In an article published Sunday, Oct. 16, the Daily News revealed that millionaire developers David and Shery Oakes controlled TesTech while the firm sought lucrative taxpayer-funded contracts claiming it was solely owned and operated by Egyptian-American Sherif Adel Aziz.
The Daily News investigation raised questions about whether TesTech violated laws governing the Disadvantaged Business Enterprise, or DBE, program, which gives preference in government contracting to businesses owned and controlled by disadvantaged people, including women and members of certain minority groups.
“We recognize there are specific concerns raised in your article and it (an investigation by the SBA) flows from that,” said SBA Communications Director Mike Stamler. “We will take a look at it and take appropriate administrative action based on our findings.”
On July 7, the FBI and federal transportation agents raided the Galleria building, 8534 Yankee St., which is the headquarters of TesTech and David and Shery Oakes’ CESO Inc. and Design Homes and Development Co. The newspaper learned the feds are investigating whether TesTech had improper ties to the Oakeses and their companies, which aren’t eligible for DBE certification. The federal and state transportation departments are moving to strip TesTech of its DBE certification, saying Aziz is not a disadvantaged minority, is too wealthy for the program and does not control the company.
“The Ohio Attorney General’s office is facilitating that decertification procedure for the department and it is our belief — along with the Federal Highway Administration — that TesTech should be decertified,” said Steve Faulkner, spokesman for the Ohio Department of Transportation.
Aziz and the Oakeses have not agreed to be interviewed by the Daily News but Aziz has issued statements denying wrongdoing and saying he has always been the sole owner of TesTech. He appealed the decertification action, and a hearing is expected next month.
In addition to its DBE certification, TesTech is currently certified by the SBA for the federal 8(a) set-aside program and through the ODAS for the state’s Minority Business Enterprise (MBE) and Encouraging Diversity, Growth and Equity (EDGE) programs. All of these programs give minority companies preference for government contracts.
The programs require majority ownership and control by a disadvantaged person or persons, and independence from other companies. The DBE, EDGE and 8(a) programs all have limits on personal net worth, but the MBE program does not.
Shery Oakes’ Design Homes and Development Co., doing business under the trade name DHDC Inc., also has MBE certification.
“In this instance, the Equal Opportunity division will review the allegations raised against TesTech and Design Homes to determine how they affect the certification of these businesses,” said Molly O’Reilly, spokeswoman for ODAS.
More oversight sought
State and federal elected officials said the government needs to do everything possible to prevent and detect fraud in set-aside programs.
“We are always open and will consider any improvements that could be made to this process,” said Rob Nichols, spokesman for Gov. John Kasich. “It’s an important program. MBE and DBE companies certainly don’t like the bad actors out there or people misrepresenting who they are.”
State Sen. Bill Beagle, R-Tipp City, said the misuse of a program designed to help disadvantaged companies is “disappointing.”
“It’s instances like this that cause the public to be suspicious of government programs in general,” he said.
U.S. Sen. Sherrod Brown, D-Ohio, supported a bill that passed in the Senate that would boost oversight in the Small Business Administration and increase criminal penalties for fraud, according to Meghan Dubyak, spokeswoman for Brown.
“Fraud wastes taxpayers’ dollars and harms those businesses that play by the rules,” she said. “(Brown) believes that DOT should be conducting regular audits of all grant programs — including DBE — to ensure that they are free of fraud and abuse.”
U.S. Rep. Mike Turner, R-Centerville, supported a House-passed provision in a recent Federal Aviation Administration reauthorization bill that would improve the DBE certification process, according to a statement released by his spokesman, Thomas Crosson.
Turner is the single largest beneficiary among candidates who have received money from David or Shery Oakes. Since 2002 Turner received $13,250 from the Oakeses, part of a total of $79,700 in contributions made by the couple or their companies to mostly Republican candidates or the Montgomery County Republican Party.
Crosson declined to answer questions about the political contributions to Turner.
State Rep. Clayton Luckie, D-Dayton, said he wants more transparency in the DBE and MBE programs, while guarding a company’s financial information. He strongly supports set-aside programs designed to give disadvantaged companies a leg up and redress discrimination.
“If you don’t have these rules in place, people won’t use a minority,” said Luckie. “It’s a good old boy system.”
Bad policy?
Companies that don’t have the DBE preference can lose out on lucrative government contracts.
TesTech competitor Steve Bowser, co-owner of the engineering firm Bowser-Morner Inc. of Huber Heights, said the system rewards companies like TesTech while shutting out those that aren’t eligible for set-asides.
“There are a lot of people out there who are profiting handsomely from these kinds of programs,” Bowser said. “There ought to be a better way. As a taxpayer it’s frustrating to see work go to a handful of competitors.”
Matt Mayer, executive director of the conservative Buckeye Institute, said minority set-aside programs are “bad policy. We need to be sure we give government contracts to the best-value bidder and not do it on factors that have little to do with the best-value bidder.”
He declined to comment specifically on the Oakes matter, but said, “When you create that kind of program, you invite people, by arbitrage or fraud, to game that system.”
Earl Passmore, owner of APA Public Research Center, a DBE company based in West Carrollton, said DBE fraud “limits our ability to grow and create jobs. There’s a lot of (fraud) in place and it makes it very difficult for a legitimate DBE to do business.”
Keith Lander, chairman of the Dayton chapter of the Southern Christian Leadership Conference, said government officials “dropped the ball” in allowing TesTech in to the set-aside programs.
“The surprising thing is, these individuals passed themselves off as disadvantaged when none of the individuals in these companies is remotely close to being disadvantaged,” Lander said. “This is millions of dollars we’re talking about. This isn’t chump change. And it could’ve helped legitimate disadvantaged minority contractors.”
Dayton Daily News investigation key findings
Two additional government agencies will investigate TesTech Inc. in the wake of a Dayton Daily News examination of the company. Here are the newspaper’s main findings:
Wealthy developer David C. Oakes and his wife, Shery B. Oakes, controlled the Washington Twp. company, which won millions of dollars in public contracts under a federal program that rewards companies owned by disadvantaged people.
The Oakeses were not eligible for the Disadvantaged Business Enterprise program because of their wealth, but a longtime associate of the Oakeses — Sherif A. Aziz — won DBE status after contending he was the sole owner of TesTech Inc. and could trace his African-American heritage through his religion to an African Nubian tribe. Aziz is Egyptian, which is not considered a protected group under the DBE program.
Federal law requires that DBEs be independent from any other company, yet Aziz’s TesTech has appeared interchangeably with companies owned by David and Shery Oakes. David Oakes signed documents as TesTech president and Shery Oakes told the government in 2004 that she and her husband owned TesTech Inc.
David Oakes’ CESO Testing Technology Inc. used the TesTech name for years, and even held the necessary federal and state licenses on equipment required in TesTech’s business.
UPDATE: TesTech investigations expanding
UPDATE: TesTech owners pay $2.9 million to settle fraud case
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