Minority contracting fraud is a not a new or rare problem. In December, one of the city of Dayton’s demolition contractors, Evans Landscaping, was convicted in federal court in Cincinnati of using a front company to get work from the city of Cincinnati that was meant for disadvantaged businesses.
Dayton city officials hired a law firm to find ways to tighten controls over their contracts.
“We are doing a full evaluation to try to understand where we have gaps and where we can improve processes and procedures in order to mitigate potential liability,” Deputy City Manager Joe Parlette said. “There’s no way to completely prevent people from doing bad things, but it’s how we respond with improvements that’s critical.”
Dayton in recent years has spent a lot of money hiring contractors to tear down vacant homes and buildings.
Between 2011 and 2018, more than 2,700 blighted structures were removed from the city landscape using state, federal and city funds, according to city records and a state audit report. This newspaper previously reported the city and its partners spent more than $18 million removing blight between 2009 and 2015.
The city of Dayton has goals for contracts that are meant to try to ensure small, disadvantaged and minority-owned businesses are included on projects.
These goals are set and monitored by the Human Relations Council, where Winburn works. Winburn, who is on unpaid administrative leave, was involved in recommending who should get city contracts, city records show.
Bidders seeking city contracts are asked to show how they have secured participation from small and disadvantaged firms to meet projects’ diversity and inclusion goals, Andrew Chow said at a commission meeting last year.
Otherwise, bidders need to submit a waiver showing they made “good faith” efforts to secure diversity participation but were unable, said Chow, who at the time was the Dayton Human Relations Council business and technical assistance administrator.
In 2018 the city had a goal for construction spending that 15 percent of all contracted work would go to minority-owned businesses; 26 percent would go to small businesses; 6.5 percent was to go to small businesses based in the city of Dayton; and 5 percent would go to women-owned businesses.
On multiple occasions in past years, companies that had the lowest bids lost city contracts to the second lowest bidder because they did not have minority subcontractors.
But there have also been times when the lowest bid that had committed minority participation didn’t lead to a winning bid.
In February 2015, United Demolition did not win a demolition contract despite having submitted the lowest bid for work. This rejection came after the executive director of the Human Relations Council at the time justified that decision by stating that the company had “unfavorable references.”
In May 2016, Steve R Rauch Inc. had the lowest bid for a demolition contract. In a letter, Winburn, who was then the business and technical assistance administrator, wrote that Rauch’s bid was not the best because of “unfavorable past practices on multiple contracts” and concerns about his company’s capacity. United Demolition, which had the second-lowest bid, won the contract.
The Dayton Daily News in 2017 revealed that Rauch had been suspended from getting work from the city after a dispute in 2014 that included allegations Rauch’s workers used improper fill material after demolitions, city records show. He resumed getting contracts in May 2016.
Rauch and his company’s have faced legal scrutiny. He and his top employee are currently facing state illegal dumping charges for allegedly dumping tons of improper fill on property owned by the city of West Carrollton. Also, in December 2016 federal agents raided the company’s offices at a landfill at 1550 Soldiers Home-West Carrollton Road and other properties.
Reached for comment, Rauch said he has “no idea” what companies might be the focus of the corruption probe, but said his is not.
A review of city agendas over the last three years shows other companies that routinely win demolition contracts include Bladecutters Inc., 5440 N. Dixie Dr.; Charles F. Jergens Construction, 1280 Brandt Pike; and United Demolition Excavation and Site Management, 130 West Second St.
None of the firms responded to requests for comment for this article.
Winburn is accused of accepting bribes including more than $20,000 in cash. In exchange, prosecutors say, he provided disadvantaged business certifications to companies without performing the checks required to determine that they were entitled. He is also accused of providing internal, confidential material to companies to give them an unfair advantage over other bidders on government projects. He is also accused of pressuring other employees to show leniency to an unidentified person or entity that failed to comply with the terms of a city contract.
He is also charged with lying to the FBI. The indictment says he told a special agent in 2015 that he conducted a site inspection for a business run by someone identified only as “K.J.” and determined that person was eligible for certification as a disadvantaged business. Winburn made no such visit, the indictment alleges.
In December, the owner of the Cincinnati firm Evans Landscaping, Doug Evans, and the company’s vice president of operations were convicted in federal court in Cincinnati of defrauding city and state small business programs. The U.S. Attorney’s Office this week would not say if the Evans case is linked to the Dayton corruption probe, and officials from Evans did not return calls for comment.
The company received at least $5.84 million in Dayton city contracts between 2010 and 2016, including $1.73 million for demolition work and activities, according to city documents analyzed by this newspaper.
The last payment the city of Dayton made to Evans Landscaping was in July 2017, according to Dayton’s deputy city manager.
Federal court records say Evans used a front company called Ergon Site Construction to get work under Cincinnati’s small business enterprise program.
Evans created the company and placed a man named Korey Jordan in charge, according to federal prosecutors. Jordan worked for Evans in information technology and had no experience in the demolition field. Evans kept Ergon’s books, did all the work and even had Jordan sign blank checks for employees to use. In exchange, Jordan got a monthly salary.
From 2011 through 2014, Ergon bid on and received more than 100 residential demolition contracts with the city of Cincinnati, totaling approximately $1.9 million, in-part by leveraging Ergon’s fraudulent Small Business Enterprise status, according to the U.S. Attorney’s Office.
Evans listed Ergon as a sub-contractor to get state demolition and construction contracts, particularly public school, university and municipal projects.
Ergon was a certified minority vendor in the city of Dayton’s contractor list in 2014 and 2016, though a review of city commission agendas did not show them being listed as a demolition contractor in recent years.
The indictment of Clayton Luckie doesn’t name the company prosecutors claim he used as a front-company.
In 2013 Luckie was convicted of misusing $130,000 in campaign funds while he was a state lawmaker. He served three years in prison.
Officials allege that just months after Luckie got out of prison in 2016 he approached the owner of a demolition and construction business with a proposal.
Luckie claimed to have an affiliation with a company that the indictment refers to as “Corporation A.” Prosecutors state the company performed administrative support services, document management and database management.
“Corporation A did not perform work in the construction industry, such as actual demolition of buildings and removal of debris from job sites,” the indictment says.
When Luckie was in prison, the owner of a company called Integrated Solutions and Services-Unlimited wrote in a letter of support for him saying it would offer Luckie a job when he was released. When he got out of prison, Luckie founded a company that today leases space to ISS at the Miamisburg Mound.
ISS is a licensed minority contracting company that does administrative services, document management and IT support, according to its website.
ISS president Clarence McGill told the Dayton Daily News in an interview this week his company has nothing to do with demolition work and he has no reason to believe his company is involved in the probe. “Nobody contacted me about anything like that,” he said.
The indictment says Luckie offered another company use of Company A’s name and disadvantaged business status to meet government disadvantaged business sub-contracting goals, though the larger company would do all the work.
It says Luckie ordered large magnetic signs with Corporation A’s name on it to slap onto the larger company’s trucks in case city inspectors visited the job site.
Based on this misrepresentation, the city of Dayton awarded contracts worth thousands of dollars, the indictment says.
The indictment of Joey Williams says he had conversations in early 2015 with an unnamed individual who was having difficulties obtaining contracts or other work from the city. Williams indicated he had a construction project at this house he wanted done, the indictment says.
Williams is charged with accepting bribes, including $50,000 worth of cash and construction work at his home — including a patio — in exchange for helping a company receive more than $150,000 in contracts with the city and its non-profit development and financing arm, CityWide Development.
CityWide has spent millions of dollars to have demolition work done in Dayton, largely through the Phoenix Project.
The Phoenix Project, focused on the area around Good Samaritan Hospital in northwest Dayton, has helped support and leverage $123 million in investment since 2004, according to CityWide’s website.
Williams — whose home is in the project area — sat on the board of trustees for the Phoenix Project from 2003 through 2017, according to CityWide President Brian Heitkamp. Heitkamp responded to phone calls and a list of questions with an emailed statement.
“We were very surprised that we were mentioned in the indictment,” he wrote. “CityWide occasionally participates in a variety of commercial and residential demolitions depending on the demand of our projects. CityWide solicits bids through a competitive bid process.”