Minority Courier Service Accuses OfficeMax of $17.6 Million DBE Contract Fraud

OfficeMax received a Pennsylvania officae supply contract and hired GCS as their Disadvantaged Business Enterprise (DBE) in order to get the contract and defrauded them out of millions of dollars.
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Harrisburg - Pennsylvania - US

Ray A. George, President and CEO of George Courier Service (GCS) once located in Harrisburg, Pennsylvania, was the Disadvantaged Business Enterprise (DBE) sub-contractor on  then Pa Governor Ed Rendell’s Strategic Sourcing project for office supplies along with prime contractor, OfficeMax.  PA rules require prime contractors to partner with a Pa DBE in order to secure state government contracts. OfficeMax secured a $12.8 million contract from the Commonwealth of Pa of which 45% was to go to the Pa Disadvantaged Business Enterprise (DBE). OfficeMax approached George’s company, GCS-George Courier Service and invited them to be their DBE. GCS agreed.

OfficeMax and GCS were to partner on this contract in April 2004 for a three year contract with a two year option for the delivery of office supplies, and paper to state government offices in Harrisburg and Central Pa areas. George delivered products and paper to the state offices, and was to receive 45% of the $12.8 million contract from Rendell’s administration.

GCS received this contract through the DBE minority participation program in which prime contractors were required to have minority participation in order to receive the contract. George, who is black, was the only certified minority courier company in the state of Pennsylvania with 14 certifications. The Governor held a press conference to announce the awarding of contract.

On the day of the press conference announcing the OfficeMax/George contract, former Governor Rendell announced that this was “historic” for a minority firm to earn such a large, lucrative contract. He also signed Executive Order 2006-02 “Contract Compliance” stating his commitment to giving minorities better access to lucrative state contracts and also laid out the compliance responsibilities of the Department of General Services.

After three years of investigation by GCS and it’s former attorney (through the Right To Know Act), it was discovered that OfficeMax reported receiving payment from the Commonwealth of Pa. of $38.5 million and falsely reported paying GCS George Courier service $17.6 million. In the three years of the contract GCS has been paid only $996,000.00 of the $17.6 million owed to them. It was also discovered that OfficeMax retained and paid their own company by the name of Guy Brown Products (GBP) of Tennessee as the DBE on the contract. OfficeMax paid GBP $18.6 million. This company owned 60% of OfficeMax, did not meet the criteria for a Pa DBE company, and was based in Tennessee.

George says he was forced to resign in January of 2007 due to racial discrimination, mistreatment, breach of contract, and fraud. George also feels OfficeMax did malicious harm to his 10 year old courier business and personal life.  George was also forced to give up several other contracts including a $25.9 million contract with the Pa. State System of Higher Education. In addition, George, says he suffered many difficulties, professionally and personally including slander, extortion, and debt. George says, he has endured more racist acts through this contract and has never worked so hard to be  so used.

George says his company delivered all products and paper and kept his commitment to OfficeMax and the Commonwealth of Pa. Throughout the contract George had many encounters with OfficeMax and DGS staff to resolve issues. George said he has encountered many aspects of wrongdoing and fraud during this contract and says he was “set up to fail” and used as a “poster child“ to make it look as if minorities were getting large, lucrative Pa state contracts.  George says he was promised working capital and not only did he not receive working capital, many times, George says, he did not receive payment for work performed. George says he has made no profit on this contract over the three years, and, in fact, has incurred more debt. OfficeMax provided him with $3300.00 in the beginning of the contract. This was the total cash assistance for such a large contract.

The Pa Department of General Services, as stated in Executive Order 2006-02 of January 31, 2006 on Contract Compliance, was to monitor the contract to ensure that the contract compliance regulations were being adhered to and George says they did a “very poor job in their oversight responsibility“ and turned their backs on him and his company. George says that The Office of Women and Minority Business Enterprise did nothing to protect George’s company  from the wrongdoings created by OfficeMax and government fraud even after numerous meetings advising them of the situation. The DGS Procurement Officer was well aware of the mistreatment of the DBE, as was the Contract Compliance Officer who wrote OfficeMax a letter stating his discomfort with the fact that while GCS was to receive 45% of the contract, they were only being paid 3%. Still, nothing changed.

George says it has been 3½  years that he has been trying to resolve this matter. He has gone to numerous federal, and state agencies, attorneys, civil groups, and other interested parties to no avail. George says, many want nothing to do with this case due to government ties and the impact their involvement may have on their reputations. George says he is still seeking legal support.

OfficeMax refuses to negotiate with him. George says he held up his part of the bargain doing all the work and OfficeMax did not. George says  he was used as a scapegoat and a poster child by OfficeMax and Commonwealth of Pennsylvania.

OfficeMax lost the contract to Staples who hired a New Jersey firm to run the Pennsylvania office supply contract using George’s former employees and his intellectual property. George said he will seek damages for unauthorized use of his intellectual property.  

This story comes on the heels of a similar case in Schuylkill county Pennsylvania. The Schuylkill county case is a DBE fraud case where a company diverted $136 million to their own company that was targeted for a DBE. The money was funneled to their own company through fraud (U.S. Department of Justice vs. Schuylkill Products, Inc). This case with OfficeMax involves OfficeMax funneling millions of dollars intended for GCS (the DBE) to a company that owns them, Guy Brown Products. George says he has proven documentation to support his claim and that this is a corporate and government cover-up. George continues to seek help to resolve this matter. George is still fighting to be made whole.
Source:Ray A. George, Owner
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Location:Harrisburg - Pennsylvania - United States
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