Calls to State Hotline a Sign of MWBE Fraudulent Activity
October 27, 2016

Albany Business Reviewby Michael DeMasi—New York’s MWBE fraud hotline has received 76 complaints since it was created in January 2015 to report suspected wrongdoing in the Minority- and Woman-owned Business Enterprise program, an average of four per month.

It’s unknown whether use of the toll-free hotline – (855) 373-4692 – reflects the actual amount of fraudulent activity in the certification and contracting program, which set hiring goals for $7.5 billion in state spending during the last fiscal year.

The owner of a small, minority-owned construction company in Albany believes there’s “absolutely” more fraud than what’s suggested by the hotline’s call volume.

Rockie Mann, owner of JAFJR Construction, said he’s received calls over the years from people asking him to participate in schemes so a non-MWBE firm could easily fulfill the state’s hiring goals on contracts. He refused to do so, but said others agree because it’s easy money.

“A company wanted me to sign off on $800,000 worth of concrete work,” Mann said. “I don’t do concrete. They wanted to give me 3 percent and I said no because if I do a job, number one, I get 15 to 25 percent, and number two, I know nothing about concrete. I declined it. That’s not legal. We can’t do that.”

Read more about Mann and the ups and downs of the state’s MWBE program in the cover story of Friday’s edition of Albany Business Review.

The state Division of Minority and Women’s Business Development first started tracking suspected MWBE fraud in the 2012-13 fiscal year. Prior to the hotline, there were 23 complaints.

“There’s been an increase in the number of complaints filed, which we think is good,” said Alphonso David, counsel to the governor. “We want to create an environment where MWBE firms and majority firms feel comfortable filing complaints.”

Two reasons there might not be more calls are an unwillingness to file a complaint and lack of awareness of the hotline.

“Part of the reason we created the hotline is to incentivize people to make a complaint,” David said. “In the past, many firms thought they had to file a formal complaint and identify themselves. They were concerned if they filed a complaint, they would be blacklisted. We’re not finding a lot of these complaints have merit, but we still think it’s a good idea because in some cases when you see smoke, may be fire. In some cases, it may be a disgruntled business.”

The division can investigate the complaint itself or refer it to other agencies. Of the 76 complaints since January 2015, six have been referred to external law enforcement.

The six do not include a settlement state Attorney General Eric Schneiderman announced two weeks ago with five Rochester-area contractors who falsely claimed to meet MWBE contracting requirements as part of a $1.2 billion modernization of city school district buildings.

The investigation was not prompted by a call to the state hotline, according to Empire State Development, which oversees the MWBE program.

Elan D. Parra, managing director of Lemire LLC, a New York City firm that monitors MWBE compliance for the Battery Park City Authority, said it’s “fantastic” the state has the hotline but it’s important callers understand they can file complaints anonymously.

Also, not all complaints are legitimate or actual examples of fraud.

“Without knowing the substance of the calls, it’s hard to tell whether the quality of the complaints are getting better or worse or whether incidents of fraud are going up,” Parra said.