broward office inspector general€¦ · 26/08/2015 · larry calufetti founded sunshine as a...

BROWARD OFFICE OFTHE INSPECTOR GENERAL

MEMORANDUM

To: Honorable Tim Ryan, Mayor, Broward County and Members, Broward Board of County Commissioners

From:

Date: August 26, 2015

Subject: OIG Final Report Re: Contractor's Scheme to Misrepresent County Business Enterprise Program Subcontractor Participation, Ref. OJG 11-023

Attached please find the final report of the Broward Office of the Inspector General (OIG) regarding the above-captioned matter. The OIG investigation found that Sunshine Cleaning Systems, Inc. (Sunshine), the prime contractor on a $62 million janitorial services contract (Contract) at the Fort Lauderdale-Hollywood International Airport, misrepresented its compliance with the County Business Enterprise (CBE) program participation requirements and its contractual obligations. Sunshine submitted misleading Monthly Utilization Reports claiming that work had been performed by CBEs, when in fact the work had been performed by Sunshine's own employees. Sunshine led the County to believe that 30 percent of the funds paid by the County were going to CB Es, while in reality the CBEs were receiving only nominal payments. Our investigation determined that, for the time period beginning with the Contract's inception through March 31, 2012, Sunshine paid the CBEs a total of $658,335.37 while representing to the County that it paid $10,897,043.32.

When contractors flout their contractual obligation to employ CBEs, the resources committed by the County in fi.111herance of the CBE provisions are squandered. Accordingly, the OIG recommends that the

County incorporate provisions to recoup its investment in the CBE program. County contracts should require prime contractors who fail to achieve CBE participation goals to reimburse the County for damages tied to the County's cost of administering and enforcing the CBE program and requirements. The County could prospectively hold a prime contractor, such as Sunshine, accountable for damages proportional to the costs of the County's CBE program.

Attachment

cc: Bertha Henry, County Administrator Joni Armstrong Coffey, County Attorney Evan Lukic, County Auditor Individuals previously provided a Preliminary Report (under separate cover)

John \V. Scott, Inspector General

One orlh University Drive, Suite 111 •Plantation, 1:1orida '.\3324 • (954) 357-7873 • 1:ax (954) 357-7857

WW\\'.browardig.org • (954) 357-TIPS

BROWARD OFFICE

OF THE INSPECTOR GENERAL

FINAL REPORT

===========================================================

OIG 11-023 August 26, 2015

CONTRACTOR’S SCHEME TO MISREPRESENT COUNTY BUSINESS ENTERPRISE PROGRAM SUBCONTRACTOR PARTICIPATION

BROWARD OFFICE OF THE INSPECTOR GENERAL

OIG 11-023

August 26, 2015

FINAL REPORT RE: CONTRACTOR’S SCHEME TO MISREPRESENT

COUNTY BUSINESS ENTERPRISE PROGRAM SUBCONTRACTOR PARTICIPATION

TABLE OF CONTENTS

Summary .............................................................................................................................................. 1

OIG Charter Authority ......................................................................................................................... 2

Entities and Individuals Covered in this Report .................................................................................. 3

Background and Relevant Governing Authorities ............................................................................... 4

Investigation ........................................................................................................................................ 6 Sunshine Utilized its Own Employees Rather than Subcontract for Services .................................. 7 Sunshine Made Nominal Payments to the CBEs and Misrepresented CBE participation in

Monthly Reports to the County ...................................................................................................... 12 Sunshine Intended to Utilize its Own Employees .......................................................................... 14 Changes to Sunshine’s Operations During the Investigation ......................................................... 15 Recommended Additional Remedy to Redress Sunshine’s Violation of the County’s CBE

Requirements .................................................................................................................................. 17

Interview Summaries Former Deputy County Administrator ............................................................................................ 19 Small Business Development Manager .......................................................................................... 21 Sunshine’s Office Manager ............................................................................................................ 22 Emily Evans .................................................................................................................................... 24 Judith Silvera .................................................................................................................................. 26 Sherry Woods ................................................................................................................................. 28 Patrick Morgan ............................................................................................................................... 29 Owner of B&B Maid and Janitorial Service ................................................................................... 30 Bernardo “Benny” Castillo ............................................................................................................. 31 Gary “Bruce” Walker ..................................................................................................................... 33 Larry Calufetti ................................................................................................................................ 35

Responses to the Preliminary Report and OIG Comments ............................................................... 36

Conclusions and Recommendations .................................................................................................. 38

BROWARD OFFICE OF THE INSPECTOR GENERAL

OIG 11-023

August 26, 2015 Page 1 of 38

FINAL REPORT RE: CONTRACTOR’S SCHEME TO MISREPRESENT COUNTY BUSINESS ENTERPRISE PROGRAM SUBCONTRACTOR PARTICIPATION

SUMMARY

The Broward Office of the Inspector General (OIG) has concluded an investigation into allegations that Sunshine Cleaning Systems, Inc. (Sunshine), the prime contractor on a $62 million janitorial services contract (Contract) at the Fort Lauderdale–Hollywood International Airport, misrepresented its compliance with the County Business Enterprise (CBE) program participation requirements and its contractual obligations.1

The OIG investigation substantiated the allegations. We determined that Sunshine submitted misleading Monthly Utilization Reports (MURs) claiming that work had been performed by CBEs, when in fact the work had been performed by Sunshine’s own employees. The evidence established that:

• Sunshine directly paid all of the janitorial workers from its own accounts;

• Sunshine reported the “CBE employees” as Sunshine employees to federal and Florida officials on W-2 forms and UCT-6 forms;

• Sunshine recruited, interviewed, hired, fired, scheduled, disciplined and supervised the purported CBE workers;

• Sunshine reassigned workers from one CBE roster to another as necessary to maintain contractually required participation rates; and

• Many workers had no knowledge of or relationship with the CBEs and even asked union representatives why their badges named a company other than Sunshine.

Sunshine led the County to believe that 30 percent of the funds paid by the County were going to CBEs, while in reality the CBEs were receiving only nominal payments. Our investigation determined that, for the time period beginning with the Contract’s inception through March 31, 2012, Sunshine paid the CBEs a total of $658,335.37 while representing to the County that it paid $10,897,043.32. The OIG also identified significant evidence indicating that Sunshine had misled the County in the

1 When referring to the County’s small business programs that existed and were applicable to Sunshine’s performance of the Contract during the relevant period of this report, we will generally refer to “CBE,” although prior to the implementation of the County Business Enterprise Act of 2009, commonly referred to as the CBE program, it was referred to as the “Community Disadvantaged Business Enterprise Act of 2007,” or CDBE program. The only exception to this usage is when we refer to the actual language of the Contract, which uses CDBE.

BROWARD OFFICE OF THE INSPECTOR GENERAL FINAL REPORT RE: CONTRACTOR’S SCHEME TO MISREPRESENT


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same manner for years on previous Airport contracts and intended to utilize its own labor when it represented to the County that the CBE firms would furnish “thirty percent of the employees who make up Sunshine’s permanent, stable workforce at the Airport.” According to the County, the purpose of the CBE program is to ensure that small Broward companies obtain “meaningful participation” in County contracts so that they may ultimately increase competition among firms seeking to do business with the County, drive down costs, and increase the quality of services. The County spends significant funds to further these goals, but those efforts are undermined when prime contractors creatively conceive mechanisms to deny CBEs of meaningful and productive experience, as was the case here. Nonetheless, the OIG determined that the Contract did not contain any explicit mechanism for the County to recoup its losses when CBE participation was circumvented. While contractual remedies such as termination and withholding payment are certainly serious in nature, and represent the considerable weight the County placed on compliance with the CBE requirements, the OIG found that they were not necessarily practical in application. The Airport is an immense operation requiring round-the-clock janitorial services; replacement contractors could not immediately step in if the existing janitorial vendor was terminated or stopped work due to withheld payments. Thus, the OIG recommends that, in addition to the sensible compliance requirements already incorporated into contracts subject to the CBE program, the County incorporate provisions to recoup its investment in the CBE program. This type of provision reflects the fact that the County expends significant resources in (1) promoting, verifying and certifying eligible businesses to maintain a pool of CBEs from which a prime contractor might obtain subcontractors; (2) reviewing potential bids for compliance; (3) monitoring and enforcing compliance with the contractual CBE requirements; and (4) working with contractors to address compliance issues. When contractors flout their contractual obligation to employ CBE’s, the resources committed by the County in furtherance of the CBE provisions are squandered. OIG CHARTER AUTHORITY Section 12.01 of the Charter of Broward County empowers the Broward Office of the Inspector General to investigate misconduct and gross mismanagement within the Charter Government of Broward County and all of its municipalities. This authority extends to all elected and appointed officials, employees and all providers of goods and services to the County and the municipalities. On his own initiative, or based on a signed complaint, the Inspector General shall commence an investigation upon a finding of good cause. As part of any investigation, the Inspector General shall have the power to subpoena witnesses, administer oaths, require the production of documents and records, and audit any program, contract, and the operations of any division of the County, its municipalities and any providers. The Broward Office of the Inspector General is also empowered to issue reports, including recommendations, and to require officials to provide reports regarding the implementation of those recommendations.



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ENTITIES AND INDIVIDUALS COVERED IN THIS REPORT Sunshine Cleaning Systems, Inc. In September 2008, the County Commission awarded Sunshine a $62 million janitorial services contract at the Airport. Sunshine has been the janitorial services prime contractor at the Airport for the past 30 years. Larry Calufetti founded Sunshine as a cleaning company in 1976. Its corporate headquarters is located in Fort Lauderdale, and it has branch offices in Tampa, Orlando, and West Palm Beach, Florida, and Charlotte, North Carolina. In addition to airports, Sunshine has experience in cleaning office and commercial buildings, sports arenas, and schools. Larry Calufetti Mr. Calufetti is the founder, President and Chief Executive Officer (CEO) of Sunshine. Bernardo “Benny” Castillo Mr. Castillo is the Comptroller for Sunshine. Gary “Bruce” Walker Mr. Walker is the Project Director for Sunshine for the Contract. Based at the Airport, he monitors contract compliance, oversees janitorial services supervisors and tracks employee time for payroll purposes. Emily K. Evans Cleaning Service, Inc. EKE is a building maintenance and janitorial services company that was a CBE on the Contract for the life of the agreement. It is owned by Emily K. Evans. EKE was incorporated in 1996 and was a certified CDBE on Sunshine’s prior Airport contract at the time the Contract was awarded to Sunshine. According to Ms. Evans, EKE has been doing business with Sunshine for approximately 20 years. NAPM Enterprises, Inc. NAPM is a janitorial, maintenance, cleaning and landscaping services company that was another County-approved CBE on the Contract. Its owner is Judith Silvera, who founded the company in 1997. Canterbury Woods Commercial Group, Inc. Sherry Woods founded CWCG in 2007. The company was certified to provide janitorial, facilities and property management services, and it was a CBE on the Contract upon its commencement.



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Patrick’s Cleaning System, Inc. Patrick’s was founded in 2011 and is owned by Patrick Morgan. Mr. Morgan has worked for Sunshine as a janitorial supervisor since 2008. Sunshine listed Patrick’s as a CBE on the Contract commencing in 2011. Until Patrick’s began using a third-party payroll service to pay its employees in 2012, Mr. Morgan was concurrently employed by Sunshine and Patrick’s. Broward Office of Economic and Small Business Development The OESBD’s stated mission is to “stimulate economic development by attracting, retaining and expanding targeted industries, including a special focus on small business growth ….” As a part of that mission, the OESBD is the County government agency responsible for administering the CBE program. BACKGROUND AND RELEVANT GOVERNING AUTHORITIES The Community Disadvantaged Business Enterprise Act of 2007 Broward County Ordinance 2007-32 outlined the Community Disadvantaged Business Enterprise (CDBE) program and specified how parties to certain large County contracts must use eligible small and economically disadvantaged Broward companies as subcontractors. It was in effect at the time of award of the Contract. The language of the Contract also required compliance with the ordinance, at paragraph 10.2.1. The program’s objectives included (1) ensuring that such companies were able to “meaningfully participate” in the award of professional services and other contracts (at Section 2.(a)(1)), and (2) permitting only the participation of companies “fully meeting” the eligibility criteria (at Section 2.(a)(2)). RLI No. 20070522-0-AV-2 The Request for Letters of Intent (RLI), the first step in the County’s solicitation and award process for this Contract, required each bidder to submit its Letter of Intent with (1) a Schedule of Participation, listing each of the County-certified CDBE subcontractors the bidder intended to use, the type of work to be performed by each, and the projected percentage of professional fees to be awarded to each, and (2) a Letter of Intent for each subcontractor, indicating the agreed subcontract amount and signed by the proposed prime contractor and subcontractor (at paragraph 1, Addendum 2). Alternatively, where participation goals could not be achieved, the interested firm could file an Unavailability Report, listing those subs who were contacted and the reasons they were unavailable or not considered. The County would evaluate such a report to determine whether the prospective contractor made a good faith effort to meet the participation goals; if so, the County would continue considering the bidding firm for selection despite such failure (at paragraph 1, Addendum 2). The CDBE participation goal for this Contract was set at 30 percent (at paragraph 1, Addendum 2).



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Contract Awarded on RLI No. 20070522-0-AV-2 On September 16, 2008, the County Commission awarded the Contract to Sunshine for janitorial services at the Airport. The original term was for three years with two optional renewal years and a total amount of approximately $62,836,469. The work was to commence on October 1, 2008. Relevant terms contained in the Contract required that:

• Sunshine would “furnish all supervision, labor, materials, tools and equipment to provide a comprehensive cleaning program” for the Airport (at Contract Exhibit A, paragraph 1.1).

• Sunshine would comply with the CDBE Act of 2007 (County Ordinance No. 2007-32 or “Business Opportunity Act”) and CDBE program (at subparagraph 10.2.1) and that the CDBE participation goal was 30 percent (at subparagraph 10.2.1).

• Sunshine committed to CDBE performance as listed in the Schedule of Participation (made a part of the Contract as Contract Exhibit D) that included CDBE names, scope of services, and percentage of participation (at subparagraph 10.2.3).

• The subcontractors listed in the Contract (EKE, Doss, NAPM, Regland, and CWCG) were “a material part of the selection of Contractor to provide the services for this Project” (at subparagraph 11.7.1). Subcontract awards to CDBEs were deemed “crucial” to achieving participation goals and Sunshine must take “affirmative action” to meet them (at subparagraph 10.2.4).

• Sunshine would bind each approved subcontractor to the terms of the Contract (at subparagraph 11.7.2) and would provide the County with proposals and agreements between Sunshine and its subcontractors (at subparagraph 11.7.3).

• Sunshine would not terminate a CDBE subcontractor for convenience “and then perform the services with its own forces or its affiliate” (at subparagraph 10.2.12).

• Sunshine would submit a CDBE utilization report with each invoice to the County showing all payments made to CDBE subcontractors to achieve compliance with the Business Opportunity Act (at sub-subparagraph 10.2.6.1), and a final CDBE utilization report with the final invoice (at sub-subparagraph 10.2.6.2). “A condition of payment to Contractor” was Sunshine’s submission of these reports (at sub-subparagraph 10.2.6.2).

• The County could withhold payment for Sunshine’s failure to comply with a Contract term (at subparagraph 4.4.2) or to protect itself from loss due to fraud or reasonable evidence indicating fraud or failure to comply with the Contract (at paragraph 4.5).



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• The County could terminate the Contract if (1) Sunshine obtained the Contract or attempted to meet its CDBE obligations through fraud, misrepresentation, or material misstatement (at subparagraph 9.6.2), or (2) upon disqualification of a CDBE if it attempted to meet its obligations through fraud, misrepresentation, or material misstatement (at subparagraph 9.6.4).

• Sunshine certified it made the Contract in good faith (at paragraph 11.8); that both parties agreed that “each requirement, duty, and obligation” was “substantial and important to the formation” of the Contract and therefore was “a material term;” and that the County’s failure to enforce any term was not a waiver or modification (at paragraph 11.11).

Community Business Enterprise Act of 2009 Ordinance No. 2009-40 was adopted toward the end of the first Contract year. This ordinance established the CBE Program and repealed the CDBE Act in its entirety (at Section 1), but left “in full force and effect” the CDBE goals in preexisting contracts (at Sec. 1-81.5(2)(d)). In enacting the ordinance, the County Commission found that “meaningful participation” would ultimately increase competition among firms seeking to do business with the County, drive down costs, and increase the quality of services (at preamble). The ordinance restated the Commission’s intent to provide small Broward businesses with sufficient opportunities to “meaningfully participate” in the award of County contracts (at Sec. 1-81(a)(1)) and to permit only eligible companies to participate (at Sec. 1-81(a)(2)). INVESTIGATION Investigation Overview This investigation was predicated on information alleging that Sunshine engaged in misconduct by making misrepresentations to the County regarding its compliance with CBE participation requirements. Specifically, it was alleged that Sunshine submitted false MURs claiming that work had been performed by CBEs, when in fact the work had been performed by Sunshine’s own employees. (A sample MUR is attached as Exhibit 1.) The OIG substantiated the allegations. Our investigation determined that Sunshine submitted MURs claiming it received services from and made payments to the CBEs, misleading County staff to conclude that Sunshine was complying with the contractually required CBE participation level. The evidence indicates that Sunshine attributed work performed by its own employees to the CBEs. The amounts that Sunshine actually paid its CBEs were far less than the amounts reported on the MURs and were contrary to the parties’ stated intent to provide “meaningful participation” by the CBEs. The investigation involved the review of substantial documentation by OIG Special Agents including, but not limited to, the Contract, bid records pertaining to the Project, Schedule of Participation, Letters of Intent, MURs, CBE verification forms, administrative authorities governing business enterprise certification and participation, Florida Department of Revenue (DOR) Wage Detail reports, tax documents, bank records and



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other financial documents, and Sunshine and EKE’s business records. OIG Special Agents also conducted interviews of witnesses including County staff, owners and employees of the CBEs involved with Sunshine, insurance representatives, a union district leader, and Sunshine’s own officers and employees. Sunshine Utilized its Own Employees Rather than Subcontract for Services The County’s solicitation for janitorial services, the RLI, required prospective proposers to identify CBE subcontractors for 30 percent participation in the project.2 Proposers were to select subcontractors from a list of CBE companies, pre-certified by the OESBD. According to the ordinance in effect, qualifying small businesses were to be independently owned and operated, limited in affiliation with the prime contractor or any other business. This requirement was not negotiable. In fact, the County disqualified one proposer that neither met the CBE participation requirement nor showed a good faith effort to incorporate CBE participation in its proposal.3 When Sunshine submitted its bid to Broward County in pursuit of the Contract, the intent of the CBE Ordinance was to ensure that small and economically disadvantaged firms based in the County were able to “meaningfully participate” in the award of County contracts. In Sunshine’s bid submission, it represented that the CBE firms would furnish “thirty percent of the employees who make up Sunshine’s permanent, stable workforce at the Airport.” In its documents and during its presentation to the County, Sunshine represented that three CBEs, EKE, NAPM and Doss, would together provide a total of 25 percent participation by way of janitorial labor and supervision; that another CBE, Regland, would provide four percent participation by way of providing cleaning supplies; and that a final CBE, CWCG, would provide one percent participation through “green cleaning” services. However, the OIG determined that, after Sunshine was awarded the Contract at the Airport, it utilized its own employees rather than actually paying the CBEs for meaningful participation via janitorial labor and supervision.

1. Sunshine Directly Paid All Janitorial Workers

The evidence established that, for the three and one-half Contract years before the OIG investigation became known, Sunshine directly paid all persons working on the Contract, including those listed by Sunshine on its CBE firms’ rosters. These paychecks were prepared at the direction of Sunshine’s Comptroller, drawn on Sunshine’s payroll account, and Sunshine deducted payroll taxes and withheld payments for benefits and union dues.

2 At the request of the selection committee, all proposals in response to the original RLI were rejected and the County issued an amended version of the RLI. The amended RLI included two addenda, one of which established a CBE participation goal of 30 percent. 3 See CDBE compliance comments disqualifying Pritchard Industries in Exhibit 2.



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2. Sunshine Reported the “CBE Employees” as Sunshine Employees to Federal and State Officials

Sunshine reported itself as the employer on filings with the federal and Florida governments for the purported CBE employees, including on W-2s and UCT-6s identifying Sunshine as the employer. For example, the names of the employees that Sunshine assigned to EKE are contained in the Florida Department of Revenue (FDOR) Wage and Detail reports for Sunshine—not EKE. Further, the OIG found that the CBEs did not maintain any personnel records for the supposed CBE Airport workers. When the investigation requested the CBEs’ personnel records for staff at the Airport, the CBEs’ owners stated that Sunshine kept those records. For example, a subpoena was issued to EKE for its Contract-related documents, including personnel files. However, personnel files for EKE-assigned Airport workers were produced from Sunshine’s Airport office.4 In the thousands of pages of personnel files in the subpoena response, we found no documents pre-dating the OIG investigation that bore EKE’s name. All such documents that reflected an employer bore Sunshine’s name. 3. Sunshine Hired, Fired, Scheduled, Disciplined and Supervised the Purported CBE Workers

There was also ample evidence that Sunshine recruited, interviewed, hired, scheduled, disciplined and supervised all the employees who worked on the Contract during that period. In the personnel records attributed to EKE produced in this investigation, we found employee reprimands, employment verifications, employee appraisal letters, W-4 withholding allowance certificates, employee acknowledgment receipts of Sunshine’s employee handbook, agreements subrogating injury litigation claims from the employees to Sunshine, leave requests to and approval by Sunshine supervisors, and other administrative documents on Sunshine letterhead or signed or initialed by Sunshine management. It was clear that these records were maintained by Sunshine and generated by Sunshine for workers recruited and supervised by Sunshine. There was no evidence that the CBEs provided any management or supervision of the workers that Sunshine assigned to them. Some supervisors assigned to one CBE’s roster oversaw janitors on another CBE’s roster. For several pay periods, one CBE roster included several janitors but no supervisor. Further, the CBEs themselves did not conduct site visits at the Airport. They did not maintain any office at the Airport. They did not keep CBE-generated records at the Airport. In fact, the OIG observed that Sunshine-assigned janitors and supervisors were provided the security clearance and badging necessary to access those areas of the Airport inaccessible to the public, while the owner of their purported employer, Ms. Evans of EKE, herself was not.

Ms. Evans told the OIG that, although EKE had conducted hiring, training, scheduling, supervision and oversight of EKE employees on other projects, Sunshine performed all of those functions for the approximately 75 employees that Sunshine had assigned to EKE on the

4 The same attorney represented both Sunshine and EKE and their principals in this investigation. It was this attorney who produced EKE’s records. The OIG received no personnel files from any source other than this attorney, and we were informed that those records were all maintained by Sunshine at the Airport.



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Airport job. Ms. Evans told the OIG that Sunshine management would contact her if there were any issues that required her attention. When the OIG asked how many EKE employees were assigned to each shift, Ms. Evans advised she would have to get that information from Sunshine’s management.

Ms. Silvera of NAPM told the OIG that she was not required to do anything on the Contract and did not do anything on the Contract. She stated that she had not interviewed, hired, supervised or evaluated any of the employees assigned to NAPM. She further stated that Sunshine provided project management, supervision, payroll and withholding of taxes, but she did not know if Sunshine charged NAPM for those services. She also advised that her company’s profit was based on a mark-up of the hourly wage of the janitorial service workers and a supervisor assigned to NAPM. She said she was asked to sign off on the payrolls after they were completed by Sunshine. 5 4. Sunshine Reassigned Workers from One CBE Roster to Another as Necessary to

Maintain Participation Rates

In further confirmation that Sunshine—not the CBEs—controlled the janitorial workers, the OIG determined that Sunshine had engaged in a practice of assigning and reassigning its employees among and between the CBE rosters for prior janitorial contracts at the Airport. This practice continued after it was awarded the Contract in 2008. After reviewing Sunshine’s unemployment compensation records maintained by the state, we determined that 22 people who Sunshine reported as its own employees between the second quarter of 2004 and the third quarter of 2005 were assigned to a CBE in 2006.6 Sunshine’s payroll check history records revealed that, upon commencement of the Contract in 2008, Sunshine reassigned sixteen of those employees as follows: twelve to EKE, one to NAPM, and three to Sunshine.

During that review, we also determined that another 16 people whom Sunshine reported as its own employees between the second quarter of 2004 and the fourth quarter of 2005 were also initially assigned to NAPM in 2006 on the prior contract. Sunshine’s employee report reflected two of these 16 employees were later reassigned to EKE’s roster upon commencement of the Contract.

For several pay periods, three janitors also simultaneously appeared on two different CBE rosters. We determined that one of these men, Sunshine Employee 91XXX, was reported to the state as a Sunshine employee as early as the second quarter of 2004. He was listed in NAPM’s Simple Employee Report dated March 2006. He was then assigned to the EKE roster for the 2008 Contract. During this Contract, all three men were assigned simultaneously to both EKE and CWCG for over six pay periods. Although they received only one paycheck for the hours they worked, the assignment to two different CBEs at the same time resulted in their appearing on two payroll reports

5 Ms. Silvera told OIG Special Agents that around March or April 2012 (after our investigation became known), Sunshine employee and Project Director Bruce Walker informed her of two openings in her roster and gave her the option of filling those positions. She referred two persons to Mr. Walker, who hired them. 6 This particular CBE, B&B Janitorial Services, Inc. (B&B), was not a subcontractor on this Contract. Its role on the previous contract is discussed in greater detail below.



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provided by Sunshine, and their hours were reflected in two CBEs’ reimbursement worksheets as calculated by Sunshine. Thus, their hours were double reported in the MURs.7 Sunshine’s Office Manager demonstrated to OIG Special Agents how easily, with a few clicks on her computer, an employee could be reassigned from Sunshine’s employee roster to any of the CBE employee rosters, or from one of the CBEs to Sunshine, or from one CBE to another CBE. While giving this demonstration, the Office Manager admitted this was the method Sunshine used to ensure each CBE had the required number of employees to meet the CBE participation requirements for each payroll period. She also stated that Sunshine would usually leave an employee assigned to the same CBE to maintain the appropriate CBE participation rates until such time that one of the CBEs fell below the participation rates. When that occurred, Sunshine would reassign employees to get the participation rates back to appropriate levels. As an example, the Office Manager advised, Sunshine maintained EKE’s employee count at 77 to meet its 20 percent participation rate.

The owners of the CBEs admitted that Sunshine assigned and reassigned the janitorial staff to CBE rosters. Ms. Evans stated that when a CBE would retire, pass away or otherwise move on, Sunshine would re-assign that CBE’s workforce to her company and continue to prepare payroll for those workers as if they were EKE employees from that point forward. She stated that for the approximately 20 years she had worked with Sunshine at the Airport, Sunshine had assigned its own employees to EKE at the Airport and that she never interviewed or hired any of the employees assigned to EKE there. She added that over the years, each time her percentage of participation increased on the Contract, the employees added to EKE’s roster were already working at the Airport for Sunshine, some of them having been assigned to a prior CBE that was no longer on the project. Mr. Walker, Sunshine’s Airport Project Director, admitted to OIG staff that such was the case when Doss resigned from the project and the five percent of Sunshine’s employees intended for Doss’s roster were then assigned to EKE, increasing its purported participation to 20 percent. Ms. Silvera told OIG investigators that when she first began working with Sunshine, she did not have any janitorial workers on her payroll and that Sunshine provided her with the labor for the Contract. She further advised that it was her understanding that those employees may have been previously assigned to a former CBE whose owner had died. She stated that at the time she signed the Letter of Intent for the Contract she did not have the employees to perform the work called for in the Contract, but added that the employees were already there working for Sunshine. She said that Sunshine “switched them over and said they were gonna give me a certain amount to equalize my five percent.”

7 An “Independent Certified Public Accountants’ Report on Applying Agreed Upon Procedures to CBE Subcontractors Payroll and Billing Procedures” commissioned by Sunshine stated that “[e]ach employee working for the CBE subcontractor has a separate and distinct employee number within the Sunshine payroll system, as well as by the CBE subcontractor for which they work” (at page 3). We question this assertion, as we could not locate any subcontractor-assigned or subcontractor–specific employee roster or key. Moreover, during his assignment to three different CBEs, Sunshine Employee 91XXX was not identified with any other employee number.



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Another example of Sunshine’s actual control over the employees, and mere attribution to the CBEs, involved a new CBE that joined the Contract in 2011. In July 2011, Patrick’s was added as a participating CBE, and Sunshine represented to the County that Patrick’s would receive three percent of the Contract for providing janitorial services. A review of Patrick’s employees, as identified in the Sunshine “Timekeeping Report,” revealed that six out of eight of them had been listed on Sunshine’s FDOR Wage Detail reports dating back to January 1, 2008. Mr. Morgan himself had been a Sunshine employee since 2008. Mr. Morgan admitted to the OIG that Sunshine provided him with employees when he commenced his work as a CBE on the Contract. According to FDOR records, as of January 9, 2012, Patrick’s had no documented employees, as the business was not registered to file unemployment tax.

Ms. Woods, whose company CWCG was supposed to perform “green initiatives,” told investigators that Sunshine had terminated her contract, effective May 31, 2011. She further advised that she had not performed any additional work since that time. However, she said that Mr. Calufetti and Mr. Castillo later asked if Sunshine could assign three janitorial workers to her contract and reimburse her for paying the workers’ compensation for those three workers. Ms. Woods accepted, but soon wanted to withdraw from the agreement because she sometimes had to pay to cover the insurance for the three Sunshine employees—whose identities she never knew. As described above, a review of Sunshine’s Payroll Check History records revealed that Sunshine assigned three janitorial services workers to CWCG who were concurrently assigned to EKE for approximately six payroll periods. 5. Many Workers had No Knowledge of or Relationship With the CBEs

The OIG also discovered evidence that the employees had no relationship with their supposed CBE employers. When the OIG conducted on-site interviews of the janitorial workers at the Airport, the vast majority had not even heard of the CBEs to which they had been assigned.

In 2008 a union, SEIU Local 32BJ, began negotiating to organize Sunshine’s employees under

the Contract. Its first contact was with Sunshine’s lobbyist, but representatives then met with Mr. Calufetti, Mr. Castillo, and other Sunshine officers, as well as Mr. Walker, Sunshine’s Airport project manager, and Sunshine’s labor counsel. A contract was not finalized until the end of 2010, following what one union official characterized as contentious and lengthy negotiations. The agreement included approximately 270 to 280 janitorial staff, excluding supervisors and managers. The union was not informed of the existence of the CBEs that Sunshine reported it paid in exchange for the CBEs’ janitorial labor and supervision during the two-year period that negotiations were ongoing. The negotiations concluded, and the bargaining agreement was signed by both parties and ratified by the required membership. It was not until about April or May 2012, well over one year following the ratification date, that the union’s hierarchy learned about EKE, NAPM and Patrick’s, after Airport workers inquired during union meetings about why they were now being asked to wear badges with the names of



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those companies.8 At that time, Union officials had had no contact with any of the Airport CBEs. One union official characterized the Airport workers as “confused.” He stated that he thought the union members believed they worked for Sunshine and just wanted answers as to why they were required to wear the badges.

Sunshine Made Nominal Payments to the CBEs and Misrepresented CBE participation in Monthly Reports to the County

Plainly, Sunshine contractually agreed to subcontract 30 percent of the project to CBEs. The Contract also reflected that the County did not desire Sunshine to perform those services “with its own forces.”9 In order to effectuate this intent, the County incorporated some sensible reporting requirements into the Contract, including:

• requiring that Sunshine provide signed agreements with the CBEs;

• requiring notarized letters of intent documenting the intent to subcontract; and

• requiring submission of MURs certifying payments to subcontractors. However, the OIG’s review of the MURs revealed that Sunshine grossly overstated the amounts it paid to the CBEs when reporting to the County. Sunshine led the County to believe that 30 percent of the funds paid by the County were going to CBEs, while in reality the services listed were provided by Sunshine’s own employees and the CBEs were receiving only nominal payments. The table below shows the amounts we calculated Sunshine actually paid and what Sunshine reported to the County as paid to CBEs EKE, NAPM, and Patrick’s from October 1, 2008, through March 31, 2012:

OIG TABLE 1

CBE Actually Paid to CBE Reported to County

as Paid EKE $468,506.17 $8,553,580.60 NAPM $173,244.45 $2,268,914.68 Patrick's $16,584.75 $74,548.04 $658,335.37 $10,897,043.32

For example, for the month of October 2009, Sunshine represented to the County in an MUR that it had paid EKE $260,052.06. Upon review of the reimbursement worksheets and the EKE check register, we determined that Sunshine had actually paid EKE $13,583.22. However, even this comparatively nominal amount did not equate to profit for the CBE. As indicated by Ms. Woods, and discussed above, Sunshine

8 As discussed below, the names on the employee badges were changed after Sunshine became aware of the OIG investigation. 9 Sunshine could not terminate a CDBE subcontractor for convenience “and then perform the services with its own forces or its affiliate” (at subparagraph 10.2.12).



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required the CBEs to pay for workers’ compensation insurance from the amounts it actually paid them.10 We determined that this was Sunshine’s routine practice each month for all janitorial services CBEs from the start of the Contract through March 2012, when Sunshine implemented changes in its financial business practices with CBEs after learning of our investigation. Sunshine also submitted MURs to the County representing that NAPM, whose participation was committed at the rate of five percent, was paid $588,171.38 for the first Contract year, when in fact Sunshine paid NAPM only $42,456.29 for that time period. In effect, NAPM only shared in the profit unilaterally established by Sunshine while providing no meaningful participation in janitorial services or supervision—all of which was actually performed by Sunshine. In fact, from October 1, 2008 through March 31, 2012 Sunshine grossly inflated MUR amounts it submitted to the County for all of its CBEs purportedly providing janitorial labor and supervision. Sunshine’s records revealed that the amounts paid to the CBEs were calculated by determining the payment resulting from that month’s stated payroll as purportedly assigned to the CBEs (what was reported on the MURs) and then deducting the actual payroll paid by Sunshine and a percentage of supply and bond expenses actually incurred and paid by Sunshine. The owners of the CBEs assisted Sunshine in misleading the County. Specifically, on occasion, the OESBD sent requests for verification of payment directly to the CBEs. These requests would identify the total amount purportedly paid to the CBEs, as Sunshine reported on the MURs, and would ask the CBEs to verify if their company had received that sum. The owners—who, by their own admission, were being paid while not providing any services on the contract—would sign and certify that their company had been paid the sum reported on the MURs, despite the fact that the payments issued to them were for comparatively nominal sums. (A sample verification is attached as Exhibit 3.) There was also evidence that at least some of the reported payments were not made at all. One CBE, Doss, claimed it never participated in the Contract. However, Sunshine reported to the County that Doss was paid $15,822 in 2008 for its CBE participation. When the OESBD attempted to verify this amount, it received a Payment Verification form acknowledging receipt of the payments. The owner of Doss told the OIG that neither she nor anyone at Doss submitted the Payment Verification form to the County, that her signature had been forged, and that neither she nor her company received any of the $15,822.

10 The OIG investigation uncovered that Sunshine was sued in June 2007 by its former workers’ compensation provider, Florida Contractors and Construction Industries Insurance Company. In the lawsuit, which related to the prior Airport janitorial services contract, FCCI alleged that Sunshine had underreported wages for workers’ compensation premiums for its employees, which included those who worked at the Airport. Sunshine settled the suit for $275,000, and proceeded to pass on the debt to EKE on the Contract discussed in this report. Sunshine divided the $275,000 liability by the five years of the Contract and immediately began reducing EKE’s artificial profit amount by $55,000 per year. By accounting for the settlement as a debt of EKE, Sunshine utilized the settlement amount towards its purported CBE participation.



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Sunshine Intended to Utilize its Own Employees As the prime contractor on the preceding contract at the time of its proposal and throughout the award process, Sunshine was already using and intended to continue using its own labor to perform all of the janitorial services and supervision at the Airport. As discussed above, the OIG determined that Sunshine had established a practice of assigning and reassigning employees to its small business subcontract partners for years before submitting its proposal for the RLI, and it continued this same business practice during and after award of the Contract. For example, in January 2006, during the preceding contract, Sunshine committed to using B&B to provide janitorial services at the Airport, at a six percent participation rate. One of the Owners of B&B (the Owner) advised the OIG that Sunshine assigned approximately 22 employees to B&B upon commencement of its participation in March 2006. State wage and detail records reflect that these 22 employees were employed by Sunshine as far back as the second quarter of 2004, predating their reassignment by Sunshine to B&B in 2006. The Owner further stated that B&B never interviewed, hired, processed payroll for, or even knew janitorial services employees working at the Airport. She provided the OIG with a “reimbursement worksheet” reflecting Sunshine’s deductions from committed payments. (Exhibit 4) We found this document to reflect the method that Sunshine similarly used with its CBEs on the later 2008 Contract.11 (A sample of which is attached as Exhibit 5.) Sunshine’s payroll check history reports and state records showed that, upon award of the Contract in 2008, fourteen B&B employees were reassigned to EKE, one employee was reassigned to NAPM, and four were reassigned back to Sunshine.12 None of the 22 workers continued on as B&B employees at any location. During interviews with CBE owners Ms. Evans, Ms. Silvera, Ms. Woods, and others, each stated that his or her company did not have the necessary employees or resources to perform the work identified by Sunshine in the SOP, and that Sunshine knew this prior to its presentation to the County before the award of the Contract. The CBE owners further individually indicated that Mr. Calufetti informed them that Sunshine—rather than they—would supply the employees from its own workforce to do the janitorial work in order to meet the CBE participation percentages called for in the Contract. Mr. Calufetti also told them that Sunshine would supervise the employees and handle the payroll. Doss’s owner stated she did not even establish how many employees were required of her company to perform the five percent participation she committed to in her Letter of Intent, and that her company resigned from the Contract immediately following its award to Sunshine. Doss never provided janitorial labor or supervision on the Contract and did not even submit invoices to Sunshine. NAPM’s owner stated that, at the time of the Selection Committee presentation, Sunshine knew that her company did not have the employees necessary to provide the committed labor and supervision.13 She

11 The Owner stated that B&B’s certification expired, and it opted not to seek participation on the 2008 Contract. 12 State records established that six of the 22 B&B-assigned workers stopped working for Sunshine after June of 2008. 13 NAPM’s participation in the prior Airport janitorial services contract began upon execution of a January 23, 2006 Letter of Intent for four percent participation, during which time Sunshine officials provided NAPM with a list of 16 Sunshine employees who were subsequently assigned to NAPM on the subject Contract, which required five percent NAPM participation.



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told OIG Special Agents that Mr. Calufetti advised her that Sunshine would assign her a sufficient number of employees to meet the five percent Contract requirement it committed to in her Letter of Intent. She further advised that she was not required to do anything on the Contract, and in fact did not do anything on the Contract. EKE’s owner advised that her company had been working with Sunshine on the Airport and other projects for approximately 20 years and stated that Sunshine assigned its own employees to EKE at the Airport, so that she never interviewed or hired any of the employees assigned to EKE there. Changes to Sunshine’s Operations During the Investigation During his interview with the OIG Mr. Calufetti, Sunshine’s owner, did not refute the allegation that his company was paying all the Airport Contract workers and deducting expenses from its payments to the CBEs. He stated that Sunshine had been using the same model of providing payroll services since approximately 1986 when the company was first awarded an Airport janitorial services contract. He also advised us that Sunshine had been a mentor to minority, disadvantaged and small businesses over the years, saying that companies like THAC14 were eventually able to take over their own payroll, and that EKE had taken over its own payroll and supervision of employees on other County projects. In a letter from Sunshine’s attorney to the County dated July 31, 2012 (Exhibit 6), Sunshine represented that “advancing and administering payroll” for subcontractors was “designed, in part” to help CBEs with what would be cash flow issues stemming from the County’s delayed payment process. Sunshine identified several factors that determine whether an entity is the employer in a given set of circumstances, asserting, “[T]he key inquiry is who directs, controls and supervises the workers’ day-to-day work activities. … In order to deem [Sunshine] as the employer of the Subcontract workers, the County would need to find that it had exclusive control and supervision over the day-to-day work activities.”15 In the letter, Sunshine claimed that the CBEs hired and supervised their Airport staff, contrary to the statements the owners of those entities made to the OIG and the evidence detailed above. Nonetheless, Sunshine compared its practices to that of a “Professional Employer Organization” (PEO), which provides payroll, benefits, and associated tax processing and administration services for other companies. Sunshine asserted, “Notably, it was not feasible for the Sunshine CBE subcontractors who hired and supervised cleaners at FLL (e.g., Emily K. Evans Cleaning Services, Inc. and NAPM) to obtain a line of credit to allow them to advance payroll while awaiting payment. Thus, Sunshine acted essentially like a PEO and advanced the money for these CBE payrolls prior to it receiving payment from the County.” However, Sunshine informed the County in October 2012 that it had implemented a number of changes to its arrangements with the CBEs. Sunshine claimed that, since March 2012, each CBE subcontractor:

14 THAC was a minority subcontractor on one of Sunshine’s prior Airport contracts. 15 As described above, the evidence unequivocally establishes that Sunshine did, in fact, have exclusive control: it hired, fired, scheduled, disciplined and supervised the very employees it attributed to the CBEs.



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• is responsible for its own payroll and has provided its own payroll processing through an independent payroll service;

• is responsible for the hiring and firing of its own employees; • has developed and maintains its own employment application, and is responsible for

maintaining its employee personnel files;

• has its own uniform; • is responsible for supervision of its employees;

• is responsible for producing W-2s and SUTA/FUTA quarterly reports; and • is responsible for producing invoices to Sunshine for payments.

Nonetheless, the investigation determined that the changes Sunshine claimed to have executed were in fact limited in substance. All of the CBEs providing janitorial services indicated to the OIG that sometime in approximately March or April 2012, Sunshine directed them to establish payroll services accounts with a company called ADP. The three janitorial service CBEs established accounts with ADP for payroll services. All of the CBEs described the new business model to be the same as the previous model, with the exception that they must now get the raw data regarding hours worked by their purported employees from Sunshine and enter it into their respective ADP accounts. All of the time-keeping data still comes from Sunshine’s time-keeping system which is managed by Sunshine employees on the Contract. The CBEs described a process by which Sunshine now issues them a check to cover the payroll, as processed by ADP, and includes the nominal amount for profit. As a part of ADP’s service to the CBE firms, W-2 forms are to be issued to the employees in the name of the CBE firms. In addition, after the changes were supposed to have been made, CBE owners Evans, Silvera, Woods, and Morgan stated that, although there were changes in the way the workers were paid, there were no changes in the delivery of janitorial labor and supervision. Sunshine Airport managers for the Contract continued to recruit, hire, schedule, supervise, and calculate hours for nearly all janitorial service workers, including those of the CBEs. Additionally, with the exception of Mr. Morgan’s supervision,16 Evans, Silvera and Woods were still not visiting the Airport to oversee or supervise the day-to-day activities of the workers assigned to their rosters. We could find no application, interview or hiring processes implemented to document a change of employment status of the workers for the latter part of 2012, except for the assigned employees now being paid by Sunshine via CBEs through the use of ADP, the third-party payroll processing service.

16 Before establishing Patrick’s as a certified CBE, Mr. Morgan was a full-time employee of Sunshine, with supervisory duties. He continued to receive full-time hourly pay from Sunshine as a janitorial supervisor, while also serving as a CBE on the Airport Contract. Mr. Morgan told the OIG that he was supervising approximately 30 Sunshine employees prior to becoming a CBE. He added that, as a CBE, he has about ten employees assigned to his company but still supervises a total of 30 employees as a Sunshine supervisor, not just those employees assigned to his company.



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Significantly, Ms. Silvera told the OIG that she wanted to implement automatic payroll deposits, but stated that it is difficult for her to get the information to those employees because she does not know them and her supervisor(s) are routinely scheduled and placed by Sunshine, often in different terminals and areas. She went on to say that she hoped to soon get “the employees for real.” Sunshine produced internal accounting documents which included the “reimbursement worksheets” discussed above. Those worksheets reflected a change in about March 2012, to include amounts due to each ADP account, as calculated by Mr. Castillo. Along with these worksheets we found emails from Mr. Castillo to each janitorial service CBE. The emails included time and attendance reports for the employees for a two-week pay period. Ms. Silvera showed the OIG an email sent by Mr. Castillo on May 20, 2013, with an attached time and attendance report from Mr. Castillo. She said that this was how she knew what to report to ADP. She also said that Mr. Castillo simultaneously provided her with a sample invoice with the figures she needed to create a NAPM invoice for submittal to Sunshine. (Exhibit 7) Recommended Additional Remedy to Redress Sunshine’s Violation of the County’s CBE Requirements Based upon the misleading MURs and verifications, County officials long thought Sunshine to be in compliance with the County’s goal of developing small businesses. However, in late 2011, the County became concerned with Sunshine’s arrangements with the CBEs. In June 2012, while these facts were being investigated,17 the OESBD issued a “Notice to Cure” expressing disapproval of Sunshine’s business model. (Exhibit 9)18 Subsequently, in March 2013, the OESBD informed Sunshine that it would not achieve the project goal of CBE participation “due to noncompliance.” (Exhibit 10) While the OESBD’s letter references potential claims and remedies resulting from Sunshine’s misleading MURs and other filings, a review of the Contract revealed that it specified only limited remedies, namely:

• The County could withhold payment for Sunshine’s failure to comply with a Contract term (at subparagraph 4.4.2) or to protect itself from loss due to fraud or reasonable evidence indicating fraud or failure to comply with the Contract (at paragraph 4.5), or

• The County could terminate the Contract if Sunshine obtained the Contract or attempted to

meet its CDBE obligations through fraud, misrepresentation, or material misstatement (at subparagraph 9.6.2) or upon disqualification of a CDBE if it attempts to meet its obligations through fraud, misrepresentation, or material misstatement (at subparagraph 9.6.4).

17 The OIG commenced an inquiry into this matter in November 2011. In February 2012, the State Attorney’s Office (SAO) began a criminal investigation of this matter, assisted by the OIG, the Federal Bureau of Investigation, and the Broward Sheriff’s Office. We withheld publishing a report detailing Sunshine’s misconduct pending the conclusion of the criminal investigation. The SAO issued its close-out memorandum on May 1, 2015, finding that criminal charges were unwarranted. (Exhibit 8) 18 Sunshine’s response to the “Notice to Cure” is the letter discussed above, starting at page 15, and attached as Exhibit 6.



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Although these remedies are certainly serious in nature and represent the considerable weight the County placed on compliance with the CBE requirements, the OIG found that they were not necessarily practical in application. The Airport is an immense operation requiring round-the-clock janitorial services; replacement contractors could not immediately step in if the existing janitorial vendor was terminated or stopped work due to withheld payments. The Contract also did not provide an explicit mechanism for valuing Sunshine’s failure to comply with the CBE requirements. Despite the fact that Sunshine misled the County about CBE participation, Sunshine was indeed providing janitorial services at the Airport, even though it was doing so with its own employees, in violation of the Contract. Thus, for future contracts requiring CBE participation, the OIG recommends inclusion of an additional contractual remedy that would enable the County to recover damages when confronted with a situation such as the one described in this report. County contracts should require prime contractors who fail to achieve CBE participation goals to reimburse the County for damages tied to the County’s overall cost of administering and enforcing the CBE program and requirements. In order to avoid additional administrative costs, the County should consider utilizing a contract’s ratio of CBE participation to the total CBE participation contractually agreed to for all contracts for the period of time in question. This ratio could then be applied to the departmental costs of the CBE program for the same period. Using the current Airport janitorial contract to illustrate,19 in 2014 the County might have been entitled to collect an estimated $140,000 for a single hypothetical year of non-compliance, assuming Sunshine were to have continued its failure to comply as established in this report and determined by the OESBD for the 2008 Contract.20 This type of provision reflects the fact that the County expends significant resources in (1) promoting and certifying eligible businesses to maintain a pool of CBEs from which a prime contractor might obtain subcontractors; (2) reviewing potential bids for compliance; (3) monitoring and enforcing compliance with the contractual CBE requirements; and (4) working with contractors to address compliance issues. INTERVIEW SUMMARIES As a part of the investigation, OIG Special Agents conducted numerous witness interviews. Significant interviews are summarized below:

19 In 2013, during the pendency of the SAO’s criminal investigation, the County awarded a new contract to Sunshine for Airport janitorial services. The contract became effective in January 2014. For the new contract, the scope of work was divided into two groups: Sunshine agreed to 35 percent CBE participation for Group 1 and 25 percent CBE participation for Group 2. 20 This approximation was computed for illustrative purposes only. Using data provided by the OESBD for 2014, the OIG estimated that Sunshine’s CBE commitment for 2014 amounted to approximately 6.5% of the total dollars committed to CBE participation for FY2014. This equates to Sunshine’s proportion of contract dollars subject to the CBE program and costs. Assuming a hypothetical 0% rate of compliance for 2014, the OIG applied the full rate to the OESBD’s administrative and small business department division budgets for FY2014 (the costs of administering and enforcing the CBE program). If incorporated into ordinance or contract, the language might require use of actual departmental expenditures versus the budgeted expenditures used here, among other potential refinements. This remedy could be incorporated without limiting the use the County’s existing contractual remedies (as they were stated in the 2008 Contract).



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1. Interview of the Former Deputy County Administrator As of September 5, 2012, the former Deputy County Administrator was also serving as the Interim Director of the OESBD.21 She explained the history of the transition from the CDBE to the CBE program, which is in place to have prime contractors subcontract part of their work to local small businesses that could not compete for the larger contract. As of 2008 it was intended that the subcontractors be independent from the prime contractor, that is, owned and operated by individuals other than the prime contractor. The County ensures this through its certification process. Related companies’ income and related owners’ net worth should be counted together to determine an entity’s eligibility for certification as a CBE.

She stated that a prime contractor need not comply with the participation goal if it shows it tried to but could not. A prime contractor who begins work on a contract and later determines a CBE cannot perform adequately to meet its participation goal can swap out that CBE for another, so long as the replacement CBE is certified under the program.

The Deputy County Administrator stated that at the time of the bid, the CBEs are already certified to do the work. However, if any felt they could not perform the work called for and needed to hire additional staff, they would be permitted to do so, so long as they are in fact the subcontractor’s employees, controlled by the subcontractor. There is no prohibition in acquiring the employees and “ramping up” is contemplated, but the additional labor must be solely the subcontractor’s employees, under their hiring and supervision. Even a day labor situation would be permitted, as necessary, only so long as the laborers were under the subcontractor’s control.

The Deputy County Administrator explained that if, as a prime contractor, you know all along that your subs cannot perform as the contract requires, and thus you decide to do the work for them and report it, this would be a misrepresentation in the selection and award process. If it was the prime’s intent “to always just have them on the books and not have them truly participate under the program, then that would be a misrepresentation.” That misrepresentation would have been made to County staff, the selection committee, and the County Commission. When the OESBD Small Business Development Manager (Manager) made a site visit, everyone indicated they worked for Sunshine. This triggered a request for an employee list and W-2s. That’s when County staff realized that the employees worked for Sunshine but were being allocated to various subcontractors. During a compliance meeting in April or May 2012 to follow up on the Manager’s request for information, one of Mr. Calufetti’s employees explained that the subcontractors did not have sufficient resources to run that size payroll. Sunshine’s attorney explained that Sunshine was performing payroll services for the subcontractors, acting like a PEO but without being one. County representatives told them that the W-2s indicated who the employer was.

21 The former Deputy County Administrator retired from government service in July 2013.



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The Deputy County Administrator observed that even if Sunshine provided payroll services, the W-2s should still reflect the subcontractors, if the subcontractors were the employers. During the meeting, she asked whose workers’ compensation coverage insured an injured worker assigned to a particular CBE, and the response was that the CBE’s carrier would cover the injury. A labor lawyer and a criminal lawyer were present on behalf of Sunshine, and neither disputed this assertion. The Deputy County Administrator stated that if they were running a true payroll service, the employees would still be working for the subcontractors, hired and supervised by the subcontractor. Mr. Calufetti explained that, although all applicants formerly completed Sunshine application forms since the prior compliance meeting, applicants had completed different applications for the different subcontractors. She asked who was conducting the background screening, and she was told that Sunshine did that on the subs’ behalf. When she questioned the appropriateness of the prime contractor being in possession of the employees’ social security numbers, she received no response. The Deputy County Administrator observed that EKE should be able to compete for prime contracts today, if Ms. Evans had actually received the amounts of money reported by Sunshine for these past 15 or 20 years. It was the Deputy County Administrator’s opinion that “it does not make sense” that Ms. Evans could not do that. The Deputy County Administrator stated that MURs are the vehicle by which the prime contractor communicates the money paid to the subcontractors for work on the County contract. Those amounts are verified by contacting the subs. These are relied on by the County to conclude that the CBEs performed work on the project. If the Sunshine check register shown to her is correct, the MURs are misrepresentations to the County. She explained that the underreporting of payments to Patrick’s is because the County denied CBE credit for the time that Sunshine paid Patrick’s prior to its becoming certified under the program. At a compliance meeting Mr. Morgan indicated that he was a former employee of Sunshine. If he was still an employee, that was something that OESBD should have reviewed, due to the requirement that the subcontractor be completely independent of the prime contractor. It was incumbent upon both the prime and the CBE to report that to the County.

The Deputy County Administrator stated that if Doss never participated in the Contract, never provided personnel, never did any work, and never even went out to the Airport, the MURs would have been misrepresentations. It would also be improper for a prime contractor to represent payments to separate subcontractors for the same employee performing the same work.

The Deputy County Administrator identified the payment verification form. The County relied on the representations made on this form to conclude that business was being conducted in the manner required by contract and that the CBE was paid what the prime contractor was representing. If the subcontractor disagreed with the amount, the County would inquire further and request checks for that period. Also, when justified, staff would request cancelled checks to validate the payments reflected in a given month’s MUR.



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The Deputy County Administrator stated that auditors made her aware of litigation against Sunshine by a prior insurer who alleged Sunshine underreported the employees working for them and thus avoided paying the appropriate premiums for workers’ compensation insurance. This was information that would have been material in the selection process, and Sunshine should have reported it in its bid package. Had the County known that Sunshine was paying all the workers at the Airport and reporting them on their UCT 6s and issuing them W-2s, that would have established substantial misrepresentations by Sunshine that the subcontractors were separate from them. The Deputy County Administrator was shown a copy of the FCCI v. Sunshine settlement. She stated that if Sunshine deducted its settlement payments from their MUR-reported payments to EKE, this would have been a misrepresentation to the County.

2. Interview of the Small Business Development Manager The Manager worked with the OESBD at the Airport, oversaw two federal and two local business enterprise programs, monitored compliance, performed outreach, and provided technical assistance. She stated that the purpose of these programs is to level the playing field for small businesses, by setting goals on contracts that allow their participation.

The Manager stated that she reviewed CBE schedules of participation and letters of intent, which reflected that Sunshine delegated 30 percent of its Airport work to certified subcontractors. The OESBD required that the CBEs be vetted through the certification process prior to bidding, but it was the responsibility of the prime contractor to determine whether the CBEs had the adequate resources to perform their part of the contract. As this Contract was “labor driven,” the CBEs were required to provide employees to perform the necessary tasks and responsibilities. Part of being a CBE, according to the Manager, is possessing the ability to hire, fire, and maintain control and independence from the prime contractor. The CBE would have to provide labor, with a clear line of demarcation in the function of the prime.

The Manager explained the process of determining the responsiveness of a bid. To the limited extent she is able, she attempts to certify and validate that the CBE has the proper workforce, size and experience to participate to the extent committed. The Manager stated that during the operation of a contract, typically when there was a change in the contract, she performed a check of the MURs to determine whether the CBEs received the amounts listed—the amounts paid for that period and cumulatively. The County uses the MUR verification form (1) to confirm that actual participation aligns with what was committed, and (2) to verify payment. The Manager stated that she transferred the amounts to a spreadsheet she maintained, to monitor overall performance of the commitments. She also transferred the information to a compliance memo, which she likened to a “report card” that provided a synopsis of the prime contractor’s performance. She or someone from her division would forward a verification form to the subcontractor CBEs. A verification meant that the CBE performed work and participated in the contract to the extent of the amount it was paid. If the CBE confirmed what the prime contractor reported, there would be no red flag to follow up.



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In Sunshine’s case, she stated that the County relied on Sunshine’s MURs and the CBEs’ verifications to substantiate what Sunshine actually paid the CBEs. Following a site visit, she was unable to understand how the written commitment would be carried out without the CBEs in control of their portion of the work. She was concerned whether the CBEs were independent and whether they were hiring and firing. If all the people working at the Airport were Sunshine employees and none were CBE employees, that would mean that the MURs and other documents provided for the Manager’s compliance review were misrepresentations to the County. One of the Manager’s concerns was that, when she requested and received a copy of the CBE firms’ employees, she obtained a payroll that was labeled, “Sunshine.” She could not identify the employees of the individual CBEs. She could not understand why Sunshine was generating the payroll reports and why she was not receiving them from NAPM, EKE, or any other CBEs. If Sunshine and its subcontractors had an employee leasing agreement or labor interchange of any kind, they would be required to notify the County, to allow the County to confirm that the alignment was in the spirit of the CBE program. Her superiors at the OESBD told the Manager not to pursue what they termed an “inconclusive” report.22 The Manager did request cancelled checks to follow up on the CWCG situation, where Ms. Woods reported she was not paid amounts that Sunshine reported.

The Manager reported that when Mr. Morgan claimed to be a Sunshine employee who wanted to certify his own firm, she saw that as a red flag, and it prompted her to make a site visit. It was during the site visit that she learned that a Sunshine employee or employees was or were told to seek certification. She denied the request to add Mr. Morgan’s company in as a CBE under the Contract until she could obtain more documentation. They were seeking retroactive participation, for time he worked on the Contract without being certified. While that request was pending, at a meeting in early November 2011 Mr. Calufetti who told the Manager that Mr. Morgan was no longer on Sunshine’s payroll. Mr. Calufetti had also mentioned it previously during the summer of 2011, when the Manager explained that the County would not be able to count participation for Mr. Morgan if he was still an employee because of affiliation and interlocking management issues.

During her site visit, the Manager was told that EKE and NAPM hired their own employees, but that Sunshine thereafter took over supervision and payroll. She informed Sunshine at that time that the process was unacceptable, went against the intent of the CBE program, and needed to change to provide for a clear line of demarcation. She further determined that Sunshine should receive no CBE participation credit for the time that this process was in place.

3. Interview of Sunshine’s Office Manager

The Office Manager informed OIG Special Agents that she had been working at the Airport for Sunshine for eighteen years. She said she was responsible for hiring, badging, employee

22 That occurred before the Deputy County Administrator became the Interim Director of the OESBD.



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scheduling and other administrative functions. She reported that there were 380 employees working for Sunshine at the Airport, 190 full-time employees providing janitorial services per day, as follows: First shift – 6:00 a.m. until 2:00 p.m. (64 employees scheduled daily) Second shift – 2:00 p.m. until 10:00 p.m. (63 employees scheduled daily) Third shift – 10:00 p.m. until 6:00 a.m. (64 employees scheduled daily) She explained that there were three shift supervisors on the Contract, one per shift. She stated that, for each shift, there were approximately six supervisors under each shift supervisor. It was Mr. Walker who decided which shift supervisors and supervisors worked. The Office Manager stated that Mr. Walker and she were responsible for interviewing new hires. She said that Sunshine assisted janitorial labor services CBEs in maintaining their required staffing levels, by routinely shifting employees from Sunshine’s roster to that of a CBE that needed a certain number of employees to “balance” the labor participation. She reported that there were 77 EKE and 21 NAPM employees on the Contract. She directed the OIG to speak with Mr. Walker about the number of employees associated with Patrick’s. She explained that if someone quit or was fired from a CBE, he or she would be replaced by a Sunshine employee and that her boss, Mr. Calufetti, placed an advertisement in the newspaper for people to replace those reassigned to the CBE rosters.

The Office Manager reported that CBE owners went to the Airport to supervise or train employees on their rosters very infrequently, and added that about the only time they appeared was for meetings with Sunshine’s upper management.

The Office Manager stated that Mr. Walker handled employee discipline or counseling, and that the CBE owner only became involved if an issue was important enough. She said that CBE owners occasionally called or attended the weekly corporate staff meetings at the offices in Fort Lauderdale but did not interface or deal with supervisors or managers associated with the Contract. She said she did not know Ms. Woods.

When asked to describe Sunshine’s employee time-keeping system, she stated that an employee entered a door in Terminal Three and punched in his or her personnel number and then placed his or her hand on a biometric scanner. She stated that the data then showed up in a database of employees providing labor for the Contract. The Office Manager demonstrated how the system showed when employees punched in and out. She also demonstrated how employees could be reassigned from Sunshine to any of the CBEs’ rosters. With a click on a drop-box, an employee could be highlighted in an employee roster and reassigned to another employee roster from any selected CBE. She stated that she used the demonstrated method to balance the workforce of the CBEs that provided labor to ensure that the required employee numbers were met for each pay period.



OIG 11-023


When asked if Sunshine employees were moved around from one company’s roster to another often, the Office Manager responded that an employee would usually stay with the assigned CBE to keep the number of employees acceptable (for example, EKE’s 77 employee count). She again explained that new employees would then be hired by Sunshine, and trained by Sunshine, as needed. 4. Interview of Emily Evans

Ms. Evans stated that her company, EKE, provides commercial janitorial services at nine libraries, a church, various attorneys’ offices, and other buildings in Broward County. EKE employs 25 to 30 individuals; however, that number does not include the 75 or 76 employees working at the Airport. When asked why the number of people stated as employees of EKE does not include those employees, Ms. Evans said it was because Sunshine prepares their payroll, withholds their taxes, and provides their W-2 forms. Ms. Evans reported that Sunshine was EKE’s largest account and that she had been working with Sunshine for approximately 20 years.

At non-airport locations, Ms. Evans conducted the background screenings. Ms. Evans advised that hiring employees depended on the contract and scope of work. She described how EKE made use of family and considered her staff a family. She said that staff may consist of employees and their children, nieces and nephews, because that model worked. She set up schedules for her employees on an as-needed basis, and EKE supervisors and lead persons oversaw on-site operations. Most of her company’s business was performed in the evenings when offices and other facilities were unoccupied. Ms. Evans stated that EKE did not have any written policies or procedures, but that she personally trained her lead supervisors, who would in turn assist her in training other employees in their duties. If there was a personnel problem at a site, it was the client who contacted her, and she would then handle it with the employee. She reported that attendance and time-keeping methods depended on the project. Evans advised that for the library projects, each library had a janitorial closet with a sign-in sheet. Ms. Evans stated that the timesheets were collected monthly, but later stated that the supervisors of the sites would collect the time sheets and deliver them to her weekly to facilitate the payroll process. Ms. Evans advised that she sometimes performed random site visits or would have supervisors perform checks and report back to her.

However, Ms. Evans advised that the Airport management processes were different. A Sunshine employee conducted all background screenings for the Airport employees, which were more stringent than for employees elsewhere. Sunshine provided the oversight of EKE’s 75 or 76 Airport workers. Ms. Evans was unable to identify her employees from a roster of Sunshine employees assigned to EKE and pulled out a current roster that Sunshine had p

broward office inspector general€¦ · 26/08/2015 · larry calufetti founded sunshine as a...

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