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Tony Nelson 'correction' steered deal
By Steve Patterson, The Times-Union
Jul 20, 2008
A $1 million JEA contract with a nonprofit company run by civic figure Tony Nelson was turned over to a for-profit business Nelson founded shortly after signing the JEA deal, records show.
The new business, First Coast BBIC Inc., had nearly the same name as the nonprofit First Coast Black Business Investment Corp., of which Nelson is the longtime president. Both companies listed the same address.
The city-owned utility apparently thought the nonprofit just changed its name, though that never actually happened. For years, JEA approved monthly flat-fee payments each time it received a new photocopy of a one-page pricing deal written on the nonprofit's letterhead soon after the start of the contract.
JEA's lawyers should have been asked to review the contract when it was changed in 1997, a city lawyer said last week, but that apparently didn't happen. A name change should have led JEA managers to ask questions, said the utility's present procurement chief, who was not involved in awarding the job.
It's not clear why the contract was transferred, or if the unusual deal somehow benefited the nonprofit. Moving the contract to a private, for-profit business paid on a flat-fee basis made it harder for the public to know how money from JEA was spent.
Nelson, who is at the center of an FBI investigation, was listed in state records as the agent and only director of the new for-profit company.
Tax returns and audit statements from the nonprofit don't appear to show any revenue from the contract, or refer at all to the for-profit business, which no longer exists. Tax returns for private, for-profit businesses are not publicly available.
To change the contract, Nelson asked JEA for a "name correction," records show. A memo to a JEA committee handling the paperwork said "the name of the company ... has been changed."
The nonprofit First Coast Black Business Investment Corp. never changed its name and still operates today. State records show Nelson dissolved First Coast BBIC Inc. in January 2004, three months after the JEA contract ended.
Job was to build database
The job at JEA was to help build its minority-contracting program by developing a database of businesses that would be informed when contracts in their field were coming up. The work included outreach efforts to get more minority companies involved, and verifying which companies were really minority-owned.
The contract was to run from 1997 to 2002, but JEA extended that by about 18 months after a review by the utility praised the growth of the minority-contracting effort while recommending areas for improvement. The amount paid to First Coast BBIC Inc. grew to about $1.4 million, invoice records show.
The Black Business Investment Corp. has figured into an ongoing federal investigation of contracts at the Jacksonville Port Authority, from which Nelson resigned last week as vice chairman.
In April, FBI agents searched offices of the Black Business Investment Corp. and Muirfield Partners, a for-profit company Nelson runs across town, as well as two companies that had port contracts.
Nelson previously declined to discuss the JEA deal, and did not return messages left last week by phone and e-mail.
Nelson's lawyer has advised him not to say anything publicly while the federal investigation is under way, said Maria Coppola, a spokeswoman.
A former chairman of the Black Business Investment Corp., who was also named in state records as a director of the for-profit company, said he couldn't explain how the two companies were related.
"You're talking about 10 years ago. ... I just don't remember," said Charles Griggs, who also served on the Florida Black Business Investment Board, a state agency created in the 1980s to help Florida's black-owned companies grow.
A report to the state in February listed Griggs as the Black Business Investment Corp. treasurer, but he said he hasn't been active on that board for more than a year.
Griggs, a public relations specialist who is spokesman for the Duval County Health Department, and Rogers Cain, a doctor, were added to the for-profit company's records as directors in 2000, and removed a year later.
Asked if he remembered being a director at the for-profit First Coast BBIC Inc., Griggs said he wasn't sure. Cain didn't return messages left at his home and office.
Contract handling 'galling'
An expert in nonprofit management said the way the contract was handed off was "galling" and extremely unusual.
"It's not a name change. This is so much more than a name change," said Harriet McCullough, who teaches nonprofit management in graduate courses at the Illinois Institute of Technology in Chicago. She said it's possible that "the original contract with the nonprofit was broken using the name change."
Lawyers would have wondered the same thing, said Cindy Laquidara, the city's chief deputy general counsel, who said the contract shouldn't have been changed without more examination.
"It would trigger a legal review at that point, if they had looked and seen that it was reported as a name change and was a different company," she said. There's no way to be sure if the change would have been ultimately approved, she said.
There's no indication that such a review took place, and a JEA manager's memo asking the awards committee to approve the contract change is actually dated one day before Nelson's written request for the change, suggesting it was approved immediately.
McCullough, a former director of Chicago's Board of Ethics, said she couldn't think of a reason to transfer a contract to a for-profit firm.
Nonprofit a three-person shop
When Nelson bid on the JEA job in December 1996, Black Business Investment Corp. was a three-person shop whose core job was helping struggling black business owners get loans and training to grow their companies.
State lawmakers and Jacksonville City Hall allotted money to help the nonprofit, which was founded with cash from the state and local banks and insurance companies. Nelson had been the president since 1990, two years after it was founded.
The bid to JEA said the nonprofit would do work alongside an Atlanta consulting business, D.J. Miller & Associates, that had worked with JEA before. The University of North Florida's Small Business Development Center and Florida Community College at Jacksonville's Urban Resource Center would be involved too, the bid said.
But after JEA awarded the contract in April 1997, the scope and nature of the job changed.
Nelson suggested opening a full-time office inside the utility's downtown headquarters.
Rather than filing detailed records of hours worked, in July 1997 he suggested billing a flat fee - $17,724 every month, year after year. The monthly price never changed during more than six years of work.
Eight days after the billing proposal, Nelson incorporated the new company. He was the only name listed as a director on Florida Division of Corporations forms, and the only one who signed.
State records don't identify owners of companies.
The same day the new company was created, Nelson asked JEA to change the name on the contract. The revised agreement listed the contractor as First Coast BBIC Inc., formerly known as First Coast Black Business Investment Corp.
JEA's procurement office was responsible for checking and understanding how any change would affect the contract, said John McCarthy, the utility's procurement director.
"That's how that should have played out," McCarthy said. He said the utility is normally more alert to name changes among minority vendors because of concerns about them being replaced by white-owned firms.
"Any time you're going to change the name of a company, you want to make sure to get legal folks to check it out," he said.
A city lawyer did approve the language used to revise the contract, but the revision was based on the belief the nonprofit Black Business Investment Corp. simply changed its name - which it didn't.
Assistant General Counsel Edward Tannen said he didn't remember the revision, but that amending a contract because one of the parties changed its name is "about as innocuous as it gets."
Invoices were 'not typical'
As a bill, each month JEA received a photocopy of a memo Nelson wrote in 1997 on the nonprofit's letterhead listing the flat-fee price. The new month and year were handwritten at the bottom, but nothing else changed.
That kind of invoice was "acceptable but not typical" for JEA in the 1990s, said Phil Mattox, a utility spokesman. He said JEA has changed policies since then, and "it would not be accepted today."
JEA wrote its checks to "First Coast BBIC," which could be either company. JEA records don't show who cashed the checks.
The JEA job eventually included reviewing backgrounds of hundreds of companies.
In 2002, a JEA report said more than $110 million in business had been directed to local firms through the minority-hiring program. City Council auditors criticized some files on companies as being incomplete in a 2001 report, but JEA answered that the files had the information the utility needed.
The utility eventually combined its purchasing program with one that City Hall started to help grow small and emerging businesses, regardless of owners' race or gender.
City Hall's small business program certifies a little over 100 companies yearly and has 377 now enrolled. JEA pays for two of the program's 11 staff members, with combined salaries of about $60,000 a year.
Financial records that the nonprofit Black Business Investment Corp. provided to City Hall give confusing and inconsistent hints about which company actually paid the staff working on the JEA contract. One former program manager who worked at the JEA office for more than a year isn't listed in the nonprofit's payroll records, suggesting she was paid by First Coast BBIC Inc. But those records indicate another former manager, who worked at JEA at the end of the contract, was paid through another nonprofit run by Nelson.
Times-Union writers Jim Schoettler and Mary Kelli Palka contributed to this report.
steve.patterson@jacksonville.com,
(904) 359-4263
Copyright 2008
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