Gov. Chris Gregoire is calling for a criminal fraud investigation into certain companies participating in the state’s minority contracting program. This follows a report by the KING 5 Investigators detailing fraud, waste and abuse in the program which is designed to help minority contractors.
On Thursday, Gregoire asked the Washington State Patrol to look into whether the abuses detailed in the KING 5 report violated criminal laws. The report raised questions about how one minority-owned contractor -- Leajak -- was able to continue winning government business after an investigator from the Office of Minority and Women’s Business Enterprises (OMWBE) found evidence otherwise.
OMWBE is a small state agency tasked with certifying companies for participation in the program. The Washington State Department of Transportation (WSDOT) has contracted with OMWBE for 29 years to do this work.
The state investigator, Melissa Hopkins, believes she was later fired for refusing to sign off on a letter written by OMWBE officials clearing Leajak's continued eligibility
Hopkins's job at OMWBE was to investigate minority-owned contractors who had qualified as Disadvantaged Business Enterprises. So-called DBEs get preferential treatment in landing government contracts, particularly big infrastructure projects like building highways and bridges.
"My job was to maintain the integrity of the program and that is to make sure that DBE's weren't committing fraud," Hopkins said.
Hopkins was assigned last year to follow up on an anonymous tip that came to OMWBE regarding Leajak Concrete Construction, a minority-owned business based in Mountlake Terrace. The complaint alleged that Leajak was pocketing money from state contracts to perform concrete pumping, but was not actually doing the work -- a violation of federal rules governing DBEs.
This wasn't the first time Leajak was investigated. Two years ago a routine WSDOT investigation concluded that Leajak performed none of the concrete pumping work it was contracted to do on the Spokane Street project in Seattle.
Instead, a larger company that was not a DBE, Ralph's Concrete Pumping, did that work, with Leajak collecting a cut of the contract payments.
The new complaint sent Hopkins looking for evidence that Leajak may be pursuing the same type of fraud at other projects.
"I needed to see if there was a pattern of behavior, if this was his mode of operation," Hopkins said. She said she suspected that Leajak had committed the same fraud on contracts it had for concrete pumping on other projects, including work on the Alaskan Way Viaduct.
When Leajak was two months late in turning over documents requested by Hopkins, she wanted to send the company a letter to alert the owner that OMWBE was planning to remove him from the program for failing to cooperate in the investigation. Her boss, Certification Manager Jean Wheat, signed off on sending the letter. "Please move forward on this one. Thanks," wrote Wheat in an email on December 20, 2011.
Leajak finally provided the requested records. The company's owner, Fred Anderson, a well-known leader in the minority contracting community, told KING 5 he never meant to mislead anyone and didn't knowingly do anything wrong. He says OMWBE approved his concrete pumping arrangement in advance, and also that Leajak provided investigators with records that it claims show that concrete pump operators on the job were on Leajak's payroll.
During interviews with six former OMWBE investigators and reviews of internal agency records, KING 5 learned that once OMWBE had the Leajak documents in hand—the investigation would normally be completed by Hopkins. The investigator would make a final determination as to whether the company showed a pattern of gaming the system and, if so, would remove Leajak from the program based on those facts.
But in this case, that didn’t happen. Instead, a few days after receiving the missing documents from Leajak, the investigation was taken away from Hopkins at OMWBE Director Cathy Canorro's insistence, KING 5 learned. Canorro denies that she ordered the investigation removed from Hopkins.
"My guess is they didn't like where I was going with it because I wasn't going to let him get out of it. I had the enough proof to show that on more than one project he was acting like a front company," said Hopkins.
After Leajak provided the missing documents, including contracts and payroll records, the company made an official appeal to OMWBE to reverse Hopkins’s decision to remove it from the DBE program for failure to respond. The case was then sent to the chair of OMWBE’s appeals division, Vicky Schiantarelli, who ruled that Leajak had indeed eventually cooperated, so she reversed the decision made by Hopkins.
Both Canorro and Schiantarelli wrote to KING 5 to say their hands were tied. They couldn’t rule on any other issues, including whether or not Leajak was defrauding taxpayers and the government because Hopkins’s first letter to Leajak only mentioned the company’s failure to cooperate.
"At that point, the process has to move forward and is referred to the Certification Committee. Because the Certification Committee can only use the information provided in the intent to remove letter, it is critical that analysts include all of the reasons why OMWBE has sufficient grounds to remove DBE certification status," wrote Canorro.
"The (Certification) Committee has no authority to conduct its own investigation or to add additional issues that OMWBE did not include in its Intent to Remove Letter," wrote Schiantarelli.
When KING 5 notified Hopkins of these responses she said she was shocked.
"I’ve never heard of this before. In my year-and-a-half with OMWBE conducting investigations, I never experienced a case where the Certification Committee refused to look at additional issues with DBE firms. As per past practice in our office, I should have been allowed to finish my investigation. It was always the case, before this, that any additional evidence I came up with would be considered. This time around the agency didn’t allow me to do my job," said Hopkins.
On March 30, 2012 Vicky Schiantarelli quit her job at OMWBE.
After the Certification Committee’s ruling that Leajak had cooperated by handing over documents, the agency authored a letter of congratulations to Leajak. It stated the company would be recertified in the DBE program for three years. The agency typed Melissa Hopkins name at the bottom of it.
"They put my name on the letter and I couldn't believe it," Hopkins said. "I was furious. I was disgusted. They gave me the letter to sign as if I had completed the investigation, which I hadn’t."
Internal OMWBE documents show that Hopkins was pressured to sign off. In one note, a manager notes that he had asked Hopkins twice to sign the letter, but each time she refused.
"I have ethics. I couldn’t do something that I knew was wrong. It was mind-boggling to do work on this investigation only to have it removed when it wasn’t going the way they wanted it to go. I was so mad I went to my manager and said ‘I will not sign this. I will not help this firm to commit contracting fraud,’" said Hopkins.
Three days after refusing to sign, Hopkins was told she could no longer work a 4-day workweek, an arrangement she negotiated as she fought ovarian cancer.
"They started using that as a weapon against me. They wouldn't allow me to work an alternate work schedule even though my doctor said I needed to," Hopkins said.
And three days after losing her flex schedule, Hopkins's superiors gave her a list detailing her failures on the job.
"I had never been told prior to this that there was anything wrong with my work product," she said. "In fact it was the opposite. My manager would say, 'Gosh, why can't everyone be like you?'"
Two weeks after that, Hopkins was fired by Canorro.
"I knew what they wanted and I wouldn't give it to them. So they fired me," Hopkins said.
Canorro told KING 5 the investigation into Leajak will eventually be completed. "It is ongoing and will be concluded during the renewal review of the firm," wrote Canorro.
Renewal reviews of DBE’s occur every three years. If this policy continues, Leajak’s review will take place in 2015.
In addition to the criminal probe, Gov. Gregoire has ordered a top-to-bottom review of OMWBE by an outside investigator.