By Kim Slowey
Oct. 17, 2018
Dive Brief:
Bell Mechanical and Kaplan Schmidt Electric have been named in an alleged minority contractor scheme in Rochester, New York, that resulted in the arrest of Orville Dixon, head of Journee Construction, earlier this year, according to the Democrat and Chronicle. The two local contractors were named after an analysis of Rochester City School District contracts and complaints by the FBI and U.S. attorney general.
Bell and Kaplan Schmidt allegedly needed to hire a certain percentage of minority- or women-owned subcontractors to meet the requirements of the school district’s modernization program. Instead, the two supposedly used Dixon, who is African-American, and Journee as a “pass-through” to make it appear as if Journee was doing the work. Bell allegedly created a fake purchase order in 2013 that showed it bought $600,000 worth of HVAC equipment from Journee and put Bell’s workers on Journee’s payroll to make it appear that Journee was staffing the project. Kaplan Schmidt also supposedly falsely claimed it purchased material from Journee and allegedly agreed to pay Dixon’s company 2.5% of the subcontract amount.
In 2016, contractors working for the Rochester school district were fined a total of $825,000 to settle claims of fraud related to minority contracting. Those companies were Concord Electric Corp. (fined $350,000), Hewitt Young Electric ($160,000), Michael A. Ferrauilo Plumbing and Heating ($90,000), Manning Squires Hennig ($200,000) and Mark Cerrone Inc. ($25,000).
Dive Insight:
There are a growing number instances of minority contractor fraud in the U.S., possibly a result of more state and local government agencies adopting or increasing minority- or woman-owned business requirements. Sometimes there may not be enough qualified minority firms available for the job, but in some cases, contractors just want to expedite construction and are willing to risk the potential fallout.