Certifiably Mad

Say "Percy Green," and some Hispanic businessmen see red

Tony Angel, a son of Cuban immigrants, was pursuing a master's degree in economic development at the University of Illinois-Springfield in 1994 when he landed an internship with St. Louis Development Corp., the agency charged with fostering the city's growth. The next year, Angel's SLDC internship turned into a full-time job.

As a neighborhood-development strategist, Angel was one of nearly 100 employees at SLDC doing economic-development-related work. The nonprofit corporation contracts with the city to provide a range of critical services, from planning to approving corporate tax breaks and grants. Since 1991, the agency has also had the controversial role of deciding who gets to participate in the city's minority set-aside programs.

Among Angel's coworkers -- although their paths didn't cross at SLDC -- was Percy Green II, who began working for the agency shortly after voters elected Freeman Bosley Jr. the city's first African-American mayor. Green was put in charge of the SLDC department that certifies minority- and women-owned business enterprises (known as MBEs and WBEs). It's an important function for a city that, as public policy, has a commitment to supporting disadvantaged businesses: The city's goal is to have 25 percent minorities and 5 percent women involved in all city projects, but only MBEs and WBEs certified by Green's department are considered legitimate for the purposes of meeting those goals.

Angel knew Green's reputation and admits being a little awestruck -- the longtime civil-rights activist is still revered for his hellraising during the 1960s and early '70s and for orchestrating the unmasking of the Veiled Prophet nearly 30 years ago. But Angel's admiration turned to anger after he decided to leave the city and go into business for himself.

After working for a couple of years as an executive for a minority-certified contractor, Angel started the Gonzalez Cos., his own site-preparation and demolition company, and applied last year for MBE certification. To qualify, an applicant must submit a broad range of business records, and, in early February 2000, Angel submitted copies of loan papers, lease agreements and tax returns. Caralin Valentine, one of two SLDC certification specialists, spent half-a-day interviewing Angel, watching him work in his office and inspecting the yard where he stored his equipment. Valentine recommended approval of Angel's application. The only step remaining was a vote later that month by the five-member Certification Review Board. But the scheduled February board hearing was canceled. In March and again in April, the board delayed action on the application. Anxious, Angel called Green, who serves as chairman of the certification board, for an explanation. According to Angel's account, which Green vigorously denies, Green told him that the city wasn't about the business of helping Hispanics. "He tells me he is there to serve the African-American male, and he said it very bluntly," Angel says.

Despite Green's alleged brush-off, Angel kept insisting that the certification board take up his application. On July 12, it did -- and promptly voted to turn him down.

Angel didn't take rejection well.

For years, members of the Hispanic Chamber of Commerce, a 19-year-old, 130-member business association, have been growing increasingly concerned about the city's certification process. Tony Angel's case seemed to crystallize their complaints, and the businessmen decided to press their case with Mayor Clarence Harmon. What they got was a meeting with Harmon's right-hand man, deputy mayor Julian Boyd. Representing the Hispanic Chamber was its president, Gilberto Pinela, along with chamber members Sergio Cuevas, Hector Barron, Al Gonzalez and Gonzalez's lawyer. The businessmen each had a story to tell about their experiences with Green and SLDC --Pinela's application for certification was denied in 1996; Cuevas' and Gonzalez's companies failed to get certified in 1999. And now Angel's company had been rejected as well. The stories seemed to add up to one conclusion for them: The city didn't want to do business with light-skinned Hispanics.

"The denial of certification to Hispanic business owners has been going on for years," says Pinela, a Puerto Rican immigrant. "The common comment they get when denied is 'You're not black.'"

Green angrily rejects the accusation: "I would never say that." Indeed, Green says that since the city agreed in 1990 to settle a lawsuit brought by the Minority Contractors Association, he pressed to ensure that nonblack minorities were allowed to participate in the city's affirmative-action program. "I recognized that it applied to the red man, Orientals and Hispanics," Green says.

Warranted or not, the Hispanic Chamber's complaints got results.

First, supervision of Percy Green and his two-person staff was transferred from SLDC to Boyd. Then, on Aug. 14, Harmon directed Green to automatically approve any company that had already received MBE or WBE certification from another local, state or federal agency. In other words, if the state of Missouri or the federal Small Business Administration or Lambert-St. Louis International Airport recognized a company as minority-owned, so would the city.

The moves angered Green, who said that nobody in the mayor's office sought his advice. In Green's view, by agreeing to recognize certification by other agencies, the city was letting companies "shop around" for the least rigorous programs. "It was bad policy -- all it does is allow the front groups in other pools into the city program," he says.

Weeding out the "front"companies -- companies headed by minorities or women but actually controlled by white men -- has been a recurring theme for Green and his staff and was a factor, he says, in why some of the Hispanic businessmen were refused certification.

In Angel's case, certification specialist Valentine had recommended approval of Angel's application, but she expressed some uneasiness about his relations with other companies. She was concerned that Angel rented storage space and maintenance from a competitor, Jones Grading and Excavating. She was concerned about the terms under which he leased trucks. And she was concerned that at the time of her investigation, Angel was vice president of Nunn's Hauling, a company that Angel himself identifies as one of his competitors. Angel resigned that position within weeks of Valentine's investigation.

Green says the certification board questioned Valentine about her concerns and decided to not to certify the Gonzalez Cos. as a bona fide minority-owned business enterprise. "The board has a right to turn down an application even if the staff approved it," he says. "That's my checks and balances."

When it comes to two common types of fronts that somehow get around the scrutiny of other government agencies, Green says he's especially vigilant: husband-and-wife partnerships that, although they're really the husband's business, put the majority of the ownership in the wife's name; and partnerships between a white man and a minority that list the minority as the main owner even though the white man put up all the money.

Green says, "We get a lot of man-and-wife companies where, for example, his plumbing company is suddenly a WBE. They swear it is her company, even though she doesn't have any plumbing experience. We ask where the startup money came from and find out it came from a joint account, that she doesn't have any independent money. So she doesn't have any experience in the business, and she doesn't have any independent money, but they'll argue she can fire her husband. We know that is superficial.

"Another one is no startup money. The nonminority will say to the minority, 'I'm going to value your being with me as equal to a certain amount of capital,' and give him 51 percent ownership, so the minority is not actually putting any money in. A lot of minorities don't understand. They think they really are owners, but when you look at the fine print and things like the bylaws, they aren't."

Pinela's business, the Greenery Plant Co., is a case in point, Green says. According to the case file, Michael Stephan, a white man, founded the company in the early nineties and was the sole proprietor until 1995, when he decided to give Pinela 51 percent ownership in the company in recognition of his "sweat equity."

"He has no right to tell you that," Pinela says angrily. "The fact that I didn't put any money into the business is a personal issue, not a business issue. Michael and I got an agreement that I would be 51 percent owner because I brought in a lot of business that he would not have gotten otherwise. Prior to incorporating, I said I would work hard, put a lot of promotional stuff in -- a lot of networking and contacts -- so I needed to be the leader. It was not for 'sweat equity.'

"What [Green] is saying is bullshit. He is trying to make us look like sleazebags. I don't have to put in capital to be the boss of the business. I can work my way up. I don't have to put in capital in order to become the business owner. It is at the decision of the partners."

Besides, even if a white man is trying to use a minority as a front, it doesn't matter, Pinela argues: "The minority still has to work on the business to make it grow. Even if you are certified, it will not grow if you are not involved with it. The Greenery Plant Co. has grown because of the involvement that Michael and I had in the business. I worked very hard. At 6 in the morning I was watering plants, and at 6 in the afternoon I was still there, watering stock."

As for the Hispanic Chamber's other examples, Green has explanations for those, too. The applications from Cuevas and Gonzalez weren't denied, he says. Their files were closed after the companies failed to submit requested information. Once a company files for certification, the certification investigator has 30 days to act on the application. If the investigator needs more information and can't get it, he or she closes the file.

Cuevas, a Chilean immigrant, remembers things a little differently. He says he got certification for Clean-Tek, his cleaning-supply-distribution company, but was then decertified because he didn't send in information the certification specialist requested. Why didn't he? He already had, he says. "It was already in their hands. A small company [he has four employees] can't afford to get caught up in red tape fulfilling bureaucratic needs."

Since then, Clean-Tek has received MBE certification from the state and the SBA. On March 22, Cuevas applied for recertification with St. Louis. Keri Kugler, a certification specialist in the MBE/WBE certification department, says she will have to return the application and tell him to start all over again because he used the wrong form. Clean-Tek never was certified in the city, she says, so Cuevas must use a certification form, not a recertification form.

The Hispanic Chamber interprets actions such as Kugler's as a violation of Harmon's order to recognize MBE/WBE certifications by other agencies. "That is why [Green] has to go," says Cuevas.

Green sees it differently. He says 120 of the 440 companies the city has certified were certified under Harmon's order. But such certification isn't automatic, he adds: "There are still things they have to do."

"The application has to be absolutely complete," Kugler explains. It is a complex application -- intrusive, some say. It requires that the applicant hand over any business agreements and the company's income statement and balance sheet, in addition to answering 29 questions. "You need information to make sound and fair decisions," Green says. Even with that information, a lot of companies will fail because they forgot to get it notarized, says Kugler.

Green brags that he runs "the most stringent" MBE/WBE program in the area, one designed to ensure "bona fide groups" benefit. The strict guidelines were developed after the black contractors' lawsuit was settled in 1990. Before the inception of the new rules, it was routine practice for large white-owned firms to create or subsidize smaller companies in order to win contracts with set-aside provisions. General contractor Kozeny-Wagner Inc., for example, met its city minority-contracting goals by subcontracting to a minority-owned company that got office space, telephone lines, administrative staff and all of its work from Kozeny-Wagner. Roadbuilder Fred Weber Inc. met minority-contracting goals by subcontracting to a company formed by the wives of key Fred Weber executives and run by former Fred Weber managers. And they were not alone.

In St. Louis, the bona fide minority contractors -- the companies actually owned and controlled by blacks -- were the ones that demanded that the city adopt stricter standards. Ironically, some members of the Minority Contractors Association -- the organization that fought for stricter standards -- have since run afoul of Green's enforcement of the strict standards their lawsuit brought about.

On April 16, 1999, the SLDC certification board of directors denied recertification to Interface Materials Inc. The ready-mix concrete company's principal owner is Sam Hutchison, a longtime MCA member. Hutchison's firm was denounced as a "minority front" during the 1999 protests over state highway funding that shut down Interstate 70, and an investigation by Green's staff found that Interface Materials owed money to white-owned companies and paid a white partner in the firm, but not Hutchison, a salary.

Interface Materials appealed the initial determination by the certification staff to a review board, then to an appeal board, then to the SLDC board of directors. Unsuccessful, Hutchison was forced to take his case to St. Louis Circuit Court, where he eventually prevailed [D.J. Wilson, "Minority Once More," RFT, Oct. 13, 1999].

Walle Amusa, a former city certification specialist who now works as a management consultant, says dissatisfaction with the city's certification process is widespread in the minority contracting community. Even when everything is in order, "it can take up to a year to get certified," he says. "That kind of delay is unacceptable -- it amounts to restraint of trade." Amusa says that at the very minimum, the staff should be increased to ensure that the city can "deliver quality service in a timely matter."

Hutchison wasn't the first black businessman who had to go to court to get his certification restored. In 1998, Circuit Judge John Garvey blocked SLDC from yanking the certification of a small black-owned painting firm [Melinda Roth, "White Out," RFT, July 14, 1999]. Green's staff concluded that a white part-time office manager was actually calling the shots at CCR Inc. But Garvey said SLDC had no actual proof and was acting on "mere suspicion."

Despite those reversals, Green remains unrepentant. "What do those judges have in common with the people the programs are trying to serve?" he asks rhetorically. "To me, it is all politics," he adds, part of a nationwide judicial assault on affirmative action.

Harmon seemed to ignore the courts, too. He didn't take any action until the Hispanic Chamber showed up. Now his successor, Francis Slay, inherits the controversy.

The new mayor, who took office last week, is facing at least two conflicting demands -- throw out Harmon's directives loosening up the certification program or throw out Green.

The Hispanic Chamber plans to press Slay to ax Green -- and move to liberalize the standards that have kept some of its members from winning certification. Pointing to the growth in the city's Asian and Hispanic populations, each of which nearly doubled in size in the 1990s to approximately 7,000, Pinela says, "A lot of businesses would move into the city and contribute to the tax base but don't, because they don't get any support.

"Better certification would symbolize that the city wants to do business with minorities, that they are opening the doors," says Pinela. "If you're turning away emerging contractors and immigrants, you won't have any businesses starting in the city," adds Angel.

But Green says Slay would be sending exactly the wrong message if he preserves the changes made by his predecessor that weaken the city certification program. Slay, says Green, should vacate Harmon's order.

"What good is a program where we say yes to everyone?" he says.

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