‘Native American’ claims by contractors to undergo review
Federal, state and local authorities are intensifying scrutiny of minority contracting programs across the country in the wake of a Los Angeles Times investigation that found that companies received more than $300 million in government contracts based on unsubstantiated claims by the firms’ owners to be Native American.
As two House committees prepare to examine the matter, the U.S. Department of Transportation has called for a review of all Native American companies in its minority contracting program nationwide to weed out firms whose owners do not belong to state- or federally recognized Native American tribes.
At the same time, officials in six states have begun stripping minority status from a number of companies highlighted in the Times report. The newspaper determined that government contracts were awarded to those companies and several others because the owners were members of one of three self-described Cherokee groups that have no government recognition and are considered fraudulent by recognized Cherokee tribes.
City officials in St. Louis said they have decertified five firms that received contracts set aside for minority-owned businesses. State contracting officials in Oklahoma and Kansas said they have removed the minority certification from two companies or intend to do so. As of this week, the two firms were still listed as certified in Kansas’ minority contractor database. The California Department of Transportation earlier lifted the minority designation of one company.
In Illinois and Arkansas, state officials said they have started the process of decertifying three companies. The certification status of the three firms in both states was unclear Tuesday.
All of the businesses won certification as minority contractors even though birth, census and other government records reviewed by the Times identified the firms’ owners or their ancestors as white. The contracts were doled out in at least 18 states.
The chairwoman of a House oversight committee said it will take up the Times’ findings, published in June, during a hearing next month.
“Government contracts are a powerful tool for spurring economic growth and job creation, and any abuse of programs intended to level the playing field for traditionally underserved populations is completely unacceptable,” said Rep. Nydia M. Velazquez, D-N.Y., head of the House Small Business Committee. The panel oversees the U.S. Small Business Administration, which issues minority certifications for federal contractors.
Velazquez said the review of the Times’ reporting will focus on determining how the SBA can “ensure contracts are being awarded to the intended recipients.” The review will occur at an Oct. 22 session of the panel’s subcommittee on oversight, investigations and regulations, a Velazquez spokeswoman said.
The chairman of a House committee that oversees the U.S. Department of Transportation said his panel also will examine the Times’ findings during a broader hearing on the agency’s Disadvantaged Business Enterprise program, which awards minority contracts.
Rep. Peter A. DeFazio, D-Ore., said Congress has a duty to “make sure the DBE program is actually helping qualified, minority-owned companies.”
Each year, billions of dollars in contracts for women- and minority-owned firms are issued nationwide through the Transportation Department’s program, which is separate from the SBA and administered by state and local agencies across the country.
Last month, the Transportation Department’s civil rights office sent a memo to those agencies asking them to review all companies classified as Native American-owned, according to a copy obtained by the Times. The memo noted that a 2014 rule change required that contractors claiming to be Native American belong to a government-recognized tribe.
Contractors with membership in a such a tribe are presumed to be socially disadvantaged, a key qualification for the minority contracting program.
“It has come to the department’s attention that some certified DBE firms may have relied on the owner(s)’ membership in Indian tribes that are not federally or state recognized,” the memo states. “It is important to the integrity of the DBE Program that only firms meeting all eligibility standards of the regulation, including social disadvantage, are allowed to participate in the program.”
The memo says that if the business owners are not members of government recognized tribes, “you must initiate proceedings to remove the firm’s DBE eligibility.”
In applying for minority status, the contractors the Times investigated cited membership in the Northern Cherokee Nation, based in Clinton, Mo.; the Western Cherokee Nation of Arkansas and Missouri, headquartered in Mansfield, Mo.; or the Northern Cherokee Nation of the Old Louisiana Territory, located in Columbia, Mo.
The SBA and other agencies granted minority certifications despite the groups’ lack of federal recognition as legitimate Native American tribes. The Times found that the certification process was often spotty, with officials accepting flimsy documentation of Native American heritage or unverified accounts that the contractors suffered discrimination because of their ethnicity.
One of the companies got a contract from the federal Bureau of Indian Affairs for work at a Native American university the agency runs.
The SBA has asked its Office of Inspector General to investigate the Times’ findings. The office conducts probes into possible fraud or other wrongdoing.
The minority contracts are reserved for companies whose owners can demonstrate social and economic disadvantages because of their race or ethnicity.