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

A politically connected contractor allegedly created a shell company and “submitted false, inaccurate, and inflated invoices” as part of a scheme to circumvent Philadelphia’s anti-discrimination policies, according to the city’s chief auditor.

The accusations against General Asphalt Paving Co., run by the Meehan family of former Philly Republican leaders, are detailed in an Aug. 9 letter from acting Controller Charles Edacheril to Mayor Jim Kenney obtained by The Inquirer.

The stinging letter, which is copied to other senior Philadelphia officials, expressed dismay that General Asphalt hadn’t been held accountable in the 21 months since an internal report about the alleged misconduct was sent to the mayor’s attention.

Instead, the city increased one of General Asphalt’s contracts by $2 million, the acting controller noted.

“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.”

Spokespersons for Edacheril and Kenney declined to comment on the letter.

City officials have known about the alleged scheme since November 2021, when the City Controller’s Office and Inspector General’s Office shared the findings of their joint investigation into General Asphalt’s hiring of the subcontractor, Empire Supplies and Services. The Northeast Philadelphia-based company used Empire to comply with a city policy aimed at offering opportunities to companies owned by people of color, women, and people with disabilities.

Investigators found “substantial evidence” that General Asphalt Paving “designed and used Empire as a pass-through,” according to Edacheril’s letter. Two of General Asphalt’s owners were also two of Empire’s three founding members, he wrote.

“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’s wrote.

In January 2022, the city’s Procurement Department informed both companies that it intended to “debar” them — meaning they would be prohibited from getting any city business for a period.

Then … nothing happened.

After General Asphalt and Empire indicated they would fight the debarment, a hearing was set for July 2022.

Then the hearing was rescheduled to the following month.

Then, last October, it was postponed again.

And again in December.

The hearing was most recently scheduled for Aug. 4, in the Municipal Services Building.

But it was postponed — for at least the fifth time.

Company president Austin Meehan did not respond to requests for comment.

General Asphalt provides a range of services beyond paving, including plumbing and heating repair, testing services for the Philadelphia Water Department, and boiler repair and maintenance. It has received tens of millions of dollars in city contracts going back decades, including about $10 million in the last six years.

The business address for Empire Supplies and Services is a duplex in Cheltenham. No one answered the door there Thursday. Its president is listed in business registration records as George Wallace.

A representative for Empire in an email to The Inquirer on Friday wrote: “Mr. Wallace would be more than willing to speak to you and even have you sit in on any hearings once they are scheduled. As of today, there has been no hearing date notification.”

In a later email, the representative wrote that Wallace “followed the direction [of] the Office of Economic Opportunity” and declined further comment.

Alexander DeSantis, the city’s inspector general, said on Monday he believed the investigation showed “significant abuses” by General Asphalt, but declined to discuss specifics because the debarment hearing had not taken place.

“I hope the outcome is this company will be sanctioned at the end of the day,” DeSantis said.

Some news reports over the years have raised questions whether the Meehan-family company had an inside track in getting city business.

In 2001, General Asphalt was part of a joint venture awarded a $13.6 million contract at Philadelphia International Airport. At the time, General Asphalt was paying then-Mayor John Street’s brother, the late T. Milton Street Sr., as a consultant. Milton Street was later convicted of federal tax charges for failing to report almost $3 million in consulting income between 2000 and 2004.

In 2010, a just-indicted former employee of the Philadelphia Housing Authority told the Daily News that her bosses sometimes circumvented the PHA’s bidding process to award contracts to General Asphalt, and that other contractors believed the company got special treatment. One of those bosses later went to work for General Asphalt. The company was not accused of wrongdoing in the indictment.

Most recently, in 2016, Fox 29 tailed General Asphalt workers as they used company equipment to illegally dump construction debris in South Philadelphia.

“If they’re doing work like this, they shouldn’t be doing work for the City of Philadelphia at all,” Councilman Kenyatta Johnson told the TV station at the time. The company said it had been using the nearby street as a “staging area” and later cleaned up the debris.

The past two mayoral administrations have made significant progress in awarding contracts to a more diverse group of companies. Between 1998 and 2003, only 2.3% of city-contract dollars had gone to minority-owned firms and 2.2% to those owned by women, according to then-Councilmember W. Wilson Goode Jr.

Last year, the Office of Economic Opportunity reported that 32.5% of that spending went to companies owned by minorities, women, or people with disabilities in fiscal year 2021.

Regina A. Hairston, president and CEO of the African-American Chamber of Commerce of PA, NJ, and DE, said she’d like to see that number continue to rise.

“I commend the city for working toward that number going up, to ensure our members have access to those opportunities,” she said.

Even so, some companies continue to find ways to skirt rules addressing socially and economically disadvantaged businesses.

In March, Sherwin-Williams, a Fortune 500 company, agreed to pay $1 million to resolve allegations that it schemed to defraud the federal Disadvantaged Business Enterprise program in connection with a $42.7 million contract to paint the George C. Platt Memorial Bridge. Government investigators alleged the joint venture that won the contract claimed to be buying paint from a registered disadvantaged business, but phony invoices were used to conceal that Sherwin-Williams actually supplied the paint.

DeSantis said the delays in the General Asphalt case highlight the need to speed up the process for investigating and sanctioning alleged abuse in Philadelphia.

“We have to find a way to do this a lot more efficiently, holding contractors accountable,” he said. “We can’t take years to bring something to a resolution.”