Disadvantaged businesses wrongly certified for airport contracting

The two firms that should not have qualified because they exceeded the $750,000 cap on personal net worth are Atlanta Restaurant Partners LLC and Mack II Inc., the Federal Aviation Administration said. In addition, Vida Concessions and Hojeij Branded Foods had inadequate documentation, the agency said in memos released Thursday.

The city of Atlanta noted there are different disadvantaged business certifications with different criteria, and the issue in question is focused just on the federal Airport Concessions Disadvantaged Business Enterprise certification.

Together, the four firms named won a significant share of the concessions contracts worth an estimated $3 billion over 10 years. They were chosen to operate dozens of new restaurants at the airport, and are in eight of the nine airport restaurant contracts approved by City Council and signed by Atlanta Mayor Kasim Reed.

The city awarded the contracts earlier this year for a massive overhaul of airport restaurants and shops.

The city said it is moving forward with the opening of the new international terminal May 16 using the companies that were certified when it went through the contracting process. Atlanta is working with the FAA to respond to the letter, city spokeswoman Sonji Jacobs said.

The city did not certify the firms as disadvantaged businesses because the Georgia Department of Transportation and MARTA handle certification for the federal program. The city said it does not have the authority to certify or independently assess the certification.

The FAA sent memos on the issue to the airport and Atlanta's chief procurement officer. It also sent memos to MARTA and GDOT because they certified the firms.

GDOT said it is reviewing the FAA's letter and its disadvantaged business files and will then respond to the FAA. MARTA did not respond to a request for comment.

Hojeij Branded Foods won one of the five largest restaurant contracts for the airport. Atlanta Restaurant Partners won one of the four small restaurant contracts, as well as parts of larger restaurant contracts as a subtenant. Vida Concessions is a joint venture partner in a small restaurant contract. Mack II is a disadvantaged business subtenant in all five of the large restaurant contracts and also won a small restaurant contract.

Atlanta Restaurant Partners has an owner whose personal net worth exceeded the $750,000 cap, and other financial information was not documented properly and verified, according to an FAA memo. The firm is owned by Daniel Halpern, who was co-chair of Mayor Kasim Reed's 2009 campaign, and two members of former Mayor Maynard Jackson's family.

Another issue raised was the connection to Jackmont Hospitality, which is also controlled by Halpern and Maynard Jackson family members, with the FAA saying there was no tracking of how that firm's assets were disbursed.

Mack II, controlled by Mack Wilbourn, also exceeded the personal net worth cap and had other financial information not properly documented and verified, according to an FAA memo.

FAA memos said Hojeij Branded Foods had inadequate documentation of equity ownership in other firms. The memo also raised concerns about the firm's ownership.

Vida Concessions provided "vague and unsubstantiated" information on the independence of the firm and who controls it, FAA memos said. The memos said Vida Concessions' relationship with Hojeij Branded Foods "is of particular concern."

Through a spokesman Halpern said he hasn’t seen the letter and will respond once he has the opportunity to read it. The other firms declined to comment or did not respond to a request for comment.

The FAA, whose regulatory oversight includes the responsibility to ensure requirements are followed under the Airport Concessions Disadvantaged Business Enterprise program, said in memos that it reviewed selected certification files based on allegations of certification irregularities received by the agency.

The firms "should not have been given scoring preference or counted toward any ACDBE participation goal" that the airport used for the concessions procurement, FAA memos said.

The airport had a goal of awarding 36 percent of the contracts to disadvantaged firms, based on value of the contracts.

The FAA said that as the city considers how to remedy the situation, it should not count as minority participation any firm that has a personal net worth of more than $750,000 or otherwise doesn't meet requirements.

The certification issues affecting the firms "could have impacted the selection process" for the concessions contracts, the memos said, so the FAA offered technical assistance to remedy any contract awards made to firms with certification problems.

There is a proposal to increase the personal net worth cap from $750,000 to $1.32 million for disadvantaged businesses seeking airport concession deals, but it has not yet been finalized and would only affect future contracts, the FAA memo said.

The city already is facing legal challenges over the concessions contracts, recently winning the denial of an appeal by a losing firm for large restaurant contract awards. That firm, SSP America Inc., plans to go to Fulton County Superior Court to seek judicial review of that ruling.

Ken Hodges, an attorney for SSP, called it "astounding" that the city is moving forward on the contracts in light of the FAA finding, "as this will surely end up costing the taxpayers of Atlanta more money to defend the award of the lucrative contracts to the mayor's friends."

The city faces another hearing next week over the small restaurant contract awards.

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