Abuses of Md. minority set-aside program probed


A Baltimore grand jury is investigating alleged fraud by companies that get contracts under state laws designed to benefit minority and women business owners, the Maryland attorney general's office said yesterday.

The investigation is part of a probe by the state that has already resulted in charges in several counties and Baltimore. The latest case ended in a prison term last week for a middle-aged, white Baltimore County businesswoman who signed her name to papers saying her company would do state road work but who turned the work over for a fee to companies owned by white males.

The state lets tens of millions of dollars worth of contracts to businesses that claim minority participation every year, most of them for state highway construction.

Since the passage of the state law on minority businesses in 1978, a portion of all state contracts -- often 10 percent -- is supposed to be set aside for companies owned by minorities or women.

The state investigation centers at least partly on minority subcontractors allegedly acting as fronts for non-minority businesses, cases already prosecuted by the state attorney general's officeindicate. The practice subverts the the law, which is intended to help minority contractors compete against older companies or encourage general contractors to hire minorities, prosecutors say.

The extent of the Baltimore grand jury probe is unknown. The panel could issue a report about abuses of the state's contract laws or return indictments. Karen J. Kruger, an assistant attorney general, said that she expects the investigation to be concluded next month.

T. Wray McCurdy, the attorney for Nancy A. Martin, who was sentenced to three years in prison and ordered to repay nearly $70,000 last week in connection with a bid to build a bridge, said the state has a big job ahead if it continues to focus on individuals like his client. All successful minority contractors subcontract some of their work, he said.

He called the state's prohibition against subcontracting by a minority business a double standard, since it is a generally accepted practice in the industry. "My client happens to be the first person to be ensnared in this," Mr. McCurdy said. "The whole industry needs some scrutiny."

Martin, president and owner of now-defunct P. E. Schumann Inc., pleaded guilty in Baltimore County Circuit Court to fraudulently obtaining public money in connection with a contract to repair the Cold Spring Lane bridge over Interstate 83. All but 90 days of her sentence was suspended by Judge J. William Hinkel, and prosecutors said she is cooperating with the probe.

Her company, a certified minority subcontractor hired by the general contractor, told the state Department of Transportation it would install expansion dams, a railing on the bridge and a safety fence, according to Ms. Kruger, the assistant attorney general. Instead, these jobs were performed by other, non-minority Maryland companies that she hired. Martin's company earned a 3 percent commission on the $240,000 job. The state has prosecuted six contractors or subcontractors for violations of the minority business laws in the past year.

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