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Over the past few years, M&N Electrical Supply Corp. has been a big beneficiary of Denver's program to promote the use of "minority business enterprises" on public-works projects. Records show the Hispanic-owned company has won contracts worth more than $12 million from the city since 1989, most of them as a subcontractor at Denver International Airport.
But M&N, the city now charges, actually has been running a bogus pass-through operation that has allowed white-run companies to circumvent Denver's affirmative-action program.
"M&N is merely an unnecessary conduit created for the appearance of satisfying [affirmative-action] requirements," the city alleges in papers on file at the Mayor's Office of Contract Compliance (MOCC). "M&N does not perform a commercially useful function as required under the [city] code."
The company's president, Normando Pacheco, insists M&N is a legitimate firm doing honest work. Pacheco, 49, is fighting the MOCC's attempt to remove M&N from Denver's list of approved minority-owned supply companies, which would effectively bar the firm from winning future city contracts.
"The city's so full of shit it's incredible," Pacheco says.
Denver's affirmative-action contracting law, designed to give women and minorities a toehold in a construction industry dominated by white men, has come under fire recently. Media reports have shown that some minority- and women-owned firms act as mere fronts on city jobs, lending their names to contracts but performing no real work.
Industry insiders say the supply business is particularly prone to abuse. Minority "brokers" can set up shop with little more than a desk and a telephone, those sources say, and then simply funnel materials from bona fide suppliers to construction contractors. A contractor who runs supplies through the broker gets to credit the entire cost of the brokered material toward the city's affirmative-action quota on the job.
"At least half of the [minority- and women-owned supply] companies are probably not doing [work] themselves," says an employee of Englewood-based Ludvik Electric Co. who asks not to be identified. "They're just shuffling papers across a desk. The whole thing has seemed like a scam to me for years." Records show Ludvik hired M&N on a number of DIA contracts, including a job supplying switchgear, generators, transformers and other equipment worth $2.6 million for Concourse B.
City law requires that any certified minority supplier be a "regular dealer" of the material in question. The company must have a warehouse in which supplies are "bought, kept in stock and regularly sold to the public."
M&N's small facility at 1629 Platte Street in west Denver fails to meet this requirement, the city says. The firm does not operate a store or warehouse, the city claims, and inspections of the building have revealed an "office operation" with five desks, a computer, a typewriter and some phones. The company has no full-time employees.
The MOCC also questions Pacheco's role at M&N, since he is a criminal-defense attorney with a "a full-time practice of law in the Denver area." Though Pacheco owns 97.5 percent of the company, his white partner, 44-year-old Leonard Stevens, is "the principal person making the deals, ordering materials and following up on M&N contracts," the MOCC alleges.
Stevens, furthermore, has served time in prison, according to an administrative law judge's report in the MOCC files. The report does not indicate what Stevens's crime was, but Colorado Bureau of Investigation records show that a man with the same name and date of birth was arrested on drug charges in 1976 and 1981.
Stevens did not return a phone call seeking comment. "I don't think he'd talk about it," Pacheco says.
M&N was founded in 1986. At the time, its president was Orlando Martinez, an affirmative-action "field investigator" for Denver's public works department.
Other government employees have held a stake in the company as well, according to MOCC records. One man owned 5 percent of M&N while he worked for the Colorado Division of Wildlife. And Denver City Councilman Hiawatha Davis indirectly held a small share through an investment company called Human & Environmental Resources Corporation. HERCO at one time owned 20 percent of M&N, and Davis was a 2.5 percent owner of HERCO. In a June 1990 letter to the MOCC, however, Davis denied knowing anything about the electrical supplier. "I do not own or have any participation in M&N," Davis wrote.
Pacheco gained control over the company after Orlando Martinez filed for personal bankruptcy in 1991. While corporate profits were "absolutely pathetic" under Martinez, Pacheco says, the company has performed well in the past few years, mostly because of DIA work.
Records show M&N worked on a variety of DIA jobs, usually as a subcontractor to companies like Ludvik or Sturgeon Electric. It supplied wire cable for Runway 826, fixtures for the DIA office building and switchgear on Concourse C.
All told, M&N's DIA contracts exceeded $8 million, records show. Other M&N clients include US West, Coors and Public Service Company.
Representatives of contracting firms say they have no way of knowing whether a supply firm is acting only as a broker. Sturgeon Electric spokeswoman Elaine Hughes says Sturgeon assumed M&N was a real supplier because it was on the city's list of approved companies.
If the city gets its way, M&N no longer will be. The city moved to decertify the company last year, but Pacheco has appealed. A hearing is scheduled for March 17.
"We've got five people to testify that we're not brokers," Pacheco says. Pacheco also rejects the city's claim that Stevens is in charge of day-to-day operations. "Leonard's a salesperson," Pacheco says. "He doesn't make any [management] decisions."
Pacheco blames the city's action on a "personal vendetta" by MOCC staffer Lupita Gusman. Pacheco represented Gusman's sister's ex-husband during the couple's divorce years ago, he says, and Gusman has been "hounding" him out of spite. "I can't give you any other explanation," Pacheco says. Gusman declines comment.
MOCC director Wayne Cauthen did not return repeated phone calls. Last year, however, he told Westword he didn't believe brokers were operating in the city on a large scale.
The city ordinance establishing preference for minority- and women-owned firms expires this year. In August the Denver City Council will vote on whether to renew it.