Firm gets years to pay six-figure penalty
Capitol Strategies, a Springfield technology firm, and two affiliated companies have agreed to pay $550,000 to the state of Illinois for violating laws intended to ensure that minorityowned firms benefit from state contracts.
The company remains a state contractor. In addition, Berjaya, Inc., a separate Chatham-based company, has agreed to pay a $10,000 fine and surrender certifications as a business that can meet goals in contracts that set aside work for small businesses and firms owned or controlled by minorities, women or people with disabilities.
According to a complaint filed last month in Sangamon County Circuit Court, Capitol Strategies told the state that it would use Berjaya as a subcontractor when it won 11 contracts between 2010 and 2014 that required use of minority-owned businesses. The work related to information technology was done for a half-dozen agencies.
The state says that Berjaya did little or no work on the contracts and Capitol Strategies knew from the start that the company wouldn’t perform work. People who did work under the contracts were either employees of Capitol Strategies or independent contractors retained by the company to work as independent contractors, the state says in court documents, and Berjaya didn’t have the ability to process payroll and other paperwork associated with having employees until the fall of 2014.
Berjaya was a “façade” for Capitol Strategies, according to a separate settlement between Berjaya and the state chief procurement officer for general services.
“The actions of Capitol Strategies and Berjaya were designed to circumvent the principles of competitive bidding and economical procurement practices,” according to the settlement agreement between Berjaya and the procurement officer.
Capitol Strategies is still doing state work, although it can’t bid on new contracts until Sept. 30 under a settlement agreement with the chief procurement officer signed last month, shortly before the company reached a financial settlement with the attorney general. The state, which has stopped paying Capitol Strategies, isn’t demanding prompt payment of the $550,000 penalty.
The settlement filed in court requires Capitol Strategies to pay $5,000 immediately, with no further payments required until the state resumes payments to the company pursuant to a state budget or a separate annual allocation for the state Department of Transportation, an agency that has contracted with the company. Once a budget is passed and the state has paid the company $250,000, Capitol Strategies will have two years to pay off the remaining $545,000 in monthly installments.
Maura Possley, spokeswoman for the attorney general’s office, said that the state considered the financial condition of both Berjaya and Capitol Strategies in determining appropriate penalties.
“We determined that both companies are nearly insolvent and had maxed out their ability to obtain credit,” Possley said. “Instead of pushing (for immediate payment), we reached a settlement based on their ability to pay.”
Officials from Capitol Strategies could not be reached for comment.
Since 2009, the state has paid Capitol Strategies more than $29.8 million for contract work, with the annual amount often exceeding $5 million. Money from state contracts has dwindled since Capitol Strategies a year ago agreed not to bid on more contracts during settlement negotiations with the state. Capitol Strategies has been paid $892,078 for work performed in fiscal year 2016, according to the comptroller’s office, and could be paid an additional $522,562. Agencies with existing contracts can renew them, but not past June 30, 2017, under terms of the settlement with the chief procurement officer, which cut short some renewal options.
Carl Draper, attorney for Berjaya, says the state hasn’t been cheated out of money.
“In no way has the state been shortchanged on getting service,” Draper said.
The problem, Draper said, was that Berjaya, which is owned and operated by just one person, allowed Capitol Strategies to handle administrative functions, which sparked concerns that Berjaya wasn’t a true subcontractor.
“No, he didn’t have a staff to manage payroll,” Draper says. “There were some problems with his business relationships and his business independence. We had to address them, and we have.”
Draper said that Berjaya has paid the state $10,000 to settle its part of the case. Under terms of the settlement, the company can reapply for certification as a minority-owned business in June, he said, and plans to do so.
Berjaya has landed state contracts independent of Capitol Strategies that are not affected by the settlement. State records show that the company was paid more than $121,000 in 2014 and 2015. Draper said that the company expects to land state business in the future.
“We’re looking forward to move ahead,” he said.
