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Inspector General Uncovers More Sham Contracts

The Philadelphia Office of Inspector General has found 11 prime contractors that used the same supply company as a "pass-through" to circumvent the city's minority-contracting rules on work done for the Philadelphia Housing Development Corporation.

The contractors paid JHS and Sons Supply Company, a certified minority-owned business, merely to satisfy the requirement, while JHS provided no work to the jobs.

In all, Inspector General Amy L. Kurland's office has found 19 PHDC contracts that included JHS as a pass-through. In most of those contracts, a local heating and plumbing supply company, William Betz Jr. Inc., facilitated the arrangement and provide the actual supplies necessary for the work.

Through that arrangement, Betz received $640,000 worth of business intended for legitimate minority-owned businesses, Kurland said, while JHS was paid $70,000 to serve as the pass through.

The arrangement was uncovered previously, in a PHDC weatherization contract with UGI HVAC Inc. In 2012, UGI and Betz both signed no-fault settlements with the inspector general's office, agreeing to pay $100,000 and $128,000 respectively.

JHS also was removed from the city's registry of certified minority-owned businesses, and Betz declared itself ineligible for city contracts for two years.

Since then, the inspector general has continued to investigate contracts involving Betz and JHS. Kurland's office found JHS used as a pass-through on 18 additional contracts, worth $4.2 million, with 10 additional contractors. All of those contracts were signed before JHS was removed from the city's registry.

Compliance agreements have been "hammered out" with eight of the 10 prime contractors involved. Most of those contractors were small businesses "that did not fully understand the city's antidiscrimination requirements," Kurland's office said in a statement. The compliance agreements are "general in scope," and do not include payments to the city.

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