Kansas City’s Hispanic contractors say H&R Block didn’t earn its tax break

City Hall lists Rodriguez Electrical in its official directory of minority- and women-owned construction companies certified to do business with the city. The address for Rodriguez Electrical — at Second and Riverview in Kansas City, Kansas — is on the far-west end of the industrial West Bottoms, down a muddy road from the chain-link and barbed-wire fencing that protects a scrap pile at Asner Iron & Metal. Fireworks warehouses are shuttered this time of year. There’s no sign of Rodriguez Electrical.

Too bad, because Ralph Rodriguez, the company owner, could tell us a lot about our city right now.

As it is, we have to rely on a short affidavit that Rodriguez signed as part of a lawsuit filed by an organization of Hispanic contractors against J.E. Dunn Construction; H&R Block; the city of Kansas City, Missouri; and the TIF Commission, which oversees tax-increment financing.

In the suit, filed back in 2005, Armando Diaz of Diaz Construction Company and other members of the Hispanic contractors’ association claimed that, during the construction of its new world headquarters, H&R Block and its general contractor, J.E. Dunn, paid fees to minority-owned businesses that acted as fronts, or “pass-through” companies, sending the work back to white subcontractors (“A City that Works?” November 15, 2007). It was a tricky way for H&R Block and J.E. Dunn to appear as if they were meeting the city’s minority-hiring goals without actually giving work to minorities, the contractors claimed.

Jackson County Circuit Judge Charles Atwell dismissed the case in December, saying that the contractors lacked legal standing to file the suit. But his ruling did acknowledge that the contractors had “presented meaningful evidence … suggesting that certifications provided by J.E. Dunn were inaccurate, false, or misleading.”

The contractors have now gone public with that evidence. Over the past few weeks, while preparing to file their appeal, they’ve sent copies of affidavits and excerpts of depositions to the mayor, City Council members, City Manager Wayne Cauthen and the TIF Commission.

That’s where Ralph Rodriguez comes in.

Among the documents is Rodriguez’s sworn affidavit, in which he describes how R.F. Fisher Electric Company approached him about “a bidding strategy” on the H&R Block project. In his July 13, 2007, affidavit, Rodriguez said R.F. Fisher wanted Rodriguez’s company to do nothing more than submit the bid to J.E. Dunn, which approved the deal. “Despite my requests to R.F. Fisher, I was not given the opportunity to perform some of the work; in fact, no Rodriguez Electrical employees ever performed work on that project,” Rodriguez stated. For its work on the H&R Block headquarters, J.E. Dunn paid R.F. Fisher $2,973,010. For nothing more than Rodriguez’s name on the bid, R.F. Fisher paid Rodriguez $66,892.73.

But then Rodriguez came forward and admitted his role in an effort to help the Hispanic contractors make their case about what they say is a widespread practice in the construction industry.

The documents contain other names and affidavits besides Rodriguez’s. They claim that, for laying cable, reinforcing steel, putting up studs and drywall, hauling in stone, excavating and other jobs, H&R Block over-reported its payments to minority contractors by more than $11 million.

The depositions are incomplete — just 70-some pages of excerpts of what must be thousands generated in the lawsuit. It’s not clear what testimony is missing. One recurring theme emerges, however: Everyone in charge of enforcing the rules seems to have passed off that responsibility to someone else.

Sandra Rayford, the TIF Commission’s affirmative action compliance officer, acknowledged that the use of front companies was “morally” wrong. But, in a deposition dated May 23, 2007, she said, “I don’t know how it would be my job responsibility” to investigate. That, she said, would be the responsibility of City Hall’s human relations department.

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Kimberly Gale, the compliance officer at City Hall, said in a May 24, 2007, deposition that she knew nothing about claims that J.E. Dunn had used front companies — but if she did, she would report it to the TIF Commission, “and they would take appropriate action” against the developer, H&R Block.

Meanwhile, Karen Orosco of H&R Block said in a deposition that it was J.E. Dunn’s responsibility: “We made it clear to J.E. Dunn on multiple occasions, both verbally and in writing, that we considered … J.E. Dunn responsible for ensuring that we were compliant.”

The docs don’t prove that anybody did anything illegal. But the Hispanic contractors say the depositions make it obvious that H&R Block didn’t make a good-faith effort to meet the city’s rules for making sure all of the city’s workers get a share of publicly financed projects.

H&R Block begs to differ. “Throughout the construction of our World Headquarters facility, H&R Block remained 100 percent committed to using the talents of qualified women- and minority-owned businesses,” spokeswoman Nancy Mays told me Monday in an e-mailed statement. “As is customary, the contractors and consultants on the project provided us with information showing they were meeting or exceeding affirmative action goals and we understand those goals were achieved. The case was dismissed by a trial judge in December and we believe the dismissal will be upheld on appeal.” (J.E. Dunn and R.F. Fisher did not return my calls.)

Now that H&R Block’s gleaming green headquarters anchors the new Power & Light District, taxes generated by the building will soon start flowing back to H&R Block — the citizens of Kansas City will begin reimbursing it for its investment in downtown.

In February, H&R Block asked the TIF Commission for a payback of $137 million in city and county reimbursements. Once a couple of independent accountants review H&R Block’s request, it’ll go to the TIF Commission for approval. That’s set to happen at the TIF Commission’s meeting on May 14.

The Hispanic contractors say that, before the city starts writing checks to H&R Block for a total of $137 million, the city needs to have a public conversation about all of this. That’s why, after years of frustration, they’ve circulated the court documents.

“It’s a shame that we have to do all of this,” says Gabe Perez, a member of the Hispanic contractors’ association. “We started asking questions over two years ago. From day one, even before the litigation started, we asked some questions and wanted some answers — that’s all we asked for. For whatever reason, our appointed or elected officials are having trouble finding the courage to look at this and deal with it.”

They got some response from Councilwoman Beth Gottstein, who sent a memo to Cauthen asking for some explanations by May 1. Word from City Hall is, though, that because litigation is pending, everyone has been advised not to talk about it.

The contractors also want to talk to the full TIF Commission, and that won’t happen anytime soon.

The TIF Commission’s executive director, Joe Gonzalez, says he has told the contractors that their request has to go through the commission’s Affirmative Action Committee. And, he says, because the lawsuit documents make allegations against specific people, the Affirmative Action Committee should invite all of those people to come in and explain their sides of the story. Then the committee will decide whether it’s an issue that should go before the full TIF Commission.

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The contractors see that as a stalling tactic — one that allows H&R Block to get approval for its reimbursements before the contractors have a chance to be heard.

“Prove us wrong, that’s all we’re asking,” Perez says. “I think every citizen in Kansas City should be concerned about this because it’s about how they really distribute and reward their tax dollars. Do you want to reward a developer for really shirking his responsibility? That’s not just a minority issue — that’s a taxpayer issue.”

The $11 million that the contractors say H&R Block over-reported paying minority contractors who didn’t really get the work might have helped make City Hall’s recent budget cuts a little less painful. And what if the same accountability problems are happening with all taxpayer-assisted construction projects? “We believe quite strongly that this matter is more prevalent than just this one instance,” adds Bill Torres of the Hispanic contractors’ association. “Had we not brought this forward, status quo would go on.”

The contractors can claim some victories. In February, following City Hall’s lead, the TIF Commission updated its Affirmative Action Policy to make it clear that front companies aren’t allowed.

When the Hispanic contractors filed their lawsuit, Torres says, they were after three things: accountability, justice and reform. “I believe we’ve accomplished a lot of that already,” he says. “Now I believe it’s time to complete the assignment.”

But the longer City Hall stays quiet, and the longer the TIF Commission drags out the issue in committee, the longer it’ll seem that this is just how Kansas City does business. It feels sad and dirty.

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