In dollar terms, the largest civil rights effort run by the Federal Government is the set-aside programs for minority-owned businesses. In 1986 more than $4 billion in federal contracts was allotted to such firms, and enthusiastic support for the programs cuts across the ideological spectrum, from Ronald Reagan to liberals in Congress. The political appeal of this kind of compassionate capitalism is almost irresistible: fostering entrepreneurship among blacks, Hispanics and other minorities with dollars the Federal Government would have spent anyway.
Good intentions, however, are rarely enough, especially when billions of dollars in contracts are being awarded free from the pressures of competitive bidding. Corruption has dogged the two primary federal set-aside programs: a Government-wide $3 billion effort run by the Small Business Administration, and the requirement that 10% of all highway funds ($1.2 billion) go to minority contractors. The most frequent problems are false-front companies, which are purportedly controlled by minorities but actually owned by whites. A federally funded 1986 study of highway set-aside programs in nine states by Abt Associates, a consulting firm, estimates that about 20% of minority contractors engage in fraudulent activities. Now the SBA is mired in the worst scandal in the history of the set-aside programs: the tangle of bribery, theft and political favoritism surrounding the Wedtech Corp., a Bronx, N.Y., defense supplier once hailed as a model minority contractor.
Attorney General Edwin Meese and former White House Political Adviser Lyn Nofziger are under investigation by Independent Counsel James McKay, in part because of possible improper lobbying that helped Wedtech win an Army contract, eventually worth $32 million, under the SBA program in 1982. Last week Meese testified before a federal grand jury in Washington that is hearing evidence from McKay. Meese's lawyer revealed that the Attorney General had also secretly appeared before the grand jury in March. Not until a month later did Meese disqualify himself from the Justice Department's own Wedtech investigation.
But the biggest headlines were produced in New York City last week as another federal grand jury investigating Wedtech indicted seven men, including Bronx Democratic Congressman Mario Biaggi and his son, on a variety of extortion, racketeering and conspiracy charges. The 84-page indictment depicted Wedtech as a racketeering enterprise dependent on bribes to public officials to win no-bid minority contracts.
Prosecutors claim that Biaggi received $3.6 million in Wedtech stock after threatening to undermine the SBA's support for the company. Among those indicted was a former SBA regional administrator who is alleged to have approved a sham arrangement masking the fact that Wedtech no longer had majority Hispanic ownership. "If Wedtech was the proverbial American success story," said U.S. Attorney Rudolph Giuliani, "these charges raise serious questions about the way we practice politics and conduct business in the city, state and nation."