Minority Contractors Cite ‘Fronts’ : Public works: They tell Assembly Transportation Committee that many contracts are fraudulently won by companies owned by Anglo men.

Despite efforts to set aside a small share of public-works contracts for businesses owned by minorities and women, many contracts are fraudulently won by “front” companies actually owned by Anglo men, a state Assembly committee was told Tuesday.

Minority contractors told the Assembly Transportation Committee that government efforts to crack down on abuses are so cumbersome, intrusive and expensive that they actually discourage legitimate minority- and women-owned businesses from bidding on state contracts.

“The program as it is now is not working,” Chairman Richard Katz (D-Panorama City) said during the hearing at the State Building in Los Angeles.

The hearings were called by Katz in response to articles in The Times documenting abuses in Metro Rail’s minority-business program, which gave special consideration to contractors who are as little as 1/64th minority.

Federal and state government encourages the creation of minority businesses by setting aside percentages of public contracts for those firms. The federal government devotes 10% of its contracts, while the state dedicates 15% to minority enterprises and 5% to those owned by women.

But African-American, Latino and women business owners testified Tuesday that large firms owned by Anglo men often win these contracts by creating subsidiary companies and hiring women or minorities as fronts to run them. Such deceit is illegal, but few violators are caught and the penalties are light, witnesses said.

“This is a major problem that we have to contend with every day,” said Craig Jackson, president of Sanders Engineering Co. of Los Angeles.

As an example, Jackson said a state official once telephoned him to ask why he had withdrawn as a subcontractor on a major construction project--a job that his firm had never even bid on. Jackson said the prime contractor had falsely listed minority-owned Sanders Engineering as a subcontractor simply to meet the minority-contracting standards, then forged a phony “withdrawal” letter once it had won the contract.

Such abuses are rarely caught, witnesses said, because the bureaucracy in charge of running the program is confusing to administrators and participants, split among too many agencies at every level of government. In other cases, witnesses said, regulating officials are simply incompetent.

Beverly A. King of the minority-owned King & Wright Consulting Inc. of Culver City said people who enforce the program often do not understand what they are doing. She said state agencies have accepted limited partnerships as minority companies even though the only minority involved was a limited partner--thus forbidden by law from exercising any control over the company.

“Why have applicants submit a corporate tax return (which certifies gross receipts and other data) if you can’t read it and don’t know what to do with it?” she asked the committee. “Trained staff should know how companies hide what they don’t want government to know . . . the things that tell you if a minority firm is a puppet.”

Deborah E. G. Wilder of the California Chapter of Women Construction Owners and Executives U.S.A. called for “one-stop” certification for minority- and women-owned businesses that would let them compete for state and local government contracts anywhere in the state.

“The current situation requiring certification every time a member works in a different county, city or municipal district is clearly ridiculous,” she stated in written remarks read to the committee. “The city of San Francisco alone has seven different entities which certify (minority) status.”