Relates to minority and women-owned business enterprises

Title of bill

An act to amend the executive law and the state finance law, in relation to minority and women-owned business enterprises post completion certification, duties of the director and creating the minority and women-owned business enterprise fund

Purpose or general idea of bill

The purpose of this bill is to reduce fraud and misuse of the minority and women-owned business enterprise (MWBE) program.

Summary of specific provisions

Section 1 requires post completion certifications to be completed, under penalty of perjury, that the MWBE actually performed the work, performed the services, or delivered the materials.

Section 2 requires the division of minority and women's business development to create an internet registry, and to perform inspections of MWBEs to weed out fraud and abuse.

Section 3 requires additional regulations to be adopted related to revocations of certifications for felony convictions for fraudulently misrepresenting the status of an MWBE.

Section 4 permits a court to issue fines double the amount that should have been paid to an MWBE upon conviction for felony fraud related to the MWBE program.

Section 5 permits certain fines to be directed to the MWBE fund.

Section 6 establishes the MWBE fund.

Section 7 provides for the effective date.

Justification

The Minority-and Women-Owned Business Enterprise (MWBE) program has served to increase the participation of disadvantaged individuals in public contracts, and it has significantly leveled the playing field in that regard. However, fraud and misuse of MWBEs serves to undercut the purpose of the program. Each case of MWBE fraud cheats a legitimate minority- or women-owned business out of a contract.

In November 2014, a New York State Supreme Court Grand Jury issued a report on the vulnerability of MWBE programs to fraud and misuse. The report revealed significant criminal conduct in the construction industry spanning at least a decade and, within the relatively small sample of cases reviewed, found evidence that over $10 million intended for honest MWBEs had instead gone to fraudulent non-MWBEs.

In many cases, contractors claimed to use MWBEs to perform work or provide the materials required under the contract, but in fact used businesses that were neither women- nor minority-owned. Contractors also misrepresented that MWBEs were providing the services or materials, when the companies that they listed did not have the capacity to do so. In some instances, invoices and other billing documents were created to make it appear as though the work and payments flowed to MWBEs, when the money was merely passed through those businesses to the non-MWBEs that actually performed the work.

The grand jury report concluded that current laws are not adequate to prevent MWBE fraud and misuse. This bill, in conjunction with steps taken at state- and city-level agencies, will serve to deter MWBE

fraud so that legitimate MWBEs are not burdened with additional barriers to entry.

Prior legislative history

This is a new bill.

Fiscal implications

None.

Effective date

This act shall take effect immediately, provided, however, that the amendments to article 15-A of the executive law made by sections one, two, three, and five of this act shall not affect the expiration of such article and shall be deemed to expire therewith.