximately $140,000 in past WBE participation on the previous contract, dating back to January 2010. After further discussion, Perino allegedly said that CW1 would have to issue her a purchase order so Perdel Contracting could bill CW1 for past work that Perdel Contracting had never performed on the previous contract. Specifically, the complaint alleges that they agreed that Perdel Contracting would bill CW1 for work renting equipment to Prime Contractor B, which had never happened. After Prime Contractor B paid the false bill, Perino would return some of that money, creating a paper trail that would falsely show that the returned money was for the purchase of two of CW1s street sweepers, thereby setting up the sham purchase contract that was part of the agreement to use Perdel Contracting as a pass-through WBE for Prime Contractor Bs bid on the June 2011 contract. The mail fraud charge alleges that on July 6 Perino sent CW1 false documents including a backdated estimate, a backdated letter of intent, a false invoice for $95,648, and a false certification of work so that Prime Contractor B could use the documents to falsely inform Chicago authorities that Perdel Contracting had provided $95,648 in equipment rentals to Prime Contractor B as of June 30, 2011, even though Perdel Contracting had not provided any such equipment.

United States v. Cappello

According to the charges, Cappello obtained certification for SGI as a WBE by falsely representing that Individual A controlled and owned SGI when she allegedly devoted only a minimal amount of time to SGI. In reality, the information alleges, the company was operated by Cappello and another individual. By fraudulently obtaining the certification and holding SGI out as a legitimate WBE, Cappello allegedly obtained business required by law to be set-aside for WBE businesses. Among the contracts that Cappello and SGI allegedly fraudulently obtained was a $1.1 million prime contract with the City of Chicago.

The charges allege that individuals on SGIs payroll actually reported to Cappello and Diamond Coring. In addition, Diamond Coring employees were dispatched to perform work in Diamond Coring trucks bearing SGI logos to conceal the fact that SGI was not a legitimate WBE or DBE. As part of the scheme, Cappello allegedly caused SGI to represent that it had a business address at a location from which it never operated in order to conceal the fact that it was using Diamond Corings office space.

In both cases, the government is represented by Assistant U.S. Attorneys Brandon D. Fox and Margaret J. Schneider.

The mail fraud count in each case carries a maximum penalty of 20 years in prison and a $250,000 fine. As an alternative, the court may impose a maximum fine equal to twice the loss to any victim or twice the gain to any defendant, whichever is greater and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The public is reminded that charging documents are not evidence of guilt. The defendants are presumed innocent and are entitled to fair trials at which the government has the burden of proving guilt beyond a reasonable doubt.

This content has been reproduced from its original source.
Post Wed Feb 21, 2018 6:31 pm 
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untanglingwebs
El Supremo

Two Michigan Construction Firms to Pay More Than $1.4 Million to ...
https://www.justice.gov/.../two-michigan-construction-firms-pay-more-14-million-res...
Nov 19, 2010 - WASHINGTON Two Michigan construction companies have agreed to pay the United States $1.407 million to resolve allegations that they ... a DBE, performed substantial work on the contracts when, in fact, the trucking firm did not and was merely a pass-through used to obtain the appearance of DBE ...The United States Department of Justice
l



Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Friday, November 19, 2010
Two Michigan Construction Firms to Pay More Than $1.4 Million to Resolve Alleged False Claims
Alleged to Have Falsely Claimed Using Disadvantaged Business at Detroit Airport
WASHINGTON Two Michigan construction companies have agreed to pay the United States $1.407 million to resolve allegations that they knowingly submitted false claims relating to a federally funded construction project at Detroit Wayne County Metropolitan Airport, the Justice Department announced today. The United States alleges that the companies, John Carlo Inc. and Angelo Iafrate Construction Company, falsely claimed that they had used Disadvantaged Business Enterprises (DBEs) for part of the work on the project when they had not. The DBE program provides assistance to businesses owned by minorities, women, and other socially and economically disadvantaged individuals to enter federally-funded construction and design industries.

Under their contracts, the two firms were required to comply with the Department of Transportations (DOT) DBE regulations and accurately report their DBE contracting to obtain and maintain the construction contracts. The companies claimed BN &M Trucking, a DBE, performed substantial work on the contracts when, in fact, the trucking firm did not and was merely a pass-through used to obtain the appearance of DBE participation.

"Those who contract with the United States must do so fairly and honestly," said Tony West, Assistant Attorney for the Civil Division of the Department of Justice. "It is not acceptable for government contractors to take advantage of programs meant to help businesses owned by minorities and women."

In addition to the $1.407 million payment to resolve civil claims, Angelo Iafrate Construction has also entered into a separate administrative agreement with DOT to ensure future compliance with DBE requirements.

"When contractors abuse programs designed to benefit disadvantaged businesses, they are stealing from the legitimate businesses that the law was intended to help," said Barbara L. McQuade, U.S. Attorney for the Eastern District of Michigan. "We are very grateful to the Wayne County Airport Authority, whose help was instrumental in this case."

The governments claims were based upon an investigation conducted by the Civil Division of the Justice Department, the U.S. Attorneys Office for the Eastern District of Michigan, DOTs Office of Inspector General and the Federal Aviation Administration, as well as the Wayne County Airport Authority. The Wayne County Airport Authority first brought the case to the governments attention and provided substantial assistance throughout the investigation and resolution of the matter.

Component(s):
Civil Division
Press Release Number:
10-1331
Post Thu Feb 22, 2018 7:28 am 
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untanglingwebs
El Supremo

"When contractors abuse programs designed to benefit disadvantaged businesses, they are stealing from the legitimate businesses that the law was intended to help," said Barbara L. McQuade, U.S. Attorney for the Eastern District of Michigan. "We are very grateful to the Wayne County Airport Authority, whose help was instrumental in this case."



Former 5th Ward councilman Matt Taylor added a large community room to his home and regularly held meetings with the Minority Contractors group. Time after time the administration found reasons to deny them contracts based not on experience but on the evaluation of their equipment and their labor pool. It did not matter if they had purchase or rental agreements agreements for additional equipment.
Post Thu Feb 22, 2018 7:42 am 
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untanglingwebs
El Supremo

When the new houses were constructed behind the Kennedy Center (Smith Village) by a minority contractor, I was impressed by the quality of the homes. I was not in the decision by Mayor Williamson to sto construction but it was disturbing to me. I met with the contractor and some companies working for him and was dismayed that they had to leave Genesee County to find work.

When my new neighbor, who lived on a corner, decided to replace her sidewalk, she hired a minority contractor. It was amazing to see this older black man supervising his crew and the speed at which they worked. I don't know construction equipment, but his was awesome. First this machine went down the sidewalk crushing up the concrete. Then a small bobcat picked up the debris. The new concrete sidewalk was done quickly
and efficiently.

I thought of that job often when the City workers replaced sidewalks on the corner of Copeman and Winona. Each council person was allowed to replace a specified number of sidewalk squares, These were definitely not the worst sidewalks. I thought about the older back man and his crews efficiency often as the City job dragged on for weeks and the streets were filled with large trucks an workers.
Post Thu Feb 22, 2018 7:59 am 
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