A joint investigation by the Office of the Inspector General and the Office of the City Controller revealed General Asphalt Paving used a shell company to skirt the City’s anti-discrimination rules
PHILADELPHIA – The City of Philadelphia announced today that the Philadelphia-based firms General Asphalt Paving (GAP) and Empire Supplies and Services (Empire) will be debarred from participating in City contract opportunities for a period of three years, following an administrative hearing that found that GAP used Empire as a shell company to skirt the City’s anti-discrimination rules. The hearing and panel decision stemmed from a joint investigation by the Office of the Inspector General and the Office of the Controller, recommending enforcement action.
The administrative panel, which included representatives from the City’s Procurement, Commerce and Managing Director’s offices, focused on two 2018-2019 City contracts that included the minority-owned material supply subcontractor, Empire. The investigation found that despite GAP’s representations to the City, Empire performed no “commercially useful function” for either contract. Rather, Empire passed all of the substantive work to GAP. Empire’s primary owner was a full-time GAP employee and it repeatedly and openly used GAP’s equipment, administrative support and labor force – at no cost – to perform all the work.
To make it appear that these firms were engaged in legitimate business transactions, Empire invoiced GAP for services and GAP paid Empire accordingly. But, the investigative findings showed that those payments were routinely returned to GAP, purportedly to repay an undocumented no-interest loan. In fact, evidence showed that Empire funneled more than $4 million to GAP in this way, allowing the majority-owned GAP to realize significant profit from its sham minority subsidiary.
“The City’s anti-discrimination in contracting rules are intended to support economic growth for those who have been historically disadvantaged. These firms took this program and manipulated it into an instrument of further discrimination” said Inspector General Alexander DeSantis. “Rather than make a real and honest investment in our underserved community, GAP and its ownership enriched themselves.”
As a result of the hearing, GAP and Empire will both be listed on the City’s formal debarment list and will be unable to bid or participate in any City contract work until 2026.
DeSantis added, “Unfortunately, we believe that this type of business practice is all too common in the City of Philadelphia, as large majority-owned firms can very easily exercise control over closely related spin-off entities. This case sends a strong message that these practices will not be tolerated in Philadelphia – we expect all of our business partners to share our staunch commitment to diversity, equity and inclusion.”