D.C. insiders can reap fortunes from federal programs for small businesses
By Robert O’Harrow Jr.
Sunday, Mar 13, 2011
For years as a lawyer in Washington, Paralee White had helped small and disadvantaged firms break into the federal contracting market.
Then she decided to help herself.
She started a business and was soon making more than $500,000 a year through a contracting program intended to help poor Alaska natives, even though she isn’t an Alaska native.
White also helped her family. She hired her sister and brother, paying them as much as $280,000 a year. She helped her sister’s boyfriend set up his own firm in partnership with Alaska natives. He made more than $500,000 a year.
White’s story offers a look at how Washington insiders can make fortunes from government programs intended to benefit small, disadvantaged and minority entrepreneurs. It also illustrates how government officials who are supposed to keep tabs on these programs often fail to do so.
White’s native partners eventually accused her and her siblings of fraud and self-dealing, saying they were paid more than the rules allowed and hid the transactions from the government. The allegations spilled out in a civil lawsuit in Alaska, and the case was quickly settled.
Although officials at the Small Business Administration say they knew about the dispute, the U.S. government has taken no action.
Over several years, White and her associates landed more than $500 million in construction contracts for the Navy and other Pentagon departments, nearly all of them through an SBA program aimed at boosting Alaska native corporations. But less than 1 percent of that money made it back to the native-owned corporations, a Washington Post investigation found.
Government officials say they were not monitoring the contracts for compliance with the rules to ensure that the natives were doing a significant portion of the work and receiving the correct share of the revenue.
...
She said that her company was “a successful participant” in the federal small-business program and that “I am proud to have contributed to that success.”
...
White works at PilieroMazza law firm in Washington as a specialist in small business contracting law. Described by associates as bright, energetic and entrepreneurial, she has said on a Web site that her first business was selling snow cones and popcorn for the local swim team. She graduated from Mills College with a bachelor’s degree in 1972 and George Washington University’s law school in 1978.
By the late 1990s, she had become a familiar figure advocating for small businesses at the SBA and other agencies.
In October 1999, she set up a firm called Sentinel Industries. Her plans for Sentinel would put her at the front edge of a multibillion-dollar wave of contracts for Alaska native corporations as government agencies sought ways to award contracts after the terrorist attacks of Sept. 11, 2001.
Three decades earlier, Congress had established more than 200 Alaska native corporations to settle native land claims and boost the fortunes of impoverished indigenous people. Those corporations have unique contracting privileges, including the ability to receive federal contracts of any size without competition.
Significantly for White, the subsidiaries set up by the corporations to receive contracts did not have to operate in Alaska or even be run by natives. They just had to be 51 percent owned by Alaska natives, and they could hire nonnative subcontractors to do much of the work.
Knowing those rules, White reached out to partner with an Alaska native corporation called MTNT Ltd.
The company was named after the four native villages — McGrath, Takotna, Nikolai and Telida — that it represented in the center of the state, not far from Denali. MTNT owned and managed 300,000 acres of land on behalf of nearly 400 native shareholders.
In 2000, MTNT took on a 51 percent ownership stake in White’s firm, officially making it an Alaska native corporation subsidiary.
White was entitled to almost half of its profit. She also received $160,000 in salary, 4 percent of the gross revenue as “incentive compensation” and unlimited paid vacation “to the extent such vacations shall not interfere with the operations of Sentinel,” according to her employment agreement.
The deal ended up reaping her more than $500,000 a year by 2004, according to data obtained from MTNT.
[It gets deeper and deeper, read the full artcle on this corruption at the above link.]
oharrowr@washpost.com
Then she decided to help herself.
She started a business and was soon making more than $500,000 a year through a contracting program intended to help poor Alaska natives, even though she isn’t an Alaska native.
White also helped her family. She hired her sister and brother, paying them as much as $280,000 a year. She helped her sister’s boyfriend set up his own firm in partnership with Alaska natives. He made more than $500,000 a year.
White’s story offers a look at how Washington insiders can make fortunes from government programs intended to benefit small, disadvantaged and minority entrepreneurs. It also illustrates how government officials who are supposed to keep tabs on these programs often fail to do so.
White’s native partners eventually accused her and her siblings of fraud and self-dealing, saying they were paid more than the rules allowed and hid the transactions from the government. The allegations spilled out in a civil lawsuit in Alaska, and the case was quickly settled.
Although officials at the Small Business Administration say they knew about the dispute, the U.S. government has taken no action.
Over several years, White and her associates landed more than $500 million in construction contracts for the Navy and other Pentagon departments, nearly all of them through an SBA program aimed at boosting Alaska native corporations. But less than 1 percent of that money made it back to the native-owned corporations, a Washington Post investigation found.
Government officials say they were not monitoring the contracts for compliance with the rules to ensure that the natives were doing a significant portion of the work and receiving the correct share of the revenue.
...
She said that her company was “a successful participant” in the federal small-business program and that “I am proud to have contributed to that success.”
...
White works at PilieroMazza law firm in Washington as a specialist in small business contracting law. Described by associates as bright, energetic and entrepreneurial, she has said on a Web site that her first business was selling snow cones and popcorn for the local swim team. She graduated from Mills College with a bachelor’s degree in 1972 and George Washington University’s law school in 1978.
By the late 1990s, she had become a familiar figure advocating for small businesses at the SBA and other agencies.
In October 1999, she set up a firm called Sentinel Industries. Her plans for Sentinel would put her at the front edge of a multibillion-dollar wave of contracts for Alaska native corporations as government agencies sought ways to award contracts after the terrorist attacks of Sept. 11, 2001.
Three decades earlier, Congress had established more than 200 Alaska native corporations to settle native land claims and boost the fortunes of impoverished indigenous people. Those corporations have unique contracting privileges, including the ability to receive federal contracts of any size without competition.
Significantly for White, the subsidiaries set up by the corporations to receive contracts did not have to operate in Alaska or even be run by natives. They just had to be 51 percent owned by Alaska natives, and they could hire nonnative subcontractors to do much of the work.
Knowing those rules, White reached out to partner with an Alaska native corporation called MTNT Ltd.
The company was named after the four native villages — McGrath, Takotna, Nikolai and Telida — that it represented in the center of the state, not far from Denali. MTNT owned and managed 300,000 acres of land on behalf of nearly 400 native shareholders.
In 2000, MTNT took on a 51 percent ownership stake in White’s firm, officially making it an Alaska native corporation subsidiary.
White was entitled to almost half of its profit. She also received $160,000 in salary, 4 percent of the gross revenue as “incentive compensation” and unlimited paid vacation “to the extent such vacations shall not interfere with the operations of Sentinel,” according to her employment agreement.
The deal ended up reaping her more than $500,000 a year by 2004, according to data obtained from MTNT.
[It gets deeper and deeper, read the full artcle on this corruption at the above link.]
oharrowr@washpost.com
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