When federal regulators catch people cheating programs funded with taxpayer dollars you’d think the public monies would dry up for the offenders. Not so in a program designed to help minority and women owned businesses obtain work on federally funded highway projects.
The KING 5 continuing investigation, “Fraud on the Job”, has revealed businesses thrown out of the Disadvantaged Business Enterprise (DBE) program are allowed to keep the government contracts they obtained through the very program they abused. And sometimes that amounts to millions of dollars from government works such as the 520 bridge or the Alaskan Way Viaduct.
The state kicked Mukilteo based Grady Excavating out of the DBE program on June 28, 2012. Yet, the contracts the company obtained while claiming to be a disadvantaged business added up to $38.5 million; most of which Grady is still cashing in on. Despite being ousted from the program, the company is still trucking on $31 million worth of government contracts. That’s $31 million not going to small, struggling businesses the program was designed to help.
“That’s horrible. Considering I know small excavating firms and family run businesses that have gone out of business because there’s not enough work,” said Rep. Jaime Herrera Beutler (R) 3rd Congressional District. Herrera Beutler is a member of the Congressional Transportation and Infrastructure Committee which oversees all USDOT programs. “Jamming the system to get a job at the expense of someone else? I don’t know anywhere in American society where that’s OK, except maybe in government.”
Grady Excavating got into the program in 2008 on the premise that a woman, Kim Grady, was the owner and person in charge of day to day operations. But after years of complaints against the company and a three year on and off again investigation by the state agency responsible for rooting out fraud, the Office of Minority and Women’s Business Enterprises (OMWBE), Grady was finally ousted.
Arbiters on the case ruled Kim Grady’s background of working as a cashier and salesperson at Nordstrom did not give her the required experience to run a multi-million dollar trucking company.
“…she does not have the experience and knowledge to make critical day-to-day decisions regarding field operations sufficient to maintain operational control as required by federal regulation (at the time of certification)” wrote OMWBE Certification Committee members. “There is no evidence that she visits jobsites on a regular basis or makes decisions on field operations.”
The Certification Committee also found it suspicious that Kim Grady didn’t appear to have the background to successfully bid on complex construction contracts, yet her husband, Joe Grady, has enjoyed a successful 20 year career in the construction field. Despite appearances that Joe Grady, who is not considered a minority, was actually making key decisions for the company, Kim Grady maintained she was the one in charge.
“Ms. Grady’s only experience in the bidding process came from a class, yet she has been successful in bidding on multi-million dollar contracts. Ms. Grady contends that her husband has no ownership in the business,” wrote the committee. “Mr. Grady has spent his entire career employed in the construction industry….Mr. Grady is also an estimator at KLB Construction. An estimator is integral to the bidding and contracting process.”
T-Max & Silver Streak Trucking
Grady isn’t alone. In September, OMWBE decertified two trucking companies owned by Tina Benson of Maple Valley: T-Max and Silver Streak Trucking.
OMWBE’s Certification Committee ruled the owner did not disclose mandatory financial and real estate records to the state agency. For example “…additional real property (Lot 3) valued at (deleted) was not disclosed by the Firm, but was discovered by OMWBE during its review of the Firm’s eligibility,” wrote the Certification Committee.
The state ruled Benson is not economically disadvantaged and does not belong in a program meant for struggling businesspeople.
“(Her) income stream is a factor for determining Ms. Benson’s eligibility for the DBE program. Her access to capital, equity in business-related and personal assets, and her ability to leverage resources and waive lease payments owed her are consistent with non-DBE businesses that have successfully competed and been awarded trucking opportunities,” wrote the Certification Committee.
Benson’s attorney, John Ahlers, wrote KING 5 to say OMWBE’s conclusion is without merit and they will fight to get reinstated into the program.
“Ms. Benson, who is the owner of two small and struggling trucking companies and who was certified by OMWBE, and her certification taken away—without a hearing or an opportunity to provide her side of the story—based on the fact that the OMWBE rebutted the presumption of economic disadvantage (even though Ms. Benson’s net worth falls well below the $1.32 million cap and OMWBE never raised the argument). If she had had the opportunity to respond, as set forth above, the evidence would have undisputedly shown that Ms. Benson has struggled mightily in the male-oriented industry,” wrote Ahlers.
"I'm really interested in what is the quickest way to cut off these funds," said Herrera Beutler.
After watching segments of “Fraud on the Job” Herrera Beutler began drafting legislation to keep government dollars out of the hands of contractors found taking advantage of a program for the disadvantaged. She’s currently recruiting other members of Congress as co-sponsors.
“We’re still developing the bill language to ensure it won’t allow any sort of work-arounds or loopholes that would let companies keep cheating the taxpayers,” said Casey Bowman, Herrera Beutler’s Communications Director.
"I'm willing to do an Act of Congress to stop this kind of activity. When we discover someone is fraudulent or cheating the system we should be able to put a stop to it," said Rep. Herrera Beutler.