A Connecticut construction company will pay $2.4 million in fines for alleged fraud tied to a 2007 road project. The settlement is being hailed as one of the most important decisions in decades for minority business owners.
The players are Manafort Brothers, Inc., a Plainville-based construction company, and JFC Construction, LLC, a minority-owned firm in Hartford.
Last week, Manafort agreed to a $2.4 million fine for abuses of the U.S. Department of Transportation's "disadvantaged business enterprise" (DBE) program, which aims to increase participation in construction contracts for firms owned by women and minorities.
"It's probably the most important legal decision that's come down in Connecticut on the issue of minority business development in 25 years," said Fred McKinney, CEO of the Greater New England Minority Supplier Development Council. He helps large companies contract with certified minority businesses. "I think the signal that this ruling represents is very important, because it will finally get the attention of abusers of the system."
Federal prosecutors allege Manafort used JFC as a "pass-through," putting them down as a minority-owned subcontractor for a road project in Bristol in order to qualify for federal money.
Explaining how it happens, McKinney said, "Essentially, we'll pay you to do x percent of the contract, and in exchange, you'll take that money and hire A, B, C, and D companies, who we want to use anyway, but are not qualified for the DBE certification."
Prosecutors alleged Manafort knew JFC wouldn't do any of the work.
Manafort disputed that claim. JFC declined comment for the story, but McKinney said it's not the first time he's heard of this arrangement. "I do hear complaints from DBE firms that they are not getting the opportunities," he said, "and that companies are giving these opportunities to [other] companies that have sort of questionable status."
McKinney hopes the ruling sends a clear signal to businesses around the state. "There are legitimate DBEs out there that want to do the work, can do the work, and are looking for opportunities," he said. "These types of actions not only do harm to those legitimate DBEs; they do harm to the reputation of the whole program, which is, in my view, a good program."