Last September, the nonprofit Blanchet House of Hospitality cut a blue ribbon to dedicate a $12.9 million, four-story homeless meal kitchen and transitional housing shelter in Old Town.

The city of Portland paid for a big part of that—$4 million from the Housing Bureau—and required that the construction project create opportunities for contracting companies owned by minorities and women.

Since 1997, the city has had a policy of trying to promote minority-owned contractors. Portland has set goals for any deal that includes city money—20 percent on the Blanchet House project.

State rules forbid a company from falsely fronting as a minority- or female-owned business to land contracts for people who are ineligible.

Now a city watchdog wants to know whether one of the contractors who got a set-aside contract on the Blanchet House project did so fraudulently.

More than $88,000 in contracts went to an East Portland company, Elkins Masonry Restoration Inc., whose listed owner, Nichole Elkins, is a member of the Confederated Tribes of the Grand Ronde.

In March, the state of Oregon cleared Elkins of allegations made by the city's procurement office she wasn't eligible under the set-asides program, and that her company wasn't independent from a firm owned by her husband, Ray, who is white.

But city ombudswoman Margie Sollinger is dissatisfied with the state's findings.

In an April 26 letter obtained by WW, Sollinger asks state investigators to explain how they could clear Elkins' company when so much of the evidence suggests her company may not have been eligible for set-aside contracts.

State officials say they'll issue a response next week.

Sollinger stops short of accusing Elkins of acting illegally. But she tells WW she wants the state to look closer to ensure Portland's minority-contracting goals won't be "co-opted by firms seeking financial gain through fraudulent means."

While the city's set-aside program is lauded by many, some minority contractors say the program is widely abused by front companies set up by white men.

"I don't want to throw accusations around like candy," says Melvin Oden-Orr, general counsel for the Oregon chapter of the National Association of Minority Contractors. "But there is speculation that it happens a lot."

Elkins, through her attorney, declined to be interviewed by WW. When Elkins first applied to qualify as a minority- and female-owned business in 2011, she said she started her own firm because she wanted independence after 10 years of working for her husband's masonry business.

"I'd like to be in charge of my own career path as I once was," Elkins wrote. "Owning my own business and showing pride in my Native American culture are steps to that goal."

Business Oregon, the state economic development agency, is responsible for investigating cases of potential fraud in minority- and female-owned contracting companies. The agency concluded it had found no evidence that Elkins improperly relied on her husband's business for help. "She has adequate experience, knowledge and ability to control her business independently," wrote Raleigh Lewis, manager of Oregon's Office of Minority, Women and Emerging Small Business. 

But in her letter to Business Oregon, Sollinger says the state cleared Elkins despite evidence she may not have been eligible for minority- or female-owned business certification in the first place.

State rules require the business owner to have "sufficient expertise in the firm's primary field of operation to control the firm independently."

Elkins told investigators her experience as office manager for her husband's company, D&R Masonry Restoration Inc., qualified her, and that she would do the estimating for the project.

But Sollinger says documents show the estimating work was done by one of her husband's employees, not Elkins.

State rules also require the business "must not be dependent upon any non-disadvantaged, non-minority or non-woman-owned firm."

According to the city's letter, Elkins initially claimed her company didn't share any resources with another company or  need to lease equipment, and that she had no financial interest in any other firm.

But Sollinger says in her letter the record is filled with contradictions: Elkins' firm shares office space and supplies with companies owned by her husband, and she used equipment from her husband's company on the city contract. And, Sollinger says, there's no evidence Elkins paid her husband's company for use of the equipment or the employee.

Business Oregon spokesman Marc Zolton says the agency won't comment on an open case or on the implication from the city ombudswoman that the agency failed to do its job right the first time.

"We're very limited in what we investigate," Zolton says. "We don't investigate fraud except in the areas of certification eligibility."

Sollinger says she wants to look into other complaints about allegedly ineligible  companies abusing the city's set-aside program. But the state is making it difficult.

Sollinger asked Business Oregon to release documents regarding three other contractors about whom her office has received complaints.

The state's response? It wants to charge the city $2,718.75 for the records—and  payment is due up front.