House Majority Leader Kevin McCarthy’s family benefited from U.S. program for minorities based on disputed ancestry – Los Angeles Times

https://www.latimes.com/local/california/la-na-pol-mccarthy-contracts-20181014-story.html

A company owned by House Majority Leader Kevin McCarthy’s in-laws won more than $7 million in no-bid and other federal contracts at U.S. military installations and other government properties in California based on a dubious claim of Native American identity by McCarthy’s brother-in-law, a Times investigation has found.

The prime contracts, awarded through a federal program designed to help disadvantaged minorities, were mostly for construction projects at the Naval Air Weapons Station China Lake in McCarthy’s Bakersfield-based district, and the Naval Air Station Lemoore in nearby Kings County.

Vortex Construction, whose principal owner is William Wages, the brother of McCarthy’s wife, Judy, received a total of $7.6 million in no-bid and other prime federal contracts since 2000, The Times found.

The Bakersfield company is co-owned by McCarthy’s mother-in-law and employs his father-in-law and sister-in-law, Wages said. McCarthy’s wife was a partner in Vortex in the early 1990s.

Vortex faced no competitive bids for most of the contracts because the Small Business Administration accepted Wages’ claim in 1998 that he is a Cherokee Indian. Under the SBA program, his company became eligible for federal contracts set aside for economically and socially disadvantaged members of minority groups, a boon to its business.

Wages says he is one-eighth Cherokee. An examination of government and tribal records by The Times and a leading Cherokee genealogist casts doubt on that claim, however. He is a member of a group called the Northern Cherokee Nation, which has no federal or state recognition as a legitimate tribe. It is considered a fraud by leaders of tribes that have federal recognition.

Vortex was awarded more than $4 million in minority set-aside contracts for projects at China Lake. McCarthy has been a staunch advocate in Congress for funding and staffing for China Lake, the Navy’s largest property at more than 1.1 million acres, and spearheaded successful efforts to expand its borders.

McCarthy is no ordinary member of Congress, but one of the most powerful elected officials in California and on the national stage. The contracts obtained by Wages’ company have prompted questions about whether he improperly benefited from being McCarthy’s brother-in-law.

The Times investigation has found no evidence that McCarthy did anything to steer contracts to the company. Both Wages and McCarthy said they have never discussed Vortex’s work with each other.

In an interview at the Vortex office, Wages said he did nothing wrong and followed the SBA’s rules in getting Vortex certified for the minority contracting program. He said he submitted a membership card from the Northern Cherokee Nation — then known as the Northern Cherokee Nation of Missouri and Arkansas — to qualify. He said he would be “very surprised” to learn he is not of Cherokee descent.

Wages’ attorney, Jason Torchinsky, said, “Look, the SBA approved the application.”

When presented with The Times’ findings, experts in government ethics said the sheer volume of federal work the company received in and near McCarthy’s district, in addition to Wages’ disputed claim to be Native American that allowed him to avoid competitive bidding, warranted more scrutiny.

Those ethics watchdogs questioned whether the blossoming of the in-laws’ business in McCarthy’s political backyard was a coincidence. They called on the Office of Congressional Ethics to investigate whether McCarthy exerted any influence over the contract awards and to determine what he knew about his brother-in-law’s participation in the minority contracting program.

“There is a direct and symbiotic connection between who McCarthy is and what he does and what his brother-in-law does,” said Loyola Law School professor Jessica Levinson, a former member of the Los Angeles City Ethics Commission. She said Wages’ work on federal contracts important to McCarthy’s in-laws and his district “should never have happened at all.”

After The Times inquired about Wages’ eligibility for the minority contracting program, the SBA referred the matter to its inspector general, Hannibal Ware, whose office conducts investigations into possible fraud or other wrongdoing. A spokesman for Ware’s office said its policy is to not confirm or deny the existence of an investigation.

In referring questions about Vortex’s certification to Ware’s office, the SBA said in a statement that it “takes any potential instance of fraud in any of its programs very seriously and refers such matters to the appropriate authorities for further independent examination and enforcement action where appropriate.”

Following The Times’ inquiries, the designation of Vortex as a Native American-owned company also was removed from the SBA’s public database. SBA officials declined to say who made the change or why, or to answer other questions.

The SBA did not require membership in a recognized tribe until 2011, about 3 1/2 years after Wages left the program. But the regulations did require applicants, if asked by the agency, to “demonstrate that he or she has held himself or herself out, and is currently identified by others,” as Native American.

All three Cherokee tribes with federal recognition consider the Northern Cherokee group illegitimate.

“It’s very much a con,” said David Cornsilk, the Cherokee genealogist and a citizen of the Cherokee Nation, the largest of the recognized Cherokee tribes.

At The Times’ request, Cornsilk cross-checked Wages and his ancestors against census records and the membership rolls of the recognized Cherokee tribes. Neither Wages nor any of his known ancestors appear on the rolls, which date to the early 19th century, Cornsilk said.

A Times examination of census, birth, death, marriage and other available public records show Wages’ ancestors were identified as white. He is listed as white on his birth certificate.

“It’s disheartening to see this,” Cornsilk said. Native Americans are “the poorest people in the United States,” and “the poverty gets worse” if there are abuses in the SBA program, he added.

Cherokee leaders said the Northern Cherokee group is one of many masquerading as bona fide tribes. Chuck Hoskin Jr., secretary of state for the Cherokee Nation, said “it is particularly disturbing” when minority set-aside contracts are granted to members of “a group that is posing as a tribe.”

McCarthy, a Republican, was first elected to Congress in 2006 after four years in the California state Assembly. He has served as House majority leader since 2014 and may become speaker if Republicans hold the chamber after the Nov. 6 midterm election.

Vortex entered the SBA program in 1998, during the Clinton administration, and participated in it for nine years — the maximum allowed. Later, it continued to profit from set-aside contracts by mentoring and helping to finance a second minority-owned company, J.J. Leon Construction. Wages said Vortex was paid about $1 million for its work with J.J. Leon Construction.

California’s Department of Transportation also certified Vortex as a disadvantaged, minority-owned business in 2009, but a department official said it has no record of awarding prime contracts to Vortex.

The Times has requested records of any communications with McCarthy and his staff about Vortex and J.J. Leon Construction from several federal and state agencies involved in awarding contracts. The requests are pending.

In the interview, Wages said anyone who claims Vortex prospered because of his ties to McCarthy “is a liar.”

McCarthy declined to be interviewed for this story. In written responses to questions from The Times, he described Wages as “a friend and my brother-in-law.”

“But other than a batting cage we owned and operated together in our 20s I haven’t had interactions with Bill on any of his subsequent business pursuits,” McCarthy wrote, referring to the Mesa Marin Batting Ranges that they started in 1991, a venture that later went out of business.

McCarthy said he did not help Wages qualify for the SBA program or obtain set-aside contracts, and said he had not discussed Wages’ membership in the Northern Cherokee group with him.

“I’m not aware of the program’s qualification process but have no reason to doubt that Bill and the SBA executed the process fairly and in accordance to program standards,” McCarthy wrote.

After The Times asked the SBA for records on Vortex under the Freedom of Information Act, McCarthy said, “Bill reached out to our family for guidance. I put Bill in touch with my counsel who referred him to a separate law firm that specializes in FOIA compliance.”

The firm — Holtzman Vogel Josefiak Torchinsky PLLC — is based in Virginia and has represented the National Republican Congressional Committee and fundraising organizations tied to Karl Rove and other GOP strategists.

Members of Congress generally do not vote directly on contracts awarded under the SBA program. Like many members of Congress, McCarthy has hosted or taken part in SBA workshops for local businesses.

He has favored China Lake with earmarks of at least $2.6 million since he went to Congress, according to news releases from his office. He said he never directed earmarks or any other funding to benefit Vortex or J.J. Leon. “I have no involvement, awareness, or even knowledge on which employees, military personnel, or contractors complete the work,” he said.

Now 55, Wages has lived most of his life in Kern County. He played baseball at Bakersfield High School and holds a mechanical engineering degree from San Diego State.

In 1995, Wages said, he decided never to discuss his government contracts with McCarthy out of concern it could one day spark criticism in the political arena. That was five years before McCarthy first won public elective office — a local college board seat — but Wages said he saw his brother-in-law as a future political star.

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