5 NY school contractors pay $825K to settle minority-owned business fraud allegations

Dive Brief:

The New York State Attorney General's office announced Thursday that five New York school contractors have agreed to pay a total of $825,000 for allegedly lying about meeting minority- and women-owned business (M/WBE) hiring mandates for the Rochester City School District's $1.3 billion school modernization program, the Democrat & Chronicle reported.
An unnamed whistleblower alleged that, between 2012 and 2014, the companies in question purchased their materials from and subcontracted portions of the project to uncertified firms and then paid M/WBEs to complete documentation stating they'd performed the work.
Authorities will use a portion of the fines to pay the whistleblower ($150,000) and to make restitution to the modernization program ($272,000). Four of the five companies, according to the Democrat & Chronicle, are still working for the school district.

Dive Insight:

Allen Williams, construction board chair and Rochester's director of special projects, said that the penalized construction companies still working in the school modernization program will face increased monitoring of their work by both the school district and the attorney general's office.

Government-funded projects often dictate that a portion of the work be set aside for minority contractors. Unfortunately, rather than make best efforts to bring women-, minority- and veteran-owned businesses on board, some companies take shortcuts for convenience. Prosecutors in these cases target everyone from the contractors doing the hiring to the M/WBE businesses themselves.

In June, Illinois prosecutors convicted contractor Elizabeth Perino for letting two general contractors use her company as a front so that they could meet a minority contractor mandate. Authorities claimed that the two firms paid Perino $365,000 for her role, and she could face up to 80 years in prison.

A New York City jury also convicted a Canadian steel contractor this past summer for M/WBE fraud. Prosecutors alleged that DCM Erectors and its owner paid two minority contractors to pretend they were under contract when DCM actually did $1 billion of work itself on the Freedom Tower and World Trade Center Transportation Hub projects.