2010 Lane Reports

Let Joe Ferguson Fix City's Minority Business Program

The Lane Report, September 2010
Wednesday, September 1, 2010 9:00 am
by Marc J. Lane


The late Harold Washington, the "people's mayor," was voted into office in 1983 after cobbling together a coalition of African-Americans and Hispanics yearning for the civil rights they had been denied, white liberals fed up with racially polarizing politics and labor unions incensed over mounting job losses. Mr. Washington's policies of inclusion gave African-Americans and Hispanics-as well as women, Asians and gays-a voice in city government and a shot at the American dream they never had before.

But Mr. Washington's vigorous affirmative-action legacy, still a cornerstone of the city's economic and social policies, is at risk of being dismantled. Joseph Ferguson, Chicago's inspector general, recently reported that the city has inflated the value of construction contracts awarded to minority- and women-owned businesses in 2008 by at least $19 million, and that fraud, abuse and mismanagement might have cost disadvantaged contractors a stunning $400 million between 1995 and 2008.

Mara Georges, the city's corporation counsel, is disputing the report's findings and challenging the methodology behind them. Mayor Richard M. Daley, who authorized a successful 2003 legal fight to save the minority business program Mr. Washington launched in 1985, downplays Mr. Ferguson's criticism.

But the empirical evidence Mr. Ferguson presents helps explain how African-American, Hispanic and women contractors are being shortchanged. According to the report, the city doesn't analyze or collect canceled checks for payments made to minority- or women-owned businesses. The city doesn't require reliable documentation to confirm that minority- and women-owned businesses are, in fact, the contractors benefiting from the program. And the city's departments don't cooperate with one another, exchange information or even agree on how to administer the program.

Non-minority males sometimes control and profit from front companies whose ownership is fraudulently held in the names of minorities or women. Some minority-owned companies secure city contracts but perform "no commercially useful function," shifting both the work and the tax dollars that fund it to majority-owned firms. Some act as commodity brokers, doing nothing more than winning a city contract and then ordering goods from a majority-owned firm to fulfill it.

Mr. Ferguson's report also noted lax enforcement that left such profiteers unpunished, "glaring mistakes" in minority certifications and insufficient city personnel to oversee the program "struggling to keep up with the volume" of minority certifications.

Mr. Washington once said, "Affirmative action works, but we're going to need to muster all our political resources if we are to keep it in place." Joe Ferguson is lobbying for policing power over the minority-contracting program. He may well be the man to deliver on Mr. Washington's promise.

Pension crises in Chicago, in Illinois and in cities and states throughout the nation threaten the retirement security of public employees, investors' confidence in public securities and, ultimately, the economic recovery on which businesses, consumers, homeowners and workers are counting.

Marc J. Lane, a business and tax attorney and financial advisor, practices law at The Law Offices of Marc J. Lane, P.C. (www.MarcJLane.com) in Chicago.

Reprinted with permission from Crain Communication Inc., Copyright 2010.

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