Dive Brief:

• A Los Angeles Times investigation has revealed that, since 2000, U.S. federal and state agencies have funneled more than $300 million in set-aside contracts intended for Native American-owned businesses to companies whose owners have inadequate or no proof of that heritage. 
• Most of the contractors the Times investigated claimed membership in one of several Cherokee groups that are not recognized by the federal government and are considered fraudulent by legitimate Native American tribes. The Times' look into how agencies register and award contracts intended for Native American-owned businesses uncovered inconsistent vetting across agencies and, in general, weak oversight of the process. 
• The Small Business Administration changed its minority contractor certification policies in 2011 and 2014 to require that claims of Native American ancestry be backed up by proof of enrollment in a federally recognized tribe, but the Times found that the agency still had suspect companies, which were grandfathered into the SBA system, on its rolls as of 2018. Each year, the federal government awards billions of dollars to businesses that identify as Native American-owned.

Dive Insight:

This is not the first time that firms that don't have identifiable Native American ancestry have taken advantage of programs intended to help small minority and otherwise disadvantaged businesses. 

Just this week, two contractors who had been implicated previously in a case of minority fraud were charged in a 16-count indictment by a federal grand jury in Kansas City, Missouri. The alleged scheme brought the two approximately $346 million in set-aside contracts through the use of sham companies headed up on paper by a service-disabled veteran and a Native American enlisted by Patrick Michael Dingle of Parkville, Missouri, and Matthew L. Torgeson of Topeka, Kansas.

Dingle and Torgeson could be forced to forfeit a total of more than $8 million in cash from personal and business accounts plus other assets like vehicles and real estate.

Meanwhile, Wisconsin contractor Brian Ganos awaits sentencing after pleading guilty to two counts of minority fraud. Ganos, who used to be a certified minority contractor, allegedly controlled companies that were supposed to be run by other disadvantaged individuals. Each count carries a maximum prison term of 20 years and a $250,000 fine, but prosecutors have agreed to a deal in which Ganos would serve only a maximum of 78 months for both counts and pay a $5,000 fine. In addition, the government has seized more than $1 million of Ganos' assets. ​