Fiscal conservatives have been howling in protest over the $54 million earmarked by Obama’s Stimulus Package to finance something called “The Wine Train” in California’s scenic Napa Valley. The notion that the government was squandering millions of taxpayer dollars to prop up a private tourist attraction seemed to epitomize everything that was wrong with pork-barrel politics masquerading as sober economic policy. I mean, while we’re subsidizing tourist traps, why not give a couple hundred million to Disneyland to build a new “Pirates of the Potomac” ride?
But the howls are about to get a lot louder. Because an investigation just published by California Watch and reprinted in the San Francisco Chronicle shows that the Wine Train scam was far worse than you imagined. The $54 million wasn’t just spent on an overpriced not-a-thrill ride for tipsy tourists: it was thrown down the toilet on a no-bid contract handed to a shady Alaskan front corporation which deviously abused race-based “set-aside” laws to land a vastly overpriced deal — which they then proceeded to subcontract at a much lower rate to a different company, while pocketing a cool $20 million for doing no work whatsoever.
The article merits a full read (and kudos to author Lance Williams at California Watch for actually doing some real investigative journalism), but these excerpts (with key sections highlighted) should make you nauseous enough:
…The main action today is in Napa, where, without competitive bidding, this unusual construction company won a $54 million federal contract to build a new railroad bridge and other structures for the famed Napa Valley Wine Train tourist attraction.
This is the world of Suulutaaq Inc. of Anchorage. Because the company was founded by Alaska Natives, it enjoys special access to federal contracts.
A Walnut Creek construction executive whose firm built a previous phase of the flood-control project said the government probably overspent by millions when it negotiated a contract with Suulutaaq rather than seeking competitive bids.
Meanwhile, investors aggrieved over the bankruptcy of the South Carolina dot-com Sailnet said they were surprised to learn of former CEO Samuel Boyle’s new job as CEO of Suulutaaq. Boyle did not mention having construction experience or ties to Alaska tribes, they told California Watch. Some said Boyle’s involvement in Suulutaaq boded ill for the Alaska firm.
Suulutaaq is one of dozens of Alaska Native corporations that have emerged as players in federal contracting via measures crafted in the 1980s and 1990s by former Sen. Ted Stevens, R-Alaska, a powerful lawmaker whose career ended with a contracting scandal.
For decades, the U.S. Small Business Administration has run a preferential contracting program to aid disadvantaged businesses. Qualifying firms can get federal contracts worth up to $5.5 million by negotiation, rather than competitive bidding.
The Stevens measures gave corporations that were set up by Alaska Natives special access – with no cap on the size of contracts they can obtain.
“Alaska Native corporations don’t have to prove that they’re socially or economically disadvantaged,” Sen. Claire McCaskill, D-Mo., said at a 2009 hearing. “They don’t have to be small businesses. And they can receive no-bid contracts worth billions of dollars.”
The companies employ few Alaska Natives and “rely heavily on non-native managers,” she said.
McCaskill also contended that some of the companies “may also be passing through work to their subcontractors.” In those cases, the companies were collecting a profit simply because they had special access to federal contracts, she said.
McCaskill proposed putting a cap on the no-bid contracts, but the measure stalled in the face of intense lobbying by tribal corporations.
The price tag might have been significantly lower but for the Wine Train, a private rail line established by the late Vincent DeDomenico, the wealthy creator of Rice-A-Roni pasta. Sixteen times each week, according to the Wine Train’s Web site, the train transports tourists from Napa to St. Helena aboard restored dining cars. A champagne dinner on the Vista Dome car costs $129 per person. About 125,000 people ride the Wine Train each year.
Brosamer, the Walnut Creek contractor, said the public was paying a premium for the Wine Train project, saying, “It would have been a hell of a lot cheaper if they had put it out to bid.”
But the quality of the construction is first rate, Brosamer said, because Suulutaaq subcontracted much of the job to the giant Peter Kiewit Sons Inc. engineering firm, which also is a contractor on the Bay Bridge.
“The reality is, Suulutaaq isn’t doing much,” Brosamer said.
Federal records show that Suulutaaq is paying Kiewit $28.1 million – 53 percent of the total stimulus contract. Suulutaaq is keeping about $20.4 million, or 38 percent of the total. The rest, about $4.7 million, goes to other subcontractors, all from the lower 48 states.
So, basically, a white wheeler-dealer got himself appointed CEO of a shell company that’s legally classified as an “Alaska Native corporation,” then, using this unique privileged status, finagled a no-bid contract to get $54 million in taxpayer funds for a construction job — and then used a small portion of that money to hire subcontractors to do the actual work, while pocketing the rest as pure profit.
Nice, eh? And guess what: You’re the sucker in this swindle.
One has the suspicion that the entire “Stimulus” is nothing but countless Wine Train-style deals bundled together and given an uplifting name to disguise that fact that it’s little more than a thousand unnecessary crooked backroom scams with essentially no oversight.
Handouts to shysters as economic theory? I feel like getting drunk. All aboard!