Minority firm disqualified on Central Corridor

  • Article by: PAT DOYLE , Star Tribune
  • Updated: October 16, 2011 - 9:55 PM

Authorities say firm wasn't a real supplier for light-rail project.

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Joan Johnson, in a St. Paul warehouse with supplies, is appealing her disqualification as a minority contractor for the Central Corridor.

Photo: Jeff Wheeler, Star Tribune

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The fax from a contractor to her suppliers caught the attention of investigators.

All material "MUST STOP AT J-MOS FOR A BRIEF, 5 TO 10 minute LAYOVER, prior to arriving at its destination," it read.

The fax intensified an inquiry that cost J-MOS its status as a minority contractor on the Central Corridor light-rail construction project. It's the first time in the project that a contractor has been disqualified as a disadvantaged business enterprise (DBE) for not doing the work expected of it.

J-MOS, which stands for Joan's Minority Owned Supplier, was part of a federal program that gives an edge to firms owned by minorities and women in winning government contracts. As a disadvantaged business enterprise, J-MOS obtained Central Corridor agreements worth nearly $500,000.

A government panel recently found that J-MOS wasn't a real supplier but was merely routing materials from other firms to projects, an arrangement that undermines the government mission to foster meaningful minority business ventures.

While the finding doesn't mean that J-MOS is barred from future Central Corridor contracts, it does mean that the Metropolitan Council cannot count any of those contracts toward the agency's goals for minority and female participation in the project. The Met Council, which oversees the $957 million project, hopes to give 15 percent of the construction dollars to female- and minority-owned firms.

Joan Johnson, owner of J-MOS, called the decision "an insult" and is appealing. Johnson said her firm provided a useful function in arranging to supply material for building light-rail stations.

But Anita Bellant, who chairs a government committee overseeing minority contracting, said Johnson "had a pattern of behavior that she had been warned against. It happened enough times that there was an investigation."

The Met Council, which has touted its performance on minority contracting, declined to discuss details of the findings about J-MOS. A Met Council official who helped direct the investigation also declined to answer questions about complaints that began in 2002.

Met Council Chair Susan Haigh said the agency's role in the investigation proves that it gives "top priority" to making sure DBEs comply with the rules. She expressed confidence that the agency would be able to find other firms to meet its goals for minority contracting.

Information about the probe comes two months after the federal government criticized minority contracting in the Hiawatha light-rail project. Two other DBE firms cited for merely routing supplies on that project are now working on the Central Corridor. They have denied wrongdoing.

The latest findings have drawn the attention of George Sullivan, senior investigator in Chicago for the U.S. Department of Transportation's Office of Inspector General. Sullivan said he was informed of the case but declined to say whether his office is examining DBE contracts on the project.

Years of inquiries, warnings

J-MOS' website mixes business promotion with religious messages.

"May God bless you and be with you all!" reads one.

"Saving both the government and taxpayers, both time and money (millions)!"

"J-MOS is looking for suppliers that are able to handle extremely large orders nationwide!"

J-MOS was established in 1999 and soon fell under review of the Met Council. Its website includes a picture of a high-rise at 7760 France in Edina with a reference to an 11th-floor business center that Johnson called "a mail drop, a virtual office."

To encourage the use of minority and female contractors, the federal government allows them to win contracts even if they don't quote the lowest price for a job.

J-MOS arranged four agreements with subcontractors working on the 11-mile Central Corridor line. The deals involve commitments to use J-MOS on planned contracts of $496,000 to provide paint, roofing and siding supplies for transit stations and for a light-rail operations and maintenance building. No supplies have been delivered or payments made.

The findings issued in July said J-MOS was warned repeatedly over several years about its practices. They come from a panel representing the Met Council, Minnesota Department of Transportation and Metropolitan Airports Commission.

Carlo Lachmansingh, a minority contractor supplying lighting for the Central Corridor, said abuses deprive legitimate minority firms from obtaining work.

"They're getting aced out by these ... so-called arrangements," he said.

Complaints began in 2002

Johnson's attorney released the findings, which show that the Met Council began receiving complaints about J-MOS in 2002. Contractors working on the Hiawatha light-rail and a water project complained that J-MOS made misleading statements about the amount of materials it could supply. In 2007, an inspection of a rented warehouse led the Met Council to conclude that J-MOS wasn't planning to store enough materials to be a supplier.

Bellant, who works for the Airports Commission, recalled checking a warehouse Johnson shared with other contractors.

"She had three 5-gallon buckets of paint," Bellant said in an interview. "I saw a couple of packages of roofing, some PVC pipe."

Johnson disputes the account, saying she used a large warehouse that wasn't inspected in years.

"We had plenty of inventory... probably more inventory than most of the DBEs," she said.

A 2009 inspection by the Met Council concluded she had enough inventory in her warehouse to qualify as a supplier, the findings said.

But in response to a complaint in January from another contractor, the Met Council decided that J-MOS was wrongly claiming to be a supplier of pipes and gaskets to get contracts for a water project.

"Submitting bids to prime contractors as a DBE 'supplier,' when your only ownership is a piece of paper, is not an acceptable practice," the findings said. "Metropolitan Council staff had already discussed this practice with J-MOS on other projects."

In May, the Met Council received a copy of the fax that instructed suppliers to run their materials through a St. Paul warehouse before dropping them off at a work site. The findings concluded that the warehouse was merely "a stopover point" intended to "mislead contractors and the public."

Johnson said she regrets sending the fax, but added she's being singled out for practices followed by many other DBE contractors on the Central Corridor project.

Johnson has moved to another warehouse in St. Paul where last week she had five cans of paint, five packages of shingles and rolls of fencing. She said she hasn't yet ramped up for Central, explaining, "We don't want to have just a whole bunch of stuff sitting here."

The Met Council still lists J-MOS on its website as a firm associated with the Central Corridor, while noting with an asterisk that it's "no longer a DBE firm."

Pat Doyle • 612-673-4504

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    The Metropolitan Council, which oversees the Central Corridor light-rail project, began hearing complaints about the J-MOS firm nearly a decade ago.

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