Public records show fraud on transportation projects ignored for years

Print
Email
|

by SUSANNAH FRAME / KING 5 NEWS

Bio | Email | Follow: @SFrameK5

KING5.com

Posted on May 31, 2012 at 11:42 PM

Updated Monday, Jun 4 at 4:53 PM

For years a small department within the Washington State Department of Transportation –the Office of Equal Opportunity (OEO) - has documented widespread fraudulent activity within the state’s minority contracting program. Yet the KING 5 Investigators have found little is done with the reports. In several cases in which OEO caught a contractor fraudulently obtaining tax-funded contracts, the reports weren’t passed on to investigators who had the power to do something about it. In other cases the information within OEO’s reports was ignored.

Purpose of OEO

Since 1992 OEO’s mission has been to monitor WSDOT’s equal opportunity, affirmative action, and contract compliance programs. Within that mandate is the responsibility to make sure federal regulations are followed in the program for minority and women-owned contractors, also known as Disadvantaged Business Enterprises (DBE’s).

Federal law requires that a certain percentage of DBE’s are hired to work on transportation projects funded with federal dollars. In an unusual arrangement, the policing of who qualifies as a DBE is carried out by a separate state agency: the Office of Minority and Women’s Business Enterprises (OMWBE). It’s OMWBE’s job to remove companies from the public contracting program if they become too large to qualify or if they’re caught cheating the system. WSDOT has an inter-agency contract with OMWBE to do this job. For that reason, OEO oversees the work of OMWBE.

OEO findings

Over the years, OEO has issued dozens of reports, including annual OMWBE program audits and reviews of DBE activity on WSDOT projects. Under Washington state’s public records law, the KING 5 Investigators obtained OEO reports which detail several recent examples of fraudulent activity by DBE’s and in many cases, the large contractors who hire them.

In one 2009 case, OEO investigators found a woman-owned trucking company conspired to "fraudulently obtain" government contracts by using equipment and employees from other companies to do her work. OEO also noted the owner was “taking unfair advantage of the DBE program” by hiking up trucking rates on taxpayer-funded jobs.

In other records OEO wrote a minority-owned heavy construction sub-contractor "violated, aided and abetted in a fraudulent practice" in 2009 by collecting millions of dollars for work his company didn't do. A large general contractor did the work instead. The OEO investigators also wrote the DBE and general contractor “have a contrived relationship to defraud the federal government from monies obtained fraudulently under the DBE program.”

In another in example in 2010, OEO stated two minority-owned concrete companies scammed the government by "functioning as a pass-through." In this scenario, the DBE’s were awarded the contract because of their minority status, the DBE owners took a cut, then passed the work on to a non-minority business.

Each one of these companies is still in the program. That continued DBE designation means despite the findings by OEO, each one is still obtaining tax dollars to work on roads, bridges and tunnels.

When KING asked the director of OMWBE, Cathy Canorro, why companies caught participating in fraudulent activity were still in the program she appeared out of touch.

“I'm not aware of any firms who have been caught committing fraud," said Canorro. “OMWBE is addressing those concerns as fast as it can given the resources provided by the legislature.”

“Nothing has changed”

A former OEO investigator, Marilyn Jeffrey, worked for the office from 1990 to 1998. During that time Jeffrey recorded fraudulent activity she found during routine visits to job sites. She told KING she became frustrated that her supervisors at WSDOT didn’t act on any of her findings.

“Nothing was fixed. Nothing was addressed. The issues were there. I kept discovering them when I went out to do the reviews,” said Jeffrey. “Nothing has changed.”

Worse yet, according to Jeffrey, her supervisors told her to stop documenting problems with the minority contracting program.

“I was waving the flag. I was bringing these things to their attention continuously and it kept getting worse. It didn't get better. I was told not to do it," said Jeffrey.

Jeffrey said she does not know why state officials discouraged her from bringing the problems forward. She eventually quit state service after eight years at OEO because of these frustrations.

“When I discovered problems I would try to shed some light on them and say, 'wait, this isn’t right. This is not according to the (federal) regulations.' And I was naïve enough to think they wanted to fix them,” said Jeffrey.

Millions into the wrong hands

KING 5 studied hundreds of WSDOT’S own records and identified 10 minority contractors -- still in the program -- that OEO has documented should not be participating.

A KING analysis of state financial records shows since 2008, those 10 companies were awarded more than $176 million in government contracts to work on projects such as the replacement of the 520 bridge and the Alaskan Way Viaduct. That is $176 million in tax dollars that went to the wrong people.

Houston Drayton is a diversity consultant who has worked to get more minorities on public construction jobs for 20 years.

He says when state officials turn a blind eye to documented cheating, it hurts hundreds of legitimate small, struggling, businesses that are in need of the work.

“($176 million would) give them hope. They go out, they buy houses, they get married, they raise their kids and make a decent income. They’re allowed to do the same things that you and I do. That’s what $176 million does (for disadvantaged minority communities),” said Houston.

OMWBE director Cathy Canorro, who was appointed by Gov. Chris Gregoire, has two more weeks on the job. She resigned her position after KING aired the third report in this series. Gregoire has appointed Chris Liu to take over.  Liu is the former director of Washington's Lottery and most recently held a director's position with the State Liquor Control Board.

“Chris’ experience in customer care and executive oversight of complex agency operations has earned him my confidence in this new role,” Gregoire said. “His knowledge of customer needs will be a tremendous asset to OMWBE.”

Fourteen years after leaving OEO, Marilyn Jeffrey is relieved to see some change taking place.

“I’m really thankful that it’s coming to light now,” said Jeffrey. “And I’m hoping, it gives me hope, that something’s going to be done about it because people who are legitimately deserving of this leg up – which is what it’s designed to do – need to be in there. They need to be part of this program. These programs are not bad programs; they just need to be done right.”

Print
Email
|