PROVIDENCE -- The owner of a small trucking company says the Cardi Corp. used her company as a front to meet the minority-hiring requirements for winning state highway contracts — and then cut her out of the jobs and the money.

Michele Grieco and her truck on Shipyard Street in Providence.

Journal photo / Bob Thayer

In a breach-of-contract lawsuit filed in Kent County Superior Court in May, Twins Oil owner Michele Grieco alleges that Cardi reneged after signing her up to deliver $506,361 worth of a liquid ingredient used in making asphalt for state paving contracts.

Grieco (pronounced Greek-O) is not asking to be paid for materials she did not deliver.

Her lawsuit asks instead for “expectation damages,” the lost profits on each of the jobs: a total of $50,636 plus interest and attorney’s fees.

In its court-filed response, the Cardi Corp. says Twins Oil was unable to meet its obligations under the contract. Grieco insists she was at all times “ready, willing and able to perform and … never refused.”

“They never tried to reach me to perform these jobs,” she said in an interview. “They used me to sign contracts so they could get awarded the jobs,” then “they would just do the work themselves. … I am sure I cannot be the only one that this has happened to.”

What elevates this court fight above a routine he-said, she-said breach-of-contract dispute is a paper trail that raises questions about how Rhode Island’s Department of Transportation administers a federally mandated program aimed at providing a slice of each highway contract to one or more “Disadvantaged Business Enterprises (DBEs).” It shows the pressure on contractors to meet minority hiring requirements.

It demonstrates how little is required for a recognized “minority” — in this case, a female business owner — to qualify for a piece of this pie. According to the federal rulebook, ownership of a single “fully licensed, insured and operational truck” may be enough.

The trail also shows how much Grieco relied on a non-minority company, billing itself as “the single largest independent distributor of asphalt products on the East Coast,” whose principals include a former DOT director under former Gov. Edward DiPrete.

According to documents produced by Grieco, the paper trail begins with a series of letters from Cardi’s equal-employment opportunity officer asking Grieco to sign forms saying she made deliveries that she says she never made.

It shows a DOT resident engineer, Gary M. Tella, signing forms “verifying” that Twins Oil made the deliveries in dispute — “to the best of my knowledge” — and then saying the opposite a few years later.

DOT Director Jerome F. Williams defends Tella.

Despite the wording of the form Tella signed, Williams said he believes the engineer was, in actuality, seeking — not providing — verification from Cardi that Twins Oil delivered what it was supposed to deliver.

“He’s seeing asphalt. He’s not seeing who delivered the components to Cardi’s manufacturing plant. He is just seeing the asphalt and, based on his records, Twins Oil was the DBE that was supposed to be supplying it.”

“Do I think the form is worded correctly? No,” said Williams, in a recent interview. “The form should be reworded.”

But Williams, formerly a high-ranked deputy in the Department of Administration who has been at his current state job little more than six months, had this to say about Cardi’s efforts to get Grieco to sign for deliveries she says she never made: “I don’t know if someone in their office made a clerical mistake,” but “they certainly should know who provided the components of their asphalt.”

Through its lawyer, Elizabeth McDonough Noonan, Cardi declined comment beyond the denials contained within its court-filed response to Grieco’s lawsuit.

THE STORY BEGINS with Michele Grieco’s 1996 entry into a government contracting arena reserved for “socially and economically disadvantaged individuals.”

The list includes those who are black, Hispanic, American Indian, Asian, Portuguese and women. Each project has an assigned minority hiring goal, which in the contracts at issue ranged from 3 percent to 10 percent. Federal rules say: “Any female qualifies as a special class of minority.”

The 47-year-old daughter of Lorraine and Laber “Sonny” Russo Jr., Michele Grieco’s résumé describes a varied career that included stints as a model “doing various fashion shows” and “photography modeling at R.I. School of Photography,” a bookkeeper in the loan department of the now defunct Greater Providence Deposit & Trust, and an assistant in her grandfather’s music and songwriting business, Jimmie Crane Music, before her first job in the family trucking business.

After 10 years working as a bookkeeper and billing clerk for her mother’s company, Atwood Trucking, she created Twins Oil the year her twin girls were born — 1993. As she explained on her application for minority certification, she was employed at the same time as a billing clerk at her father’s company, L. Russo Trucking, because “I currently must do this work to supplement my income.”

There are many acronyms for the minority set-aside program: MBE, WBE, DBE.

Companies that want a slice of the federal contract money set aside for “Disadvantaged Business Enterprises” need to be certified first as minority-owned businesses by an arm of the state Department of Administration known as the Minority Business Enterprise Commission. Grieco began her quest there.

A February 1996 staff report on her application said: “Her husband, Michael Grieco, works part-time as a driver for the business. The company owns one truck which holds up to 3,000 gallons of oil.”

The truck was kept then — and now — at the former home of L. Russo Trucking at 5 Shipyard St., in Providence, according to her application. Under equipment she listed: “typewriter, adding machine, desk.”

A small brick home on a neat residential street not far from Providence College serves as her trucking company’s mailing address. (Her lawyers describe it as a rental property owned by her family.)

She initially listed her line of business as “Retail Oil — #2 Home Heating — Delivery Service,” which led one member of the DBE-certification commission to ask during a February 1996 hearing: “How is minority certification going to help you in home delivery business? People really don’t care if you’re a minority or woman. They just want a low price.”

“I was thinking more or less of housing units … state buildings,” she said. “You use oil here?”

“No. 2?” asked another of the commission members, DOT audit chief James Choquette. “Yeah. I noticed it’s always cold in here,” she said. “No. 2?” He asked again. Her answer: “Yeah! What do you have, gas?”

Her application was approved that day, but staff at the Minority Business Enterprise Commission had questions when she returned a short time later with a proposal to expand. The questions centered on the “affiliation” between her company and her father’s Russo Trucking.

“Because of the information provided, it is hard to determine where one company begins and the other company ends,” wrote the program and development officer, Muriel A. Evans.

The questions eventually evaporated after an upset Grieco wrote the commission: “I feel [there] has been a misunderstanding. … Based on the information I submitted ‘retail oil,’ to my understanding means, I can bid on all petroleum products, which I am licensed for.”

BY LATE 1998, Cardi was aggressively pursuing her signature on delivery contracts, even tracking her down at her parents’ ice cream shop on Atwood Avenue, Johnston, according to her lawyers Cristina A. Azzinaro and Felicia A. Manni-Paquette. Much was at stake.

The award of a highway contract hinges on the contractor supplying the DOT with the names and addresses of all DBE firms it intends to use; a description of the work that each will perform; the agreed payment amount and “written confirmation from the DBE that it is participating in the contract.”

Between Jan. 4 and April 19, 1999, Cardi lined up three new DOT contracts for “improved ramp access” to and from Route 95 from various locations, including the Francis Street and Memorial Boulevard access points just below the State House. A few months later, it picked up the repaving project at T.F. Green Airport.

Before the DOT awarded each of these contracts, Cardi signed Twins Oil up to deliver “bituminous asphalt cement” and presented the company’s name to DOT as one of several DBEs it intended to use, according to records provided by Grieco and the DOT.

One contract called for the delivery of 235.75 tons of material, at a cost of $34,891, to Cardi’s manufacturing plant in Warwick for work on an “improved ramp access from I-95/Dean Street”; another for $34,928 worth of material for the construction and paving of the revamped Memorial Boulevard and Francis Street; and a third, for a $38,332 delivery for a ramp-improvement project on Routes 6 and 10. The price per ton: $148.

On June 17, 1999, came Twins’ last — and largest — contract with Cardi for the delivery of $398,210 of material for the repaving of the main runway at T.F. Green Airport.

On paper, it was a major coup for Grieco.

MICHELE GRIECO’S dealings with Cardi got off to a promising start.

Within months, her records indicate, she was “paid in full” for the $13,813 worth of material she delivered to the Cardi plant in November 1998 in connection with earlier improvements to an interim rent-a-car lot at the airport, according to documentation provided by her lawyers.

By spring 2000, however, her records reflect her growing concern about the amount of time gone by without a call.

On April 4, 2000, she wrote Cardi president Antonio Cardi: “I have on at least five different occasions signed (minority and female participation) agreements with the Cardi Corporation to perform certain services. … I have since learned that the work has been completed (airport job) and I was not called to perform per the agreements.”

“Obviously I am somewhat concerned and I would like to know who fulfilled the requirements as a minority [on] those jobs.”

Getting no response, Grieco’s records show, she voiced her concerns to the DOT’s civil-rights administrator, O.J. Silas, and her suspicion of “contract irregularities” to the complaint desk of the Office of Inspector General, U.S. Department of Transportation.

While she was trying to find out why she wasn’t called, she says, Cardi and the DOT were asking her to “verify” that she had made deliveries she never made.

Between June 5, 2000, and May 2001, Grieco got letters from Cardi’s equal-employment opportunity officer, Carol Biagetti, saying: “Please verify the amount of payment you received to date on this project, sign and return to me. I have enclosed a self-addressed, stamped envelope for your convenience.”

Along with these letters, she also received — and recently produced from her own files — four “completion/verification” forms signed by Tella, an engineer in the DOT’s operations-construction division who has worked for the agency since 1986.

Signed between June 2000 and May 2001, they each said: “To the best of my knowledge, the above noted DBE performed the assigned items of work.” Given a choice of checking a box that said “DID” or “DID NOT PERFORM,” Tella in each case checked the box that said “DID.”

Below was a space for Grieco to verify that her company had indeed made the deliveries so Cardi could get credit for using a “Disadvantaged Business Enterprise.”

She refused, leaving a blank where she was asked to verify that: “I was the approved DBE on the above contract; I performed the items of work subcontracted; I actually received $(fill in the blank) for my work.”

On June 5, 2000, Tella signed another such document that said, “to the best of my knowledge,” Twins Oil provided $175,909 worth of material. Grieco, through her lawyers, says she never had any such contract. (DOT spokeswoman Dana Alexander Nolfe suggests that Tella batched several contracts together under one contract number.)

These documents came out of Grieco’s own files. The DOT, responding to a public record request, produced only the 2004 versions in which Tella reversed himself.

On April 10, 2001, for example, Tella “verified” a $34,928 delivery by Twins Oil for the Memorial Boulevard paving project, according to Grieco’s records. In March 2004, Tella and Cardi treasurer Stephen A. Cardi signed another version of the same form for the same project that said: “The above noted DBE did not perform the assigned items of work,” according to DOT’s records.

What had changed? For one thing: The DOT’s deputy chief engineer Frank Corrao says the department’s “check and balance” system worked.

He explains: “The check and balance is that he [Tella] puts in that they did [the work]. If the contractor and ‘sub’ sign it, then that assumption is good. If it is not and they are unable to sign it, it comes back. … That would trigger the thought process that maybe they did not do that.”

Was he concerned that the Cardi Corp. was asking Grieco to verify deliveries that never took place?

“Isn’t that a question for them more so than us?” Corrao asked.

With the case in litigation, Cardi treasurer Stephen Cardi last week declined comment.

On Dec. 12, 2003, however, the Cardi treasurer sent Tella a letter in which he explained why he hadn’t used Twins to supply the liquid asphalt for the work along Memorial Boulevard.

It is not yet clear what prompted the letter — or why the DOT, in its initial response to a Journal public records request — said it had no knowledge until April 2007 that Twins was not used on any of these projects.

In his letter, Cardi said: “Construction of this project along with two others in the area required work to be performed twenty-hours per day, seven days a week.” He said Twins Oil was unavailable during the off hours Cardi needed to haul the material, so Cardi itself “had to perform that work in order to keep the project going.”

“This happened with nearly every d/b/e on the project,” the letter said. “In particular … Twins Oil,” but “the exact same issue happened with both Cosco and M.O.N. Landscaping which has created a shortfall of the d/b/e goal on the project.”

WHO WAS to blame? “Had the d/b/e’s been available to perform the work as it needed to be done, sometimes on Saturday nights and Sundays, there would have been no shortfall,” Cardi wrote.

Grieco’s lawyers dispute this. They say Grieco had relied before on Hudson Terminal Corp., a non-minority subcontractor open 24 hours a day, seven days a week to both supply and deliver the liquid asphalt — and could have done so again.

The company is an arm of the Hudson Companies, which describes itself as “the single largest independent distributor of asphalt products on the East Coast,” with “an extensive fleet of trucks” and “an extensive delivery system” that guarantees deliveries “on-spec, on-time, every time.”

When asked for comment on Twins’ relationship with Hudson, a company secretary said the appropriate person to comment was former DOT Director Matt Gill, who, according to the company’s Web site, is responsible for daily operations of Hudson Asphalt and affiliated companies.

Gill joined joined the company in 1994 after a five-year stint (1986-’91) as DOT director under then-Gov. Edward D. DiPrete.

Gill deferred comment to his boss, Francis J. O’Brien, the president and chief operating officer of the Hudson Companies, who acknowledged a pivotal role in introducing Michele Grieco to Rhode Island’s highway construction and paving industry.

O’Brien traces his company’s business relationship with Grieco to a phone call from her father, Sonny Russo, whom he figures he has known for close to 30 years.

“He called me way back when and said, you know Fran, I’ve got to know more about this minority thing. My daughter’s trying to get involved and whatnot, so I tried to explain it to him. … I said, you know, your daughter’s going to have to go down to RIDOT and get certified, and he said, you know what, I’m going to bring her in so you can explain it to her, which he did.”

With Gill and his head salesman in the room, O’Brien said: “I just said, ‘Michele … you can’t just do this, you have to be certified.’ ” He said he brought Gill in because of his “experience at DOT.” (Grieco calls Gill her “mentor.”)

And, “I think we probably, because of my relationship with her father, probably made introductions around to some of the contractors,” O’Brien said.

He said Hudson was then — and now — a major supplier of liquid asphalt to Cardi: “They’re a good customer of ours.”

Once Twins Oil got certified as a minority-owned company, he said his company had the kind of relationship with Grieco in which she “could have called and said ‘Gee, I have a call, for example, from Cardi or whomever else and I don’t have a truck available. Can you deliver that for me?’ ”

“Then we would deliver it for her and bill her for that service,” O’Brien said.

In a recent interview Grieco said she arranged deliveries but had to rely on Hudson to produce and deliver the product to Cardi because her truck was only capable of hauling heating oil.

When things were still going well, “an engineer at Cardi would call me and say they needed, for an example, 50 tons of product delivered either today by 5 p.m. or by tomorrow morning … and I would say ‘no problem.’ ”

“So I’d get on the phone and I’d call Hudson and I’d say to whoever answered the phone, ‘I have a delivery.’ She, in turn, would direct me to the right person. … It would be delivered to Cardi, the liquid asphalt. And at Cardi’s, they would mix it with the sand and stone to make the asphalt for your roads. Simple.”

But, “I would definitely call back to make sure everything was done.” For her role in the transaction, Grieco charged a 10-percent markup.

Asked how the taxpayer would have benefited from having a middle-man — or in this case, woman — deliver its product to one of its own best customers at a profit, O’Brien mused on the required “minority” set aside of federal contract dollars.

“Well, I will tell you,” he said last week, “and this is just my own personal opinion, OK? I think this was probably a well-intentioned program that didn’t work in real life as well as it did in principle…. You know, we’re going to help the DBEs or minorities or whatever. … I just don’t see how the minority community, the ‘disadvantaged business’ community benefited to any great extent from it.”

FOUR YEARS after receiving Steve Cardi’s letter explaining why he hadn’t used Twins Oil, the DOT is still weighing how to respond to the company’s acknowledgement that it was having difficulty meeting its 3-percent minority “goal” on the Memorial Boulevard project.

On two of the three Cardi highway contracts at issue, the DOT determined the company met its goals by using other minority-contractors, including H.B. Welding, SAI Surveying, Service Contracting, Dura Curb, Ravin Steel, Cosco Inc. and MON Landscaping. Nothing — except perhaps the contracts currently in dispute — prohibited Cardi from replacing Twins Oil as one of its DBE contractors.

Asked if the Cardi Corp. should have notified the DOT that it was replacing Twins Oil with another contractor, Phillip Kydd, the DOT assistant director who oversees the agency’s DBE program, said: “They should.”

Kydd said the DOT is withholding $24,000 in final contract payments on the Memorial Boulevard project and weighing whether to penalize the company the full $60,000 shortfall on its minority-hiring commitments.

In March 2004, however, Tella drafted a memo suggesting the shortfall was not Cardi’s fault.

Tella said “field measurements” resulted in a reduction in “actual quantities paid.” He accepted Cardi’s explanation that “Twins Oil was not available to perform [its contracted] work during nighttime hours or weekends, thus Cardi was forced to perform the work on its own.”

“Based on the fact that the contractor had attempted to meet or exceed the specified contract DBE goal in good faith,” Tella recommended “acceptance” of the $54,000 (1.6 percent) Cardi paid its minority contractors out of its $3.4-million federally subsidized highway contract.

In a recent interview, Kydd said construction operations staff members are also evaluating whether field conditions, design changes, reductions in quantity and other possible factors made it DOT’s fault that Cardi fell short.

Asked if he was disturbed by Twins’ allegations, DOT Director Williams said: “Contractors need to meet their DBE goals. That’s first and foremost. Relative to this issue, this is breach-of-contract litigation. Until the court decides who’s right and who’s wrong it is hard for me to determine who’s right and wrong.”

THE DOT ISN’T the only arm of state government that needs to make that judgment call.

On Dec. 2, 1999, the Rhode Island Airport Corporation sent the Federal Aviation Administration a year-end report titled: “Certified DBE Contractors Used on FAA Assisted projects.”

The report includes the alleged payment by Cardi of $398,210 to Twins Oil for “asphalt cement” for the repaving of the main runway — a payment Grieco says, through her lawyers, she never received, for a job she didn’t do.

When things work the way they should, the Airport Corporation’s CFO Brian Schattle said, the “prime” contractor and the DBE each sign a “certificate of waiver” to “confirm they are actually paying their subs.”

“Are they saying they didn’t do the work on this project?” asked Schattle after being told about the allegations contained in Twins’ lawsuit.

“I think that’s important for us to know as well, because if that is the case, that is not a good thing,” Schattle said. As of late last week, the corporation had not located the years-old file.

Meanwhile, on Wednesday, Grieco’s lawyers filed a request for arbitration of a dispute with another DOT contractor who they say signed Twins up as a DBE, then didn’t use the company: the Shire Corporation.

On Thursday, Shire initiated settlement discussions. By Friday, Grieco’s dispute with Shire had been settled for what new Shire owner Laura Gammino called a “fair price” that reflected Grieco’s “anticipated profits” from the two delivery contracts totaling $103,750.

Here again, a DOT engineer — Yasser Alani — appeared to have verified a delivery that, Grieco says, never took place and then reversed himself.

Gammino said she cannot fully explain what happened since her company “subbed” out the work in dispute to other companies, such as Cardi, because “we are not asphalt producers.”

Asked why her company signed Grieco up in the first place, Gammino said: “We had a relationship with her father. … He moved a lot of equipment around for us.”

“He asked us if we could give her any business. We tried.… It really didn’t work out for us. We really couldn’t control the situation,” Gammino said. But “I wanted to do the right and fair thing…. I didn’t feel like she should have been penalized.”

kgregg@projo.com