Dive Brief:
- Illinois contractor Michelle Cho pleaded guilty to conspiring to commit wire fraud after allegedly acting as a disadvantaged business "straw man" for another company, according to the Engineering News-Record. Cho will be sentenced in March and has already been fined more than $200,000.
- Federal prosecutors said Cho, whose Far East Construction was registered as a disadvantaged business under the Small Business Administration's 8(a) program, conspired with Colorado-based MCC Construction to secure federal construction contracts even though both companies knew that MCC, a non-DBE company, would actually be performing the work.
- MCC and two of its executives have also pleaded guilty to fraud and conspiracy charges and have been fined a total of almost $2 million so far.
Dive Insight:
The SBA's 8(a) designation makes it possible for small and economically disadvantaged to compete for set-aside contracts in all business areas, including construction. The program is known for its rigorous application process.
Cho and MCC are the latest to join a long list of contractors that have allegedly tried to game federal or state programs intended to help disadvantaged, minority- and women-owned firms compete. Some larger contractors complain that the pool of qualified D/M/WBE contractors is thin and that they cannot meet hiring goals. One roadblock to higher D/M/WBE participation, according to attorney Andrew Richards, partner at New York's Kaufman Dolowich Voluck, is lack of a good mentoring program.
One of the more egregious examples of DBE fraud is the case of Canadian contractor DCM Erectors, which was convicted — along with its owner — of using two minority firms as a front on the $1 billion steel work contracts for the Freedom Tower and World Trade Center Transportation Hub projects in New York. One of the minority companies testified that DCM and owner Larry Davis paid him $2 million to do "basically nothing," but Davis' lawyer said both firms did the work they were hired to do and that Davis and DCM would appeal the verdict. Davis is set to be sentenced sometime this month.
