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D.C. insiders can reap fortunes from federal programs for small businesses

After the attacks of Sept. 11, 2001, the Pentagon and other agencies awarded thousands of contracts without competition or proper oversight. In that rush, billions went to entities known as Alaska native corporations. Then the problems began.

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Washington Post Staff Writer
Sunday, March 13, 2011; 11:42 PM

For years as a lawyer in Washington, Paralee White had helped small and disadvantaged firms break into the federal contracting market.

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Then she decided to help herself.

She started a business and was soon making more than $500,000 a year through a contracting program intended to help poor Alaska natives, even though she isn't an Alaska native.

White also helped her family. She hired her sister and brother, paying them as much as $280,000 a year. She helped her sister's boyfriend set up his own firm in partnership with Alaska natives. He made more than $500,000 a year.

White's story offers a look at how Washington insiders can make fortunes from government programs intended to benefit small, disadvantaged and minority entrepreneurs. It also illustrates how government officials who are supposed to keep tabs on these programs often fail to do so.

White's native partners eventually accused her and her siblings of fraud and self-dealing, saying they were paid more than the rules allowed and hid the transactions from the government. The allegations spilled out in a civil lawsuit in Alaska, and the case was quickly settled.

Although officials at the Small Business Administration say they knew about the dispute, the U.S. government has taken no action.

Over several years, White and her associates landed more than $500 million in construction contracts for the Navy and other Pentagon departments, nearly all of them through an SBA program aimed at boosting Alaska native corporations. But less than 1 percent of that money made it back to the native-owned corporations, a Washington Post investigation found.

Government officials say they were not monitoring the contracts for compliance with the rules to ensure that the natives were doing a significant portion of the work and receiving the correct share of the revenue.

In statements, Navy and Air Force officials said that responsibility fell to the SBA. But SBA spokeswoman Hayley Meadvin said her agency long ago transferred that authority to the Pentagon and other agencies.

White, 59, declined to answer questions about the contracts. In e-mails, she said the questions involve "events several years in the past and I don't have the files or time to research or reflect on them sufficiently to give you accurate information."

She said that her company was "a successful participant" in the federal small-business program and that "I am proud to have contributed to that success."


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