News

White Out

Continued from page 1

In the case of Vee-Jay Cement, which lent Interface Materials $94,000 in 1996, Taylor stated that "it is not in VJs (sic) interest to fund the building of a competitor unless there is a financial gain or competitive disadvantage. VJ is not a financier, it is a cement contracting company."

The loans made by McCarthy to Interface Materials, of about $520,000 in 1997, were a little different, because McCarthy had the partnership/joint venture for many projects with Hutchinson's other company, Interface Construction.

"Through the relationships between the owners of these companies, it is understandable that IMI (Interface Materials Incorporation) would enjoy a working relationship on joint contracts; however, McCarthy is not a financier either and unless there were financial gains or competitive advantages it would have no interest in FUNDING another person's business," Taylor noted.

Although Interface Materials technically met the city's definition of a minority-owned business — "a sole proprietorship, partnership or corporation owned, operated and controlled by a minority group member or members who have at least 51 percent ownership" — the SLDC review board voted in June 1998 to decertify the company on the basis of its belief that Hutchinson did not really control the company and because the company was receiving money from "competitors."

Interface Materials appealed SLDC's decision, but in December, the appeal was denied. Interface Materials then threatened to take SLDC to court, and a second appeal was granted.

That sparked an internal protest from Percy Green, director of SLDC's Certification and Outreach section, who in a letter to the SLDC board complained that allowing a second appeal was highly unusual and hinted that politics were involved:

"The credibility of the City's (certification program) is doing business with legitimate, minority and women owned businesses, and not FRONT companies. The certification component works very hard to be fair to all its participants and those seeking certification. There were no exceptions made because Interface may be larger than most other firms. Neither did the certification process concern itself with whom Interface may know at City Hall."

Taylor quit in January 1999 after three-and-a-half years with the city. Green won't comment, because Interface Materials made good on its promise to sue. The case is before Circuit Court Judge Robert H. Dierker.

Hutchinson's lawyers also declined comment, but in court filings, they make these arguments:

• On the salary issue, Hutchinson decided during the start-up of the company that he would forego a salary but pay Lohse, his president, instead. Hutchinson was already earning a salary from his principal business, Interface Construction.

• The city misunderstood the $94,000 "loan" from Vee-Jay Cement. According to Interface Materials, Vee-Jay Cement was close to losing a concrete-mixing plant through foreclosure, and when Interface Materials made the only bid on the plant, Vee-Jay jumped at the offer. Vee-Jay accepted a promissory note from Interface Materials; court documents show that Interface Materials has made its payments on time.

• The McCarthy loan is an arm's-length transaction. Although McCarthy did have a partnership with Interface Construction, it also bought supplies from Interface Materials. During one project in which all three were involved, Interface Materials was building several plants at which it would later make ready-mix concrete. McCarthy was scheduled to buy that concrete.

But because of cost overruns and a lack of capital on Interface Materials' part, it couldn't complete the plants on time, so McCarthy, dependent on getting the concrete, finished the plants instead. The notes it issued to Interface Materials were for the cost of finishing the job. Those payments, too, have been paid in a timely fashion, according to the company.

Though the St. Louis Development Corp. saw those loans as evidence that Vee-Jay and McCarthy controlled Interface Materials and the salary payments as evidence that Lohse was calling the shots, the fact that Sam Hutchinson owned the controlling interest in the company was never in dispute.

Interface Materials isn't the first minority-owned company to be decertified by the SLDC, then sue.

CCR Inc., a small painting business founded by Samuel Washington, lost its official minority status last year after city compliance officers concluded that Washington's white part-time office manager, who prepared paychecks and answered the telephone, might actually be calling the shots. The city's evidence? The manager also happened to be working for a large white-owned painting business that was renting CCR an office.

"The evidence," said Circuit Judge John Garvey in a ruling that rejected the city's position, showed that the part-time employee "had absolutely nothing to do with the larger management decisions of the company."

The CCR case suggests that the city's certification process could end up turning legitimate minority-owned companies into victims of the very system designed to help them.

State transportation officials won't go that far, but they're convinced that Interface Materials has been wrongly targeted.

"This company is being unfairly caught in the fire on this, just because the city's certification process is different from what we have to follow," MoDOT's Wilson says.

• 1
• 2