Fraction of Indian Blood Worth Millions in Business : Transit: Critics cite 1/64th-Cherokee contractor as example of abuses, laxity in program for minority firms.

Joining the Cherokee Nation has been worth millions of dollars in construction work to Jon McGrath.

The blue-eyed, fair-skinned contractor from Tulsa, Okla., who is 1/64 American Indian, has obtained $19 million in minority subcontracts on the rapid transit system in Los Angeles--more than any other “disadvantaged” firm.

McGrath’s Cherokee ancestry is the equivalent of having a great-great-great-great-grandparent who was a full-blooded Indian. But it allowed him to gain membership in the Cherokee Nation of Oklahoma and to subsequently obtain certification for McGrath Construction Corp. as a minority firm.

Such certification--granted by government agencies across the country--made McGrath’s company eligible for lucrative public works subcontracts meant for disadvantaged businesses.

The McGrath case, critics say, is an example of how the federal goal of bringing minority contractors into the white-dominated construction industry is being subverted. The case also shows that Los Angeles transit officials sometimes are unaware of important regulations governing the certification of disadvantaged companies.

The Times has found that firms with questionable minority status and companies serving as alleged “fronts” for non-minority businesses have won tens of millions of dollars in subcontracts on the rapid transit system under construction in Los Angeles.

McGrath’s minority status has been repeatedly disputed by a Los Angeles-area labor union, and now the prime contractor who gave McGrath millions of dollars in public works contracts is “uncomfortable” with the fact that McGrath is only 1/64 American Indian.

McGrath says that he is a bona fide minority entitled to contracts that he has obtained as the owner of a “disadvantaged business enterprise.”

Jon Michael McGrath’s claim of minority standing hinges on an unusual clause in the constitution of the Cherokee Nation of Oklahoma. Under the clause, anyone who can trace an ancestor to Cherokee tribal rolls at the turn of the century can join the tribe.

McGrath, the son of a railroad contractor, joined the Cherokee Nation in 1981 at the age of 22 after showing proof that a grandmother who was 1/16 Indian ancestry had been on the rolls.

Asked why he had joined the tribe at that time, McGrath replied: “That was a turning point in my life. . . . It was time to start being responsible.”

When McGrath joined the Cherokee Nation, he was vice president and 25% owner of Railroad Contractors Inc., which that year had applied for certification as a minority firm, according to Oklahoma state Department of Transportation records.

It is unclear what happened to that application for minority certification. But 3 1/2 years later, in November, 1984, the McGrath Construction Corp. was formed with Jon McGrath as president. The company was subsequently certified as a minority firm by public works agencies across the country.

These certifications made McGrath eligible to receive minority subcontracts from large non-minority prime contractors that bid on public works jobs. Federal regulations require that prime contractors seeking public works contracts make “good faith” efforts to hire minority firms as subcontractors.

During the last six years, Herzog Contracting Corp. of St. Joseph, Mo., has used McGrath Construction Corp. as a minority subcontractor on public works jobs in Los Angeles County, San Diego County, Santa Clara County, Sacramento, Portland, Baltimore, Washington, D.C., and Texas.

Herzog was awarded a total of more than $180 million, and McGrath was awarded $28.6 million in minority subcontracts, public records show.

McGrath, whose business headquarters is a trailer on a weedy lot near downtown Tulsa, said Herzog teamed up with his company because “they like our work.”

The relationship allowed McGrath’s business to rise virtually overnight from small rail jobs in Oklahoma worth less than $100,000 each to public works jobs worth 10 to 100 times that amount.

In March, 1987, McGrath was awarded his first subcontract on the Los Angeles transit system--a $13-million construction job on the Blue Line. Herzog, the prime contractor on that job, received $43.9 million. The companies also worked together on two other Blue Line contracts.

Now, after a six-year relationship, Herzog would like to sever its ties with the smaller company because of the “great suspicion” caused by union challenges to McGrath’s claim to being Cherokee, according to Herzog attorney George Kieffer.

Herzog, the attorney said, has become “uncomfortable” with the fact that McGrath is only 1/64 Indian. Kieffer said Herzog is attempting to subcontract with black- and Latino-owned firms.

“This (controversy over McGrath’s status as a Cherokee) has put a severe strain on our relationship,” said Al Landes, Western states vice president of Herzog. “We almost can’t afford to use Jon.” The International Union of Operating Engineers Local 12 has repeatedly complained that McGrath acts as a “front” to enable Herzog to obtain contracts.

McGrath and Herzog deny the accusation, and attribute it to the union’s anger over the refusal of the companies to hire union workers in Los Angeles.

The Labor Research Group, representing the union, formally challenged McGrath’s claim to being Indian in a July 31, 1987, letter to the Los Angeles County Transportation Commission.

Agencies such as the Transportation Commission are authorized under federal regulations to require a contractor whose minority status has been challenged to present evidence of being the victim of social and economic disadvantages.

A federal regulation contained in county transportation commission guidelines states:

“The individual’s social disadvantage must be chronic, longstanding and substantial, not fleeting or insignificant. The individual’s social disadvantage must have negatively affected his or her entry into and/or advancement in the business world.”

But county Transportation Commission officials did not require McGrath to present such evidence and instead accepted documentation that the contractor is 1/64 Indian and a member of the Cherokee Nation as proof of his disadvantaged minority status.

“It is being continually reasserted by the Cherokee Nation that he (McGrath) is a member of the Cherokee Nation . . . and we accept that,” said Leslie Porter, deputy executive director of financial and administrative services for the Transportation Commission.

Asked about federal regulations requiring proof of chronic disadvantage when a minority firm is challenged, Porter said, “I’m not familiar with that.”

When the commission failed to require McGrath to prove that he was disadvantaged, the union forwarded its complaint to federal authorities. In 1988, the U.S. Department of Transportation ordered state transportation officials in Oklahoma to hold a hearing on McGrath’s status as a minority contractor.

Three witnesses testified for McGrath at the hearing held Sept. 13, 1988. No one appeared in opposition to McGrath. John Richardson, who operated the Labor Research Group, said he does not recall being notified of the hearing. Norman Hill, general counsel for the Oklahoma state Department of Transportation, said Richardson probably was not notified because state officials did not know the identity of the complainant.

McGrath testified at the hearing that he had considered himself a Cherokee since he was a child and, as proof, said he remembered raising his hand in the sixth grade when the teacher asked how many of the students were Indian. He testified that since his childhood he had attended Indian events such as pow-wows--which are open to the public. He also said he joined several Indian business organizations as an adult and received a minority enterprise development award in 1986.

McGrath’s testimony did not relate any instances of discrimination or disadvantages except his assertion that other businessmen were occasionally reluctant to advance him funds or supplies when they learned his company was categorized as a minority firm.

Asked if any competitors had made “discriminatory remarks,” McGrath answered, “Yes they have. On one occasion a gentleman made a comment . . . that I was about as much Indian as a particular part of his anatomy.”

Robert Lee Fleming, registrar of the Cherokee Nation of Oklahoma, testified that McGrath joined the tribe in 1981 and had requested an absentee ballot to vote in a tribal election in 1987.

Finally, Gary Miles Victor, who identified himself as Osage and Choctaw, testified that he had known Jon McGrath’s father since 1956 and that the elder McGrath was proud of his Cherokee background. Victor said that he had been out of state when Jon McGrath was growing up, but that he had subsequently seen the younger man at pow-wows and that McGrath was active in the Native American Chamber of Commerce.

The Cherokee Nation of Oklahoma submitted a legal brief supporting McGrath’s claim to being Indian, arguing that the tribe alone has the authority to decide who is a Cherokee.

State hearing officers ruled on Oct. 14, 1988, that Jon McGrath qualified as a disadvantaged minority subcontractor.

“Jon McGrath was known among his schoolmates as far back as grade school as having Native American lineage,” hearing officers found. “Jon McGrath has publicly acknowledged his Cherokee heritage since at least the sixth grade.”

But if Jon McGrath considered himself a Cherokee since childhood, he apparently kept that fact from some people who were very close to him, The Times found.

Ray and Beatrice Hardacre live on one side of the white frame house in which Jon McGrath grew up in Tulsa. Bill and Hertha Beattie live on the other side. Both elderly couples know the McGrath family well.

“He was our boy for years, I’ll tell you,” Ray Hardacre said of Jon McGrath.

“We just loved the kids,” Hertha Beattie said of Jon and his brother. “We kept the kids when their mother was sick.”

Both couples said they were unaware of McGrath’s claim of being Indian.

McGrath said in response: “We are Indian.”

John Wyrick Jr., of Tulsa, says that he had been a close friend of Jon McGrath since the two were in about the ninth grade. They played baseball together, roomed together in college and belonged to the same fraternity.

Asked if McGrath ever referred to himself as an Indian, Wyrick said he “vaguely” recalled McGrath saying something about a relative being Indian.

“He seemed to like the idea of being classified as an Irishman,” said Wyrick when asked if Mcgrath identified with an ethnic group.

“I have no reaction,” McGrath responded.

The question of whether a person of Jon McGrath’s background should be awarded public works jobs as an Indian subcontractor receives mixed responses from Native American organizations.

For some, it is a question of Indian self-determination.

“If the Cherokees say someone is Cherokee . . . that really has to be accepted by public and private entities,” said Steven Stallings, president of the National Center for American Indian Enterprise Development in El Monte.

For others, it is just one more example of whites exploiting Indians.

“I really do resent the fact that this man or any man is playing with a little drop of Indian blood for his own benefit,” said Evelyn Stephens, executive director of the federally funded Oklahoma Tribal Assistance Program in Tulsa.

McGrath completed his jobs on the Blue Line and went to work for Herzog as a minority subcontractor in other parts of the country, including Baltimore and Washington.

MINORITY IDENTIFICATION

Copies of identification cards showing that Jon McGrath is 1/64 Indian and a member of the Cherokee Nation are on file with the Los Angeles County Transportation Commission as documentation that the Tulsa railroad builder is a disadvantaged minority businessman. McGrath Construction Corp. has gained more than $19 million worth of minority contracts on the rapid transit system under construction in Los Angeles -- more than any other so-called disadvantaged firm has received.

McGrath’s status as a minority group member was challenged by a union in 1987, but the transportation commission never required McGrath to show that he was the victim of “chronic . . social disadvantaged” as called for by federal regulations.

The commission instead accepted McGrath’s membership in the Cherokee Nation as proof that he is a minority group member and eligible for contracts meant for disadvantaged firms.