U.S. Department of Transportation penalizes white man $417,417 for his skin color.  Black man -- a Minority Business Enterprise (MBE) -- uses white man's resume, and gets $490,600 from DOT.

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Case 24 - White Male Denied Contracts with U.S. Dept. of Transportation

DOT Denies Contracts to Whites

DOT was enthusiastic about hiring Fay Communications until they found out the owner is white.

DOWN:  Details of FayComm vs. U.S. DOT Fay Communications v. U.S. DOT:  They sought him out. They liked his work. They needed his expertise. But he was white!

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$490,600 Goes to Black Man using White Man's Resume
Posted Oct. 28, 2000


(1) Overview and Summary:

          In 1997 U.S. DOT initially wanted to contract with Fay Communications to produce an interactive CD-ROM concerning DOT transportation regulations.  But then DOT found out the owner, Tim Fay, was white.   Here's a synopsis:
  • DOT was very enthusiastic about Fay Communications' interactive CD-ROM work.
  • DOT wanted to hire FayComm -- they reached out to FayComm and initiated contact.
  • Then, DOT refused to hire FayComm because they found out that the owner, Tim Fay, was white.
  • Tim Fay subsequently arranged to have a black man "front" the DOT contract, in order to meet DOT's minority contracting quotas.
  • The black front man had no prior experience in CD-ROM production, or in DOT transportation regulations.
  • DOT hired the black man only after he falsified his records to show that Tim Fay was an employee of his company, at which point he was able to use Tim Fay's resume to qualify his 1-man firm for DOT's minority set-aside contract.
  • During the ensuing 3 years, the black front man kept 85.1% of the contract funds; FayComm got only 14.9%.
 

DOT's Minority Setaside Contracting Record (white males cannot bid on these):

Setaside
Category
$ All DOT Contracts
(millions)
$ DOT Contracts Setaside for Minorities
(millions)
% DOT Contracts Setaside for Minorities
SBA Section 8(a) Set-asides by DOT $1,837.8 $279 15.2%
DOT Small Disadvantaged Business (SDB) Minority Setaside PRIME CONTRACTS: $1,837.8 $85.2 4.6%
DOT Small Disadvantaged Business (SDB) Minority Setaside SUB-CONTRACTS: $545.4 $98.4 18.0%
DOT Women Owned Business (WBE) PRIME CONTRACTS: $1,837.8 $44.4 2.4%
DOT Women Owned Business (WBE) SUB-CONTRACTS: $545.4 $14.3 2.6%
TOTAL -- All DOT race/gender set-asides: ------- $521.3
million
28.4%

DOT's Employment of Minorities:
(Source: U.S. OPM 2003)

Category Civilian Work Force % DOT % % Over affirmative action quota
Blacks 7.4 15.3 +106.9%
Asian-Pacific Islanders 2.9 3.6 +24.1%
Native Americans 0.5 0.8 +160.0%
White Males not specified not specified not specified

(2) Details of U.S. DOT Minority Quota Scam:

          In October 1997 Ms. Deirdre Breithaupt from U.S. DOT’s Research and Special Programs Administration (RSPA) placed an unsolicited phone call to the offices of Fay Communications, Inc. (FayComm).

          FayComm's owner, Mr. Fay, had recently produced a CD-ROM training program for a transportation firm regarding DOT regulations and requirements.

          FayComm's client was so pleased with the CD he mailed a copy to DOT in order to show them the innovative training being used by the his transportation firm to keep its operators abreast of new DOT requirements.

Mr. Fay's personal account appears below: 

          The October 1997 phone call from DOT's Ms. Breithaupt was very exciting.  She was so impressed with my work she kept repeating how good it was.  She said DOT had an urgent need for similar work, and wanted to know if I was interested.

          In small business circles, this is what we call a "very hot sales prospect".  A large government agency called me out of the blue to hire me because of the excellence of my previous work.   And I hadn't even solicited DOT!

          Ms. Breithaupt was very direct.  She said that DOT's previous contractor had "really hosed them" and DOT really needed someone with my demonstrated qualifications to do a similar CD-ROM project for them.

          Then she just absolutely devastated me by asking "Are you registered with the Small Business Administration as a minority-owned firm?

          I immediately replied "What you're saying is that the contracts have been set aside for a minority owned firm."  She paused for a moment, then said "Yes".

          After I hung up the phone, I was thoroughly depressed and despondent.  The thought that kept running through my head was "What did I do wrong?  I do excellent work.  DOT really, really liked my work.  They enthusiastically acknowledged my technical qualifications.  They wanted me to do the work for them.  But they told me that I am the wrong color!"

          My depression gave way to anger, then to a burning desire to obtain justice.  My business had already been decimated during the preceding 10 years (1987 to 1997) by government minority quotas.  [I sued the U.S. SBA for reverse discrimination in 1987 (See also Case 1) and hadn't performed a single government contract since then.]

          Three weeks later, in November 1997, I launched Adversity.Net on the internet in order to provide a support network for the tens of thousands of other victims of the government's reverse discrimination.

          But, being a businessman, and being very poor, I also devised a scheme to get at least part of the DOT contract funds.

          I called DOT back and made arrangements to have a black man "front" the DOT contract.  The black man was duly registered with the U.S. SBA as an "historically disadvantaged business enterprise" (i.e., black-owned) even though he'd been in business for over 15 years, and lived on a large tract of very valuable, developable farm land in the DC suburbs. 

          My private deal with the front man was that he would subcontract 49% of the DOT project to me, which was the maximum allowed by the government's racial quota contract laws.

          However, DOT needed some sort of "proof" that the black front man could actually do the CD-ROM work.  So he falsified his records to list me, Tim Fay, as an employee of his 1-man business, and he used my resume "prove" to DOT that his tiny firm could do the work.

          In early 1998 the deal was sealed:   DOT had their "disadvantaged minority" contractor.  A contract was signed between DOT and the black man without any competitive bidding.


(3) DOT Penalty Paid by FayComm for Being White-Owned:

          Below are the actual contract amounts which the black front firm received as a non-competitive gift from U.S. DOT. 

          Also shown are the token funds sub-contracted to the white-owned firm, Fay Communications whose technical expertise and previous work were responsible for obtaining the contracts.

DOT Contract: Time Period: Statement of Work: Total Contract Set Aside for Black Minority-owned firm: Funds Retained by Black "Front" Contractor and His Other White Sub-contractors: Amount Sub-contracted to FayComm (White-owned):
DTRS56-98-70054 Apr. 98 - Jul. 98 Develop interactive CD-ROM training program $98,600 $50,600 $48,000
DTRS56-98-C-0008 Sep. 98 - Sept. 99 Revise and update preceding interactive CD-ROM training program $294,000 $278,890 $15,110
DTRS57-98-P-80918 Sep. 98 - Mar. 99 Produce two videotapes dealing with same material as CD-ROM $98,000 $87,927 $10,073
TOTALS:     $490,600 $417,417
(85.1% of total contracts)
$73,183
(14.9% of total contracts)

Note:  The DOT contracts listed above are a matter of public record, and are available from U.S. DOT under the Freedom of Information Act.


(4) Conclusion

The public record is crystal clear on the following key points:

  • Fay Communications had the track record and the demonstrated technical expertise to perform the work for U.S. DOT.
  • DOT made it very clear that they initially wanted to hire FayComm.
  • If Fay Communications had been owned by a black man the U.S. DOT would have awarded the firm $490,600 in contracts.
  • Since Fay Communications is owned by a white man, the U.S. DOT flatly refused to award the contracts to FayComm.
  • U.S. DOT and SBA regulations forced FayComm to arrange for a black man to "front" the contracts.
  • The price paid by FayComm for being white was $417,417 (or 85.1% of the contract totals).
  • Overall, U.S. DOT excludes all white males from over $521,300,000 in annual agency contracts, which is 28.4% of all U.S. DOT agency contracts.
  • According to U.S. Small Business Administration, in 1999 over 50% of all set-asides went to only 209 disadvantaged firms for an average of $15,000,000 in contract gifts per firm.  See SBA Quotas.  One must ask how a firm can be considered disadvantaged with a guarantee of $15,000,000 in government work every year!?
  • The SBA's definition of "economic disadvantage" is very generous:  a minority can have $250,000 in assets, not counting house and business, and still be considered disadvantaged.  By this definition, 90 percent of all American families would qualify as disadvantaged except for their skin color.

END Case 24: DOT Awards $490,600 to Black Man using White Man's Resume

 

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*  We use the term reverse discrimination reluctantly and only because it is so widely understood.  In our opinion there really is only one kind of discrimination.