More than $12 million from state contracts was improperly laundered through a shell company to enrich a pair of related companies, according to an investigation released Tuesday by Ohio Inspector General Randall J. Meyer.
The investigation found that while certified as a minority-owned business enterprise, TSG Partners used its status to land set-aside state contract opportunities totaling nearly $15.8 million between Jan. 1, 2015 and Aug. 31, 2017.
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TSG Partners’ owners, father and son Kyle and Mark Schriml, however, had no employees and only a semblance of an office, with $12.3 million in its state payments transferred to Advocate Solutions and Advocate Consulting Group within a few days of receiving the money for information-technology work, according to the report.
The Columbus-based Advocate companies are 50 percent owned by Mark Schriml, according to the inspector general’s report.
The investigation found that the Department of Administrative Services, which awarded contracts to TSG Partners, failed to adequately review the company’s qualifications in wrongly granting it minority-business enterprise designation that allowed it to receive numerous state contracts during the tenure of former Gov. John Kasich.
Owners of qualified minority companies must have have day-to-day control of their companies under state law. TSG relinquished its MBE status in October 2017.
Meyer referred his report to Franklin County Prosecutor Ron O’Brien for consideration of potential criminal charges. A person who intentionally misrepresents himself as owning or controlling a minority business enterprise to obtain contracts can be charged under state law with theft by deception.
A review of bank records suggested that TSG Partners “has a limited, if any, commercial useful function,” with Kyle Schriml unable to answer basic questions about its state contracts, the report said. He admitted the company used the Advocate companies as its contractors. The report said Schriml lacked the expertise to oversee the work and that his father effectively ran TSG.
Photos of TSG Partners’ office “show empty office space, but for a few chairs, a couple of desks that have nothing or very little on them … no office supplies,” the report said.
The inspector general’s report recommended that the administrative services department determine if the Advocate companies, TSG Partners and the Schrimls should be barred from receiving further state contracts. It also recommended that a commercial viability test be part of granting minority contractor status.
Department spokesman Bill Teets said, “We’ve received the inspector general report and are reviewing its findings and recommendations. We will respond to the inspector general within the allotted time frame. We are committed to maintaining an effective MBE program, and are currently conducting site reviews and have developed more detailed business reviews to ensure the business qualifies to be certified as an MBE.”
Online records show that Advocate Solutions received $3.5 million in state payments in 2018 and $599,287 in 2019 while Advocate Consulting received $3 million in 2018.
A message seeking comment from the Schrimls or Advocate representatives was left at the company’s office on Tuesday morning.
The Dispatch uncovered in 2017 that the Advocate companies had received in excess of $14 million in improper no-bid contracts since mid-2011. The company employed several former Department of Administrative Services information technology executives.
The revelations prompted inspector general reports confirming The Dispatch’s reporting and reforms in state bidding requirements.