He didn't have to use the F-word; Linda Miller knew exactly what he wanted.
Nor was he shy about asking when he called, out of the blue, a few months ago.
This guy was looking to cheat.
Here was his proposition: If Miller, the owner of a St. Louis software- and technology-testing company, would agree to allow her company's name to be used in a bid on a state contract, he'd kick her 10 percent of the contract amount.
They'd tell the state that she'd be testing software -- and she'd even sign documents telling the state that the software worked.
Here was the catch: Miller's company would sit the contract out. Her only responsibility would be to deposit a check in her bank account.
"He offered us the opportunity for 10 percent of the contract and wanted us to sign off that we tested the application and accept the funds," Miller says. "In fact, they were going to test it themselves."
What he wanted to do was borrow Miller's dress.
"I went, 'No way!' I'm not that desperate."
Miller didn't report the guy to the authorities. She threw out his name and phone number, determined not to get mixed up in his scheme. And yet she's still simmering over the guy's indecent proposal.
Why would another business hand over a piece of the action to Miller if she wasn't doing any work on the job?
The simple answer: Her firm is certified as female-owned and controlled, giving her a leg up when it comes to bidding on public projects. Teaming up with her without actually giving up any work was an easy way for a white guy to cash in. Because most government agencies set goals for female and minority participation, white-male-owned businesses constantly scramble to team up with woman- and minority-owned business enterprises, also known as WBEs and MBEs.
Most of the time, the system seems to work just fine. Goals are met. Small firms that might otherwise be shut of out of public projects get a piece of the action.
But when the stakes get high -- a multimillion-dollar bridge-construction project, the renovation of a downtown hotel -- the cheaters come out to play.
The white boys get businesses with the right certification and the wrong motivation to serve as fronts.
The evidence that it happens is more than anecdotal. Several St. Louis area businesswomen -- two of whom asked that their real names not be used because they feared retribution -- say the problem of fronting is pervasive in local publicly financed projects yet has been largely ignored.
They say it's happened on a major Highway 40 project; it's happened on the downtown convention-center hotel; it's happened on a city-funded bridge project. And the allegations of fronting have touched prominent politicians and businesspeople, including an ex-mayor, the wife of a politically influential city official and a long-time board member of a minority-business association.
Instead of aggressively policing contract compliance, the women say, government agencies have looked the other way. Politicians, who could help, do nothing. Prosecutors won't throw the book at the scammers. And companies involved in fronting aren't stopped from bidding on projects in the future.
That willful neglect carries a price. Two businesswomen who refused to play the game say their companies were crushed and their lives threatened; one was so afraid that she fled the state.
But all legitimate minority- and women-owned businesses have been stung.
"They're hurt by it, the integrity of the programs are hurt by it, but mainly it discourages participation," says Percy Green, who ran the city's certification program until last year.
And it's demeaning.
Miller recalls: "The thought that I would consider cheating my home state and jeopardize my integrity -- I was very angry and insulted."
There are at least two ways to set up a front.
A white guy or a white-owned business sets up a company and recruits women or minorities to act as figureheads. The recruits get the title, the office with the big chair and stock ownership, but they don't really control the business.
The other way occurs after a legitimate business is certified. Its solid credentials -- and certification as a qualified WBE or MBE -- make it a powerful fraud magnet. White-male-owned businesses start leaning on them, as Linda Miller was leaned on. "Lie to the government," they're told. "Tell them your company is going to perform some work." After the contract is awarded, it's "Here's a cut of the profits, but don't bother showing up on the job site."
One woman claims her concrete company was squeezed to death by both types of fronts.
Emilene Felger (a pseudonym) worked in the concrete business with her husband for several years before they divorced. In 1999, she started her own concrete company and got certified as a WBE.
Then she plunged headfirst into an all-out effort to team up with big companies on bids, but all she got in return was the proverbial smack upside the head.
She says the owner of one big concrete company asked her why in the world she thought they'd get together with her -- they had their own minority company already in place.
That was the same reaction she received from a union representative. The concrete work was sewn up, she remembers being told.
Naïvely, Felger pressed on: "I thought there was enough work to go around."
At first, Felger says, a minority business enterprise, Interface Materials Inc., seemed to be getting all the local work. The company was owned by Sam Hutchinson, an African-American, and Jim Lohse, a white guy.
Interface eventually tumbled from grace. The company was targeted as a front in 1999, during the protest over state highway spending that briefly closed Interstate 70. Interface had been decertified by Percy Green at the city level, but Hutchinson filed suit in St. Louis Circuit Court, and a judge overturned the decertification.
But with Interface feeling the heat -- the firm eventually went out of business -- Felger thought her company might finally land some work on public projects in the St. Louis area.
But a new competitor, United Materials Inc., quickly emerged.
At United Materials, Jim Lohse was once again behind the wheel. Along for the ride were former city mayor Freeman Bosley Jr. and two of his ex-aides, Tim Person and Walle Amusa.
Amusa has served as a consultant to the Missouri Minority Contractors Association (MOKAN), which helps MBEs and WBEs get work. The group is known for helping lead the 1999 protest that shut down I-70. Amusa also is the treasurer of the African American Political Action Committee, and according to the Missouri Secretary of State's office, a business partner with MOKAN executive director Eddie Hasan in a venture named MOKAN/ADECS. Amusa declines to say what the business does; Hasan did not return a phone call.
As rumors flew in the construction business about United Materials, Felger did her own detective work. And in February 2001, she attended a mayoral-candidate question-and-answer session sponsored by MOKAN and the African American Political PAC titled "A Special Invitation to Look Deeper."
Bosley, the ex-mayor, was running again, and Felger was there to grill him about his concrete company. It was at this session that she learned about the company's ties to Lohse -- and came to believe that United Materials also was a front company.
Person says the allegations were nothing more than a "political vendetta" that arose during the heated 2001 mayoral primary. "It is unfounded, and we honestly believed that if we would go to court, we would have won, hands down," he says. Amusa also denies that United Materials was a front, saying he made a substantial personal investment: "I spent almost $10,000 of my own money, cash, to invest in a company because I thought it was a very good idea."
Lohse and Bosley also have defended themselves against accusations about the company.
Felger, however, says she became convinced that all of the company's principals, including Lohse, were just bit players, that other, more powerful interests were behind the concrete company.
On April 17, 2001, Felger hand-delivered an explosive letter to several legislators in Jefferson City. She left a copy at Attorney General Jay Nixon's house and walked into a meeting sponsored by Lieutenant Governor Joe Maxwell. Maxwell wasn't at the meeting, but a top aide was there. Felger gave him the letter.
The letter involved the convention-center hotel, concrete companies and fronting.
Felger noted that after Interface lost its certification, United Materials -- a new minority-certified firm -- slipped into the space. Felger also claimed that Lohse's real backing came from a large white St. Louis cement company, as well as a big general contractor. She also claimed that a convention-center-hotel project manager admitted that he knew Lohse's new company was a front.
"A majority company is awarded a contract and admits that the minority participation is fronted and everyone turns his or her head," she wrote.
In May, Felger leveled similar charges in a letter to the St. Louis Development Corporation (SLDC), which is helping fund the hotel project.
Two months later, Felger was one of the participants in a conference call arranged by U.S. Senator Jean Carnahan's office to discuss business issues facing Missouri women. Again Felger raised the issue of fronting. Two days after the discussion, Felger wrote Carnahan: "Please read this and try to understand. Between the union and the fronted companies, I don't know how much longer I can hold on to my business."
Nothing good happened when she reached out to the politicians.
In August 2001, Felger says, "I had a phone call that said, 'Maybe when you go out in your car tonight, maybe you better look underneath it. Sometimes they don't start right.'"
Soon after, Felger says, "I had a man call me, and he said he was a friend and he said that they're all having a meeting. They would kill you, but they'd have to explain. You have to be careful."
One of the threats, Felger says, she taped and turned over to federal investigators. At the same time, she was fighting the unions over alleged delinquent dues and trying to get paid for work she'd done at the Darst-Webbe public-housing complex.
Finally, in the fall of 2001, Felger threw in the towel.
"I was worried about my safety," she says.
Even though Emilene Felger and Roberta Dawson don't know each other, their stories are similar.
Dawson started a flooring company in 1984. Her company was certified as a WBE by the state; it also was certified by the U.S. Small Business Administration.
Dawson says she wanted to expand her business beyond flooring. When she asked the St. Louis SBA office for help, she says, they told her to partner with St. Louis Bridge Construction Company, a large general contractor.
In 1995, she set up a joint venture with the contractor, which, in turn, installed a satellite office in her home and integrated her computer system with their system.
She says the joint venture landed a contract to do construction work on a downtown St. Louis bridge. But, she claims, somebody -- she believes it was somebody associated with St. Louis Bridge -- was soon signing her name on her company letterhead without her knowledge or consent.
Dawson says she ended the joint venture and called Jack Thomas, then an employee at SLDC, to complain that she wasn't paid.
"He came over to my house and showed me the payment," Dawson says.
"I told him, 'It looks like our form, but I never signed this.' He reaches up and circles a fax number, but I told him that wasn't our fax number," Dawson says.
She called the phone company and was told the number was assigned to a fax machine located in Morrison, Missouri. The fax was registered to a company with the same name as her company, but the bill was being paid by St. Louis Bridge.
Patrick Dolan, a spokesman for St. Louis Bridge, dismisses Dawson's account as untrue. "That is so totally false," he says. "I have no idea what she is talking about. She made thousands and thousands of false allegations." Dolan says his company has never used Dawson's firm -- or any firm -- as a front.
Two years later, Dawson turned to a St. Louis lawyer, Arthur C. Kellum, for help. She says he reviewed her file, then referred her case to an Alabama firm because it involved several matters that he thought were "frankly beyond my ability to handle."
Kellum wrote the Alabama lawyers: "I had suggested joining as an additional defendant... another contracting company which had a mentoring relationship with [Dawson]. Then I discovered that there are several other claims involving breach of contract in amounts over $25,000 and intentional interference with contractual relationships and fraud which should be considered against this company.
"She needs help from an aggressive litigator from outside the area willing to take on a major bank and contracting company."
The Alabama law firm wasn't interested in the case, Dawson says. "They said it was out of state, they'd be papered to death and it was too political."
Dawson is convinced that her refusal to kowtow to fronting pressure led to problems that forced her out of business.
She claims she received telephone death threats, which she took very seriously because of an earlier bad experience that she says was related to her earlier refusals to front for companies. Her home had been broken into, and all of the water faucets were turned on and left running. As she opened her door, she was greeted with the pungent smell of mold and rotting carpet.
In the dining room, scrawled in what she believes was blood, was the word "bitch." After she turned off the running water, there was another stench she couldn't identify.
"The refrigerator was just bloody," she says. "Our cats' heads were in the refrigerator. They were dismembered." The intruder was never identified.
Dawson eventually went bankrupt, lost her home and left the state.
Few legitimate companies are willing to publicly crusade against fronting. They're just interested in keeping their businesses afloat.
"I don't want to be blacklisted," says the owner of a respected St. Louis information-technology company, who asked for anonymity. "I'm not a martyr; I can't afford to be a martyr -- it hurts."
Her company is certified as both an MBE and a WBE.
"Lip service" is how she describes government goals for minority and female participation.
"There may be a requirement by the state that a company has to bid with a minority, but in some cases, I've been put on contracts and then never notified by the prime contractor that I won," the businesswoman says.
She recalls a few years back, when she received an investigative demand letter from Attorney General Jay Nixon asking for "my invoices and payments to and from this prime contractor."
She sent a reply saying, "I would be very glad to send you the information, and you're free to look at my books, but I've never done any business with this prime contractor."
Nixon's contact was the first time she became aware that her company was being listed as a subcontractor on contract bids without her knowledge.
The woman says that although the prime contractor is headquartered in another state, the company has a large presence in Missouri. After her letter went to Nixon's office, she says, she never heard from the attorney general again. She doesn't know whether the prime contractor is still doing business with the state or whether it was sanctioned for listing her as a subcontractor without her knowledge.
But she's not too riled up about the practice. She even questions whether it's really fronting.
"Fronting isn't to me such an issue as access. But I guess, in a way, if they use you and don't use you -- use you to win and then don't use you, that's not really true fronting. That is basically just lack of business ethics," she says.
That's not how federal regulations define fronting. A front is not only a fake company, it is a real company that "doesn't perform a commercially useful function" on a job.
That's the phrase that recently nailed DKW Inc. -- a firm that, ironically, is celebrated as a local minority success story. Dorrie K. Wise, president of DKW, is also a longtime board member of MOKAN.
In November, the Missouri Department of Transportation made an official finding that DKW did not perform a "commercially useful function" on an I-70 construction job near St. Louis. When MoDOT started accepting bids for the work, DKW was listed by three different St. Louis contractors as the minority participant. St. Louis Bridge won the contract, but when it came time for DKW to handle its part, a MoDOT investigator discovered that the company wasn't doing any of the work. Instead, Thomas Industrial Coatings Inc., which isn't a minority- or woman-owned business, did the work.
On December 5, 2002, the state hit St. Louis Bridge with an $800,000 fine for using a front company, then turned over its findings to the federal government. Now DKW and St. Louis Bridge are the target of a federal probe. Wise did not return a call for this story; St. Louis Bridge's Dolan says his company expects to be "fully vindicated on this.
"We have never been involved in fronting and never will be involved in fronting," he says.
Although Wise may be in hot water with the highway department and the feds, there's no rush in St. Louis to decertify her company.
Most local government officials would rather play the "see no evil, hear no evil" game.
But there are notable exceptions.
Bernie Rivers Blackmon sits at a large conference room table, nervous and alone. She could have brought a spinmeister, a lawyer or a high-ranking executive to the interview, but she didn't.
Blackmon is the director of the two-year-old office-of-diversity program at the Metropolitan St. Louis Sewer District. And she's the one responsible for asking the auditor to look closely at a possible front company.
"The request I made to the internal auditor is to be vigilant about the subcontractors. You know, they can be unscrupulous and they can have arrangements, and ... they are being unfair to their peers," Blackmon says.
That request led to the recent discovery that a woman-owned company is just a front for a couple of white guys in Pennsylvania. The company, Penn Credit of Missouri, is a collection agency owned by Robin Beckerle, wife of former St. Louis 25th Ward Alderman Paul Beckerle.
MSD awarded a contract to Robin Beckerle in 1995, but according to the draft audit report, her company didn't do the work on the contract -- another firm did.
The auditor found that Beckerle's company didn't have an office in Missouri. She only had a post-office box and an 800 number that connected to Penn Credit Corp., a separate Pennsylvania corporation that was the parent company of Penn Credit of Missouri.
Although the Pennsylvania company didn't have a contract with MSD, it was doing all of the collection work.
The auditors also discovered that Beckerle and the Pennsylvania company had a secret side agreement. The Pennsylvania company received the 24 percent commission, then turned around and gave Beckerle a 15 percent cut of the gross commissions. From 1998 until 2002, Beckerle received $136,375 for signing the contract with MSD and opening up a post-office box.
What's more, the report notes, "alleged relations between a former MSD Trustee and a former City Alderman were used to develop the business relationship with the district."
And several other Missouri government agencies were Beckerle's clients, the draft audit alleges. Beckerle's company appeared to be "just a shell pass-through for the business," the audit says.
Beckerle will not talk about the audit findings: "I just talked to my husband, and there are some other things going on, so I'd rather not comment right now."
By "other things," she may be referring to an investigation by the St. Louis circuit attorney's office.
After Blackmon released the auditor's finding, she sent the information to the prosecutor.
On April 19, 1999, U.S. Attorney General Janet Reno sent out a memo to all federal prosecutors, including the one in St. Louis.
Reno put her lawyers on notice that the Justice Department was increasing its "efforts against fraud in affirmative action procurement programs." The heightened attention was coming in response, she wrote, to "concerns raised by minority contracting groups and ... the federal agencies charged with overseeing the federal procurement system," Reno says.
Within months of Reno's memo, the Justice Department was getting indictments and convictions.
In late 1999, a federal jury in West Virginia convicted two men, Kermit Bunn and Charles Striblin, of conspiracy to defraud the government, wire fraud and obstruction of justice. Bunn's company named Striblin's company an MBE subcontractor on a highway project. But the two had a side agreement: Striblin wouldn't do any of the work, but he'd receive a cut of the contract.
In Los Angeles, a federal grand jury indicted officials from a large company and a small minority business for lying to the government about minority participation on airport contracts. A city official in charge of monitoring minority-outreach programs was also indicted.
In St. Louis, sources say, the FBI is investigating St. Louis Bridge and DKW Construction. The Department of Labor's Office of Racketeering has an open case file involving Felger's accusations.
But so far, St. Louis federal prosecutors haven't issued any indictments.
Ray Gruender, U.S. attorney for the Eastern District of Missouri, says that fronting is "something that we are quite interested in prosecuting.
"We consider anyone who would falsely either put up a front or identify themselves as minority. Those are the kinds of cases we're interested in prosecuting and that we believe are fraud," Gruender says.
Gruender says although he can't comment on any specific investigations that are pending, he does recall a case he handled: "Ten years ago, I actually prosecuted a case where a man basically used another African-American employee's name to head up a phony company to get government printing jobs."
Gruender says the man entered a guilty plea in the case.
But a ten-year lapse in prosecutions sends a powerful, if unintended, message to swindlers and schemers: We've got more important things to do than clean up corruption.
On the state level, things aren't much better.
Scott Holste, a spokesperson for Attorney General Jay Nixon, says he can't recall a prosecution against a front company by Nixon's office.
Morris Hudson is the director of the Missouri Procurement Technical Assistance Program. The group receives taxpayer money to help small businesses win government contracts. However, it isn't involved in government compliance and enforcement.
Hudson says that if he's alerted to a fronting problem by one of the businesses he works with, "we would bring it to the attention of the proper authorities, whether it was federal or state."
And, he says, "you can go to a state representative and the state senator and they can jawbone it, but there really isn't any legal mechanism to go to if you have a problem."
Hudson admits that he's heard about problems with blacklisting:
If a WBE "makes waves, then she may get locked out of the St. Louis market."
He adds, "St. Louis is such a tough area to break into."
On the local level, United Materials never got hit with any criminal charges. There's no word yet on whether the St. Louis circuit attorney's office is going to prosecute Beckerle and the guys in Pennsylvania.
This means that policing front companies lands squarely in the lap of government employees. And Percy Green says that honest people willing to stick their necks out and crack down on cheats end up paying a high price because politicians aren't interested in honest programs and neither are contractors.
Green should know. He was the official who stripped Interface of its certification and investigated the financing and ownership of United Materials. He was kicked out of his job by Mayor Francis Slay in September 2001, after which airport officials took over city certification.
"Anytime you are doing an assessment or an audit, you know you always got people who want to attempt to bribe you," Green says.
"And you got some people that are vulnerable to that for whatever reason. And if you're a politician, a politician lives for the day."
Jonathan Bean has written extensively about preferences and fronting.
"The fronts are nothing new," says Bean, a history professor at Southern Illinois University-Carbondale. They go back to the early 1970s. These programs depend for their success on dishonesty and deception.
"The goals are too high for the available legitimate contractors, so you have the charade of big white contractors' mentoring minority firms."
Bean says that some cities "have been barring contractors guilty of fraud. That coupled, with heavy fines, might reduce the problem."
St. Louis hasn't taken those kinds of steps.
Felger, the former concrete contractor, is also a cynic but one who keeps trying to draw some attention to the problem.
She was invited to speak to a Missouri legislative committee last spring on a bill dealing with employment issues. Though the proposed legislation didn't have anything to do with fronting, that didn't stop her from talking about it.
The Women's Action Resource, a not-for-profit that works to help women business owners, has also taken steps to address the problem. Jan Scott, WAR's president, says that last year she got permission to put together a program during a small-business-contractors conference.
The program title: "How to Succeed in Business Without Even Fronting."
Scott says she's pessimistic that the fronting problem will be addressed.
"I don't see what the answer is -- there has to be some kind of teeth," she says.
Meanwhile, Bernie Rivers Blackmon at MSD continues her efforts to run a clean program and purge cheaters.
"The big picture is that it is more important to eliminate companies like that from the public dole at the expense of legitimate companies."
But Blackmon notes that her efforts can also have the unintended consequence of hurting the legitimate companies she tries to help: "Just the way I'm trying to build legitimacy into our program, these firms have spent a lot of time to build viable companies.
"Now they're being looked at with a jaundiced eye."
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