Minority contracting scam busted by city's inspector general

Posted: July 26, 2012

INSPECTOR GENERAL Amy Kurland wants city contractors to know that anyone who tries to scam his way around minority-contracting rules does so at his own peril.

Kurland announced Wednesday that a prison contractor will pay a $1.85 million penalty for using a female-owned business as a sham subcontractor. Prison Health Services (PHS) — which has received $196 million from the city since 1995 — told the city that JHK Inc. was getting 40 percent of the contract. But in fact PHS paid JHK only for the use of its name and then gave the work to companies that do not meet the city's standards for minority-, female-or disabled-owned vendors.

"We expect to pursue these matters very vigorously," Kurland said, whose office cracked down on another minority contracting scam in January. "We will not tolerate this kind of conduct."

The sham subcontractor is barred from doing any business with the city for two years. But the Tennessee-based PHS, now known as Corizon, will be allowed to continue to bid for city work because it paid the penalty, put a real female-owned business in place as a subcontractor and made other corrections, Kurland said.

Neither firm responded to calls for comment. The contract is set to expire in February and is open for bids, though PHS can continue to apply for the work.

Kurland said that the city learned of the fraud last fall when a city employee noticed that JHK, based in Indiana, was not registered with the city to provide pharmaceuticals, which it was ostensibly doing, although it had been registered to provide other services.

According to the city, PHS held that a prison employee was aware of the arrangement. That worker is no longer with the city, according to Kurland. The departure was not related to this case. According to the city, PHS held that a prison employee was aware of the arrangement. That worker is no longer with the city, according to Kurland. The departure was not related to this case. Another worker with knowledge of the situation is getting retrained, Kurland said.

Contact Catherine Lucey at 215-854-4172 or luceyc@phillynews.com. Follow her on Twitter @phillyclout and read her blog at phillyclout.com.

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