Today, Atlanta’s minority contracting program is credited with injecting billions of dollars into minority and female businesses. But it’s also blamed for favoring politically connected insiders and opening the door for corruption, especially in airport contracting.
Photo: Mandi Albright/The Atlanta Journal-Constitution
Photo: Mandi Albright/The Atlanta Journal-Constitution

Corruption scandal taints diversity program that shaped Atlanta’s image

After winning hard-fought federal legislation for civil rights, African American leaders in the 1970s focused on a new battle — one for economic equity, an effort summed up by the slogan “from civil rights to silver rights.”

And in 1973, two things positioned Atlanta to become an early leader in that fight: Maynard Jackson, a bold 35-year-old with a plan for bringing equal opportunity for city contract awards, became Atlanta’s first black mayor just before the expansion of the airport, the largest municipal construction project in the south.

At the time, less than 1 percent of city business went to minority-owned firms, and Jackson believed that the only way to ensure the participation of businesses owned by minority and women was to make it a legal requirement. So his administration pushed through a controversial mandate that 25 percent of the airport contracts would go to minority firms.

“You can have 75 percent of this project or you can have 100 percent of nothing. What is your choice?,” Jackson reportedly told white contractors.

Today, Atlanta’s minority contracting program is credited with injecting billions of dollars into minority and female businesses, helping nurture and expand Atlanta’s substantial black middle and upper classes, and for fostering a nationally recognized entrepreneurial spirit in the city’s African American community.

But it’s also blamed for favoring politically connected insiders and opening the door for corruption, especially in airport contracting.

“The airport is the funding mechanism for the black political machine,” said attorney A. Lee Parks, who has sued the city several times over its contracting process, and represented former airport general manager Miguel Southwell after he was fired by Mayor Kasim Reed in 2016.

“This is where friends and family make their money to provide the money for the election campaigns to keep political power firmly in the hands of minorities,” said Parks.

Maynard Jackson and his wife Valerie smile as they leave the registration room for qualifying for the mayoral race in Atlanta in 1989. Jackson initiated a plan to bring equal opportunity for city contract awards. (Johnny Crawford/AJC staff)
Photo: The Atlanta Journal-Constitution

The latest scandal involves Reed’s brother, whose business partner led the office charged with ensuring the integrity of the city’s diversity contracting programs.

Larry Scott, who ran the city’s Office of Contract Compliance since 2014, has admitted to collecting more than $220,000 in unreported salary from a side business that helped companies win government contracts. Some contracts were with the city of Atlanta.

The company, Cornerstone U.S. Management Group, was formed in 2011. Scott’s partners were the former mayor’s brother and sister-in-law, Tracy and Crystal Reed. Tracy Reed also worked in the compliance office until he left city employment in 2011.

Scott pleaded guilty earlier this month to charges of wire fraud and filing false income tax statements, and is cooperating with investigators the on-going federal probe.

Scott became the third high-ranking city hall official to plead guilty in the investigation.

The Atlanta Journal-Constitution interviewed an array of contractors, political leaders and experts in minority contracting. Some said that Scott’s plea revealed corruption they already knew was present. Others said that while Scott’s actions were unconscionable, they were also an aberration that shouldn’t taint the entire program.

“I was furious,” former Mayor Shirley Franklin said of her reaction to charges against Scott. “How do you take the public trust and throw it out the window?”

Former Georgia Sen. Vincent Fort, who unsuccessfully ran for mayor in 2017, sponsored legislation that created a minority contracting program for the state in 2015. He said even small amounts of corruption can inflict massive damage to the reputation of a good program.

“When we allow questionable acts and illegal acts into these programs, we give life to the enemies of the programs,” Fort said.

The ‘virtuous cycle’

The goals for diversity participation vary significantly from contract to contract, and are ultimately determined by the Office of Contract Compliance.

Scott’s guilty plea raises troubling questions for city officials: How did Cornerstone operate for so long without being detected? How many contractors paid Scott’s company for City of Atlanta contracts? And when will they be identified?

Mayor Keisha Lance Bottoms recently ordered an outside review of the contract compliance office during Scott’s tenure, though it is still unclear who will conduct the probe and what they will investigate.

“Mayor Maynard Jackson’s legacy of inclusion in City business leveled the playing field for generations of business owners across the nation,” Bottoms said in a prepared statement. “This administration will not allow abuse or dishonor to undermine this critical program.”

Atlanta City Councilman Michael Julian Bond said such reviews should be routine.

“This program has been copied in some variation all over the United States,” Bond said. “It’s been successful basically everywhere.”

Work continued on the North Terminal on Tuesday, Sept. 24, 2019 at Hartsfield-Jackson International Airport. For generations, Atlanta’s minority contracting programs have attracted African-American businesses from around the country and served as the basis of claims that this where blacks enjoy unparalleled opportunity. The success of those businesses, growing a substantial black upper class and a minority entrepreneurial spirit that was recognized around the country, helped the city earn its reputation as the ‚”Black Mecca.‚”But lately, those same programs have also drawn criticism for continually rewarding an elite and well-connected group of City Hall insiders. And now a guilty plea in federal court last week by the official who oversaw minority contracting has sparked fears that the city’s reputation has been irrevocably tainted and that calls for reform may end minority access to those lucrative municipal contracts. JOHN SPINK/JSPINK@AJC.COM
Photo: The Atlanta Journal-Constitution

In Jackson’s first term, the Atlanta City Council approved legislation mandating that specific percentages of city business be awarded to firms owned by minorities and women. The ordinance also created the Office of Contract Compliance to ensure that the new rules were followed.

In 1974, Jackson halted design of a project to double the size of then Hartsfield Atlanta Airport, and created a plan to award 25 percent of the $400 million expansion to minority contractors.

Between 1974 and 1979, the percentage of city business that went to minority firms soared to 38 percent.

Lawyer Rodney K. Strong, who served as the director of contract compliance from 1988 to 1992, said the program created a phenomenon he calls the “virtuous cycle.” The program attracted black contractors, which created a national buzz and attracted more people. That cycle repeated for years.

The city’s diversity participation goals have also contributed to the city’s racially tolerant spirit because they require larger white-owned firms to partner with minority businesses, Strong said.

“These business relationships often bleed into personal relationships, so it creates vibrant, integrated business in Atlanta, more than you would have in any other city.”

Atlanta City Hall. The city’s director of contract compliance resigned from his job this week.
Photo: The Atlanta Journal-Constitution

Courts strike down mandates

Parks argued that the programs have fostered racial division.

“The city has created such an affirmative action edge for minorities and bullied white contractors into having minority partners, which essentially does nothing but increase the cost for the consumer,” Parks said. “And that creates corruption.”

Clark Sharpe, the Federal Aviation Administration’s former director of civil rights who now owns gift stores at Hartsfield-Jackson International Airport, challenged critics to identify some other catalyst that could have boosted minority participation in government contracting.

Sharpe said the program is one of the main reasons for his success. However, Atlanta’s affirmative action contracting programs have not gone unchallenged.

Since the 1970s, various organizations representing the construction industry have sued, arguing that the programs were another form of discrimination.

Judges struck down minority contracting programs in cities that followed Atlanta’s example. Then in 1989, the United States Supreme Court ruled that Richmond, Va’s, minority contracting program violated the equal protection clause of the Constitution.

Atlanta was forced to revise it’s diversity programs several times in response to court challenges. Today, the city has more 1,600 certified firms on its minority program registry.

‘It has reached inertia’

Scott isn’t the first city official to face federal charges involving the program.

Longtime City Councilman Ira Jackson was convicted on multiple counts of mail fraud, conspiracy and tax evasion after he set up sham companies — one in his wife’s maiden name — that he used to secretly own interest in airport businesses whose contracts he helped approve.

Mayor Maynard Jackson appointed the councilman as aviation commissioner in 1990, and he resigned two years later when his relationship to the businesses was discovered.

Twenty-one months after leaving office, Jackson himself took advantage of the program he created. His business partnered in a joint venture that operated a TGI Fridays restaurant at the airport. The former mayor was criticized for being too politically connected and well-off for a program designed to help disadvantaged businesses.

As contracting scandals roiled City Hall during the early 1990s, then City Councilman Bill Campbell mounted a mayoral campaign around an anti-corruption platform.

Campbell won that 1993 election. However, before he left office, his fundraiser and longtime friend, Fred B. Prewitt, plead guilty to tax evasion and acknowledged that he served as a minority front for white-owned firms seeking city business.

Campbell’s second term was engulfed by a federal corruption investigation, and he would serve more than a year in federal prison after leaving office for tax evasion.

United States Attorney Byung J. “BJay” Pak’s comment on Facebook about Atlanta Public School Superintendent Meria Carstarphen’s contract was not being renewed caused a stir at Atlanta City Hall. (Alyssa Pointer/alyssa.pointer@ajc.com)
Photo: The Atlanta Journal-Constitution

The current federal corruption investigation became public in 2017 with a guilty plea to bribery charges by Elvin “E.R.” Mitchell, Jr., a long-time African-American contractor who performed work for the city. Mitchell’s guilty plea was followed quickly by white contractor Charles P. Richards Jr., who admitted to paying bribes for a sidewalk contract that was renewed dozens of times without competitive bidding.

Mitchell’s company was the minority subcontractor on Richards’ sidewalk contract. Both men were sentenced to prison.

As the scandal has played out over the last three years, it’s left some of the city’s more controversial airport contracts hanging.

“Right now its gotten so bad that it has reached inertia,” said Parks. “We have contracts awarded five years ago that are held in limbo because of the fact that the next shoe [in the investigation] hasn’t dropped.”

At a press conference earlier this month, U.S. Attorney Byung J. “BJay” Pak declined to provide details about how Scott’s company helped businesses obtain city contracts. But Pak decried Scott using his position for personal gain.

“It’s designed to help groups that have historically been disadvantaged to get ahead,” Pak said of the Office of Contract Compliance. “We can’t have people with conflicts of interest like this who are in a compromised position exercising powerful discretion.”

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