Political Corruption Gets the Headlines, but Minority Business Fraud Costs Us More

Political Corruption Gets the Headlines, but Minority Business Fraud Costs Us More

Political Corruption Gets the Headlines, but Minority Business Fraud Costs Us More
May 21, 2015

Albany was rocked this month by the criminal charges against state Sen. Dean Skelos, who is accused of using his influence to intervene in Nassau County’s procurement process. Skelos’ case may have gotten more attention, but it’s not the first time that Preet Bharara’s office has found criminal misconduct in the government contracting sector.

While Skelos was forced to resign as majority leader, another bad actor in the contracting process is already on the rebound.

I’m talking about Skanska, the multinational construction giant.

Back in 2011, Skanska paid a $19.6 million fine to avoid criminal charges for widespread minority business fraud for its contracts with the Metropolitan Transportation Authority. Skanska used tactics often referred to as “men in skirts,” where women and people of color are used by white men as fronts to qualify for contracts or subsidies for women- or minority-owned businesses.

It’s not a victimless crime.

Men-in-skirts fraud has deprived women- and minority-owned business enterprises (MWBEs) of countless opportunities and chances to succeed. It has blocked the creation of new jobs in communities of color, and slowed the rebuilding of the black middle class that was badly damaged by the Great Recession.

Skanska paid its fine over four years ago. But this month, an MTA inspector general’s report revealed that the conditions enabling this fraud to occur remain unchanged. Even after more than 30 recent settlements and guilty pleas, the inspector general found that over 70 percent of New York City Transit and Metro-North projects never received a single inspection.

Now, as the Port Authority continues to deliberate over the selection of a prime contractor for the multibillion-dollar LaGuardia Airport Terminal B renovation project, Skanska is reportedly a top contender. That’s right—the same company caught systematically cutting out MWBEs at one transportation agency is set to receive control of a $3.6 billion effort with a 35 percent MWBE participation target.

If we can’t trust Skelos, or the many public servants in Albany who have been arrested for “monetizing” their government offices, how can we trust a for-profit company with a record of illegally dodging minority business requirements? And if Skanska is awarded another billion-dollar deal without accountability, how can we trust the state’s MWBE numbers as a whole?

State government has touted its increased MWBE participation rates in recent years, but those gains have been highly concentrated in a select few places, like the School Construction Authority, the Dormitory Authority and the MTA. A project the size of the LaGuardia terminal renovation will noticeably impact the state’s overall MWBE numbers. The question is, can we trust them? 

This April, The Black Institute kicked off a campaign for MWBE accountability with the release of our report, “Not Good Enough.” We were disappointed, but hardly surprised, to read the MTA inspector general’s report soon after. We know we’ve gotten city and state government’s attention—soon after releasing our report, Governor Cuomo announced a $2 million fund for tech industry MWBEs, and the de Blasio administration revealed it was seeking support for state legislation amending the contracting process.

There’s a reason we titled our report “Not Good Enough”: It a clearly applies to Skanska’s punishment.

We can’t meaningfully address minority business fraud until the punishment is strong enough to deter others from similar crimes. Barring Skanska from the LaGuardia project would be a good start.

That’s also why we’re not backing down from our goal of creating a “chief diversity officer” for New York City—a position that would ensure we have accountability when MWBE goals aren’t met. We’ll be announcing a series of town halls to build support for this, and expect to see City Council legislation soon.

Supporters of the status quo are going to fight us every step of the way. After all, men-in-skirts fraud is big business. Skelos would be more than a little proud.


Bertha Lewis is president of The Black Institute.