The companies claimed to be small, minority-owned businesses, giving them preference in bidding for government contracts, Air Force documents allege. But government investigators found they were part of a larger minority-owned firm and not eligible for small-business contracts.

The Air Force and Army awarded the companies 112 stimulus projects, federal contract records show. It wasn't until Sept. 23 — more than a year after the investigation started — that the Air Force suspended the firms from new federal contracts.

Scott Amey of the non-partisan Project on Government Oversight said the case exposes an oversight gap under the $787 billion stimulus plan and federal contracting in general. "Was there any disclosure of the contractors' missteps prior to them receiving the stimulus money?" he asked.

Air Force Lt. Col. Ann Stefanek said the stimulus projects were awarded independently by officers at military bases who wouldn't have spotted problems unless a contractor was suspended or debarred.

Federal rules let agencies terminate contracts if it's in the government's interest. Stefanek and Army Maj. Jimmie Cummings said the companies' work has been satisfactory and neither branch plans to cancel the stimulus contracts that were awarded before the firms were suspended.

According to the Air Force, Craig Jackson, who owns Sanders Engineering in Yorba Linda, Calif., created various businesses that were owned by friends and family — but were managed and controlled by him or his companies. Jackson and his family hid financial ties between the businesses, the suspension order alleged.

Over the years, 19 companies controlled by Jackson "received more than $700 million in government contracts to which they may not have been legally entitled," the Air Force said.

Jackson did not return calls. An attorney for Sanders Engineering, Tony Franco, said the company plans to "vigorously contest" the suspension.

In a response to the contracting suspension filed Friday, Franco said the Small Business Administration always has known of the relationships and encouraged Sanders to share its administrative expertise with other businesses.

Allegations concerning one of the companies, APM LLC of Yorba Linda, Calif., became public in an August 2008 SBA audit. The firm was suspended from an SBA development program, and the Defense Department opened a criminal investigation.

Records show Scott Air Force Base in Illinois awarded two projects worth $423,000 to APM on Sept. 24, a day after the contracting ban was issued. Stefanek said those awards have been rescinded.

Grabell reports for ProPublica, an independent, non-profit newsroom based in New York.

Source:  http://www.usatoday.com/news/washington/2009-10-25-stimulus-contracts_N.htm