Transportation, Distribution & Logistics

Companies abuse certification to nab contracts: Critics wonder if they truly are 'disadvantaged'

February 21, 2005

Indiana companies are playing the system to get millions of dollars in federal highway funds by posing as and receiving state certification as economically disadvantaged, minority or women-owned businesses.

Under federal law, a prime contractor bidding on a federally funded project has to subcontract a certain percentage to businesses that are certified by the state as disadvantaged. The idea is to ensure that these companies have an equal opportunity to become successful.

Files at the State Department of Administration show women-owned businesses run by men, minority-owned businesses controlled by white contractors, and disadvantaged businesses owned by millionaires.

These are among the findings uncovered by WISH-TV (Channel 8) in a wideranging investigation that showed undeserving companies were able to get and keep certification as a Disadvantaged Business Enterprise, a minority- or women-owned business enterprise.

The investigation showed the state Department of Transportation sometimes overrules recommendations by the state Department of Administration to deny certification to ineligible companies.

"Certification is not about certification. It's about money," said Elena Looper, former deputy commissioner for Minority and Women's Business Enterprises at the Indiana Department of Administration.

Looper, appointed by the late Gov. Frank O'Bannon in early 1997, was fired 13 days after Gov. Joe Kernan took office. "I didn't do what people wanted me to do," she said.

Kernan appointed long-time ally Ronalda Minnis to replace her. The task: Get rid of the backlog of all the companies waiting to be certified. Certify more...faster.

"Companies know how to work the system," said Minnis.

Prime contractors, many of them white males, don't want to give up any of the money that's up for grabs in INDOT's $770 million annual highway construction budget. The U.S. Department of Transportation's chief watchdog, Ken Mead, says it's a national problem.

"Every time we turn over a rock, we find fraud in the DBE program," said Mead. "This crime defrauds the very integrity" of the federal program.

Federal regulations that govern removing a DBE's eligibility are very detailed and make decertification extremely difficult.

Such is the case of Slussers Green Thumb of Logansport, whose DBE and WBE certifications expired in 2003. State certifiers from the Department of Administration, examining Slussers' application for recertification, alleged last summer that owner Cecilia Slusser's husband, really runs the business. But certifiers were unable to find "new" tangible evidence to support that accusation, as required by state law.

Last September, the certifiers recommended, with reservations, that the company be recertified as a women-owned business, but simultaneously recommended the company be "graduated" from the DBE program because Slussers makes too much money to qualify. Slussers appealed to INDOT and subsequent foot-dragging by the agency allows the company to keep getting federal highway money.

"Biggest thorn in my side, I could not stop the corruption in the (highway) construction industry," said Harry Alford, who worked for minority business development under then-Gov. Evan Bayh. He's now president of the National Black Chamber of Commerce.

One of Gov. Mitch Daniels' first executive orders was to outsource the certification of minority-owned firms to the Indiana Regional Minority Supplier Development Council, a private organization that certifies minority businesses for its corporate members, including Eli Lilly and Co.

The details of that arrangement have yet to be hammered out, but the investigation exposed concerns about the council. Case in point: Locally-based Mezzetta Construction was recently certified by IRMSDC, in spite of being turned down for certification by the city of Indianapolis and twice by the state.

IRMSDC President Reggie Henderson said his group stands by its decision to certify Mezzetta, and he said that IRMSDC's certification decisions usually mirror those made by the city and state. Henderson stopped short of providing examples, noting that most of the work his group does is proprietary.
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