They look like minority businesses and qualify for the plum jobs available only to minority firms under affirmative action programs -- but they aren't. In a case highlighting just the sort of fraud that such unconscionable government-sponsored discrimination programs inevitably spawn, a major highway contractor has been penalized for setting up several puppet firms to qualify for work that it could not otherwise get.

Williams Brothers and its owner and chief executive, James D. "Doug" Pitcock Jr., are Texas construction legends. Formed 50 years ago to take advantage of the new Interstate Highway Act, the company has built and rebuilt virtually every freeway in Houston and had more than $400 million in revenues in 2004, virtually all from the Texas Department of Transportation.

The state transportation department started its program for "historically underutilized businesses" in 1983.

Anyone receiving federal highway dollars would have to make sure a percentage was subcontracted to women and minorities, later changed by court cases to anyone who could prove a disadvantaged background.

According to FHWA case files and depositions, Pitcock asked two of his Hispanic workers if they would like to become a company.

Williams Brothers sold the men equipment it had been using to mix concrete, loaned them part of the money for the purchase and co-signed on loans for the rest. The men did business exclusively with Williams Brothers.

The FHWA and state transportation department both argued the subcontractor wasn't independent enough, and the state eventually decided to "graduate" it from the affirmative action program for exceeding the program's cap of annual business.

The company folded soon thereafter.

The federal penalty concerns a second and third subcontractor.

Williams Brothers sold the equipment from the defunct subcontractor to a man who in turn leased it to his wife. She sold concrete back to Williams Brothers.

Such programs invite this sort of fraud. By awarding contracts based upon critereia other than quality and price, there is always an incentive to find a way to "buck the system." There is no telling how much money such programs have cost the taxpayer over the years -- and cases like this show that a fair chunk of it was spent enriching those engaged in fraud.

Posted by: Greg at 01:44 AM | No Comments | Add Comment
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