Study finds many businesses present themselves as minority-owned through ‘fronts’

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A study found that more than a quarter of reported corporate and federal government spending on minority and women-owned businesses is channeled to white male-led businesses and large state-owned companies, according to BJM Solutions. , based in Trumbull.

Minority and female entrepreneurs receive a commission to set up front companies, called “minority intermediaries”, according to the study. However, most of the revenue goes to white-owned and state-owned businesses.

According to the study, 28% of vendor diversity professionals’ spend was attributed to minority referrals.

“It was a larger amount than expected and significantly larger than the amounts thought to exist,” said study author Fred McKinney, an economist and co-founder of BJM Solutions.

“Front organizations were a major problem in early programs designed to promote minority and women-owned businesses,” McKinney said. “With federal and corporate funds flowing in to address equity issues in communities of color, this unethical practice is growing rapidly.”

The survey was conducted in February 2022, when McKinney sent out a survey with a link to 14 questions to over 400 supplier diversity professionals. Thirty-eight supplier diversity professionals responded to the survey. The results are available here.

BJM Solutions is an economic advisory firm and is certified by the State of Connecticut as minority owned and operated.

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