Federal Listing Puts Squeeze on Contract Rogues

Unlike the Yellow Pages, businesses lose customers if they are published in this directory.

Every month, the federal government distributes a thick listing of contractors who are temporarily barred from future business with Uncle Sam. To make the blacklist--and numerous San Fernando Valley-area companies or their top officials have--contractors must be convicted of fraud, antitrust violations, embezzlement, theft, forgery, bribery, false statements or one of a wide variety of mostly felony offenses.

Dr. Alan R. Schankman--convicted of submitting dozens of fraudulent Medicare claims from his North Hollywood ophthalmology office--is one of them.

During Schankman’s 1991 trial, prosecutors called him “a thief in a white coat” who billed Medicare $1,600 for each of more than 30 eye operations he never performed. Although Schankman was prosecuted only for those phony billings, his total suspected Medicare thefts topped $1 million, prosecutors said.

He has sold his medical practice, remains imprisoned and is banned indefinitely from submitting bills to the government.

Once blacklisted, contractors can no longer tap into the roughly $400 billion the federal government spends on goods and services every year, a potentially fatal blow for those who rely on federal business.

The punishment can span up to a decade for the most egregious violations, but yearlong penalties are more common, and contractors sometimes are able to remove themselves from the list by correcting their violations.

“It can be a tremendously big deal to be on that list,” said Charles Eckerman, an Environmental Protection Agency attorney who has cited companies for serious environmental violations. “For those heavily involved in federal contracting, it can be worse than a criminal action. It could mean the end of the company.”

That’s exactly what happened to Melody Knitting Mills Inc., which ended up in the infamous government manual for repeated violations of the Clean Water Act.

The Simi Valley fabric dying factory was the largest discharger of industrial waste water into the local treatment facility, EPA officials said. In 1994, owner Richard Bates and plant engineer Kenneth Baber were found to have illegally polluted the water with chlorine residuals, toluene, xylene ethyl benzene and other chemicals, officials said.

The company, which paid $45,000 in restitution, has already shut its doors. But EPA officials included it on the list of banned contractors to prevent it from immediately reopening.

Some contractors who make the list are unable to conduct business at all, because they are behind bars.

For instance, John Douglas Charlton, a former Lockheed engineer from Lancaster, is in jail for passing classified information to an undercover FBI agent. And another defense contractor, Billie Wayne Puckett, was sent to prison for falsifying federal documents and selling uncertified airplane parts to McDonnell Douglas Corp. His Simi Valley firm, Tri Air Supply, no longer does business with the federal government--or anyone else.

A good chunk of the nation’s businesses count on Uncle Sam as a customer. As of 1993, approximately 26 million workers--22% of the work force--were employed by federal contractors or subcontractors. The government’s $400 billion in annual purchases accounts for 6.5% of the nation’s economy.

James H. Paxin was added to the list after he was found to have shortchanged the pension funds of his employees at the now-defunct Paxin Electric Inc. in Lancaster. During its heyday, the company thrived on government business, handling much of the electrical work for public works projects in the Antelope and Santa Clarita valleys.

It is barred from federal business through April 6 of this year.

The book was created in the early 1980s to coordinate what had been haphazard tracking of rogue contractors, said Ida M. Ustad, associate administrator for the General Services Administration. Previously, each government agency had its own list of violators, but there was no universal directory.

The current book, which contains tens of thousands of individuals and corporations, is updated monthly and made available--in published form and by computer--to officials throughout the bureaucracy.

Before any contract is signed, officials are required to check the book--officially called the List of Parties Excluded From Federal Procurement and Nonprocurement Programs.

In his State of the Union speech last month, President Clinton indicated that he intends to use the purchasing power of the government as leverage against scofflaws, a move that is sure to add more names to the book.

To fight illegal immigration, Clinton called for an executive order that would prevent the government from doing business with employers found to have knowingly hired illegal immigrants. Those companies fined for such an offense would be added to the blacklist.

The prospect of losing federal business might prevent employers from hiring illegal immigrants, Clinton aides said. But they acknowledged that it is difficult for the Immigration and Naturalization Service to prove that a company has knowingly hired an illegal immigrant because of the wide availability of fraudulent work documents.

Ustad, the official who oversees the directory, said the prospect of being listed strikes fear in the hearts of many a contractor. A few have even filed lawsuits to block publication of their names.

‘Usually people like to see their names in print,” she said. “This is a definite exception.”