Philly to cut ties with contractor accused of creating Black-owned shell company

Philadelphia officials said on Thursday that they planned to cut ties — for three years — with a politically connected contractor alleged to have formed a Black-owned shell company to circumvent the city’s antidiscrimination policies.

The “debarment” decision involving General Asphalt Paving Co. and its principals was announced by city Deputy Commerce Director Lynn Newsome during a brief virtual hearing.

“GAP shall be prohibited from participating in all of the following activities,” Newsome said, before detailing how the company would not be allowed to work as a contractor or subcontractor for the city, or to bid on new contracts for three years.

General Asphalt’s lawyer did not immediately respond to a request for comment. The company has the right to appeal the decision.

Based in Northeast Philadelphia, General Asphalt is run by the Meehan family of former Philly Republican leaders. It provides a range of services for city departments and has received tens of millions of dollars in city contracts going back decades, including about $10 million over the last six years.

» READ MORE: Contractor allegedly used a shell company to thwart Philly’s rules for hiring Black-owned businesses

General Asphalt caught the attention of city investigators a few years ago for using a subcontractor, Empire Supplies and Services, in order to comply with a city policy aimed at increasing participation among companies owned by people of color, women, and people with disabilities.

The Inquirer reported in August that investigators in the City Controller’s Office and Inspector General’s Office had found evidence in 2021 that Empire was not a separate company, but essentially a shell company run out of a Cheltenham duplex that appeared on paper to be owned by a Black man.

Two of General Asphalt’s owners were also two of Empire’s three founding members, according to acting Controller Charles Edacheril.

“Empire was merely a pretextual shell for [General Asphalt] to claim MBE [Minority Business Enterprise] credit without giving real opportunities to minority-owned businesses,” Edacheril wrote in a letter to Mayor Jim Kenney in August.

Edacheril fired off the sharply worded letter over the summer because the results of the investigation had been shared with city officials back in November 2021 — yet General Asphalt had not yet faced any repercussions. Hearings on the matter had been postponed for 21 months.

“When abuse of the system meant to boost minority-owned businesses is thoroughly documented and exposed, but the city is slow to act in sanctioning this misconduct,” Edacheril wrote, “the lack of urgency seems to reflect a lack of sincere commitment to equity.”

There have been questions over the years about whether General Asphalt received favorable treatment in getting public contracts.

In 2010, for example, a former employee of the Philadelphia Housing Authority who was facing a federal indictment alleged that her bosses sometimes circumvented the PHA’s bidding process to award contracts to General Asphalt. One of those bosses later went to work for General Asphalt. (The company was not accused of wrongdoing in the indictment.)

In 2001, General Asphalt was paying then-Mayor John F. Street’s brother, the late T. Milton Street Sr., as a consultant when it became part of a joint venture that landed a $13.6 million contract at Philadelphia International Airport.

Edacheril declined to comment on Thursday’s ruling.

Philadelphia Inspector General Alexander DeSantis said he was “encouraged” by the decision to finally sanction General Asphalt.

“It sends a very important message to our contracting community that we expect and demand a true, real, good-faith commitment to diversity, equity and inclusion,” he said. “I do think it’s a good deterrent. We have to get serious about this.”

DeSantis said the investigation found that Empire was “spun off” of General Asphalt and that some revenue appeared to be going back to General Asphalt.

“What happened here is just wrong,” DeSantis said.

Last year, the city’s Office of Economic Opportunity reported that 32.5% of city contract dollars went to companies owned by minorities, women, or people with disabilities in fiscal year 2021. That number is much higher than it was 20 years ago, but DeSantis said he believes some businesses continue to use questionable schemes to evade antidiscrimination policies.

“I think, unfortunately, this type of business practice is quite common out there,” he said. “I’d like to see us really ramp up enforcement.”

Newsome, who heads the Office of Economic Opportunity, said at Thursday’s hearing that Empire will also be prohibited from doing business with the city for three years. Its president is listed in business registration records as George Wallace. He did not immediately respond to a request for comment.