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End of Empire

Responding to persistent complaints from employees about shoddy products, Department of Water and Power general manager Ron Deaton suspended a $1.75 million contract with Empire Cleaning Supply this week. The DWP Board of Commissioners had approved a contract extension in December, despite scrutiny from Councilman Tony Cardenas, chairman of the Commerce, Energy and Natural Resources Committee, who raised concerns about the integrity of the DWP’s administration of the contract.

Empire has been a cleaning supplier for the city since the 1930s. The company’s owners, Robert Cronyn and Jerry Elkind, purchased the company from relatives in 1991 and grew the business substantially. “We were just a couple of guys selling brooms and mops,” Elkind told the Weekly last year, after DWP custodians alleged the company sold substandard-quality products to the department at inflated prices. In 2000, Empire landed an exclusive, seven-year, multimillion-dollar contract with the city, after failing to submit the lowest bid in a first round of competitive bids that was scuttled. Soon the DWP and the airport and harbor departments “piggybacked” on the contract, meaning that they bypassed competitive-bidding procedures in making Empire their exclusive supplier.

On Monday, Cardenas’ committee found that the piggyback contract violated the city’s administrative code. “We found that the DWP contract was substantially different from the contract with the city,” says a committee staff member, who could point to just 10 percent of the items on the DWP contract that matched the items specified on the city contract. The remainder were being sold under “Line 36,” a catchall provision that allowed Empire to sell non-specified items to the city for a supposed 30 percent discount. DWP custodial supervisor Sandra Miranda blew the whistle on the contract last year, and urged the City Council to look closer at what the DWP was getting for its money.

Sources at the Commerce Committee meeting described a heated exchange between Deaton and Cardenas, who expressed displeasure at the lack of cooperation from the DWP in response to his inquiries. In 2004, Cardenas wrote to DWP board president Dominick Rubalcava, complaining that DWP supply manager Arnold Netka and assistant general manager Thomas Hokinson had presented him with misleading information about safety standards of products purchased from Empire. “I made a New Year’s resolution,” Cardenas said, according to sources at the meeting, “to ensure that contracts with this department are done by the book.” Deaton complained that cleaning services departmentwide could be affected if the contract was canceled abruptly, so the committee agreed to give the DWP six months to phase out the contract while competitive bids are held.

Cronyn and Elkind could not be reached for comment. But in news reports Monday they vowed to win back the contract. “We won it fair and square,” Cronyn told the Daily News. “Our prices are extremely low.” Meantime, the Department of General Services has had no problems with the Empire contract. The consolidation of citywide contracts took place under former Mayor Richard Riordan’s administration, a staff member says. “We haven’t received a report from General Services in some time about whether the consolidation is working. Anytime you consolidate contracts you have to take a look at the public-policy reasons behind it.”

Small-business owners have paraded into City Hall in recent months complaining that Empire’s monopoly contract cut them out of the loop. DWP employees have suffered disciplinary action, allegedly in retaliation for speaking out. “The DWP is telling us they cannot buy from us because a new ruling came down that all janitorial supplies must come through Empire,” one small vendor wrote in a letter to Cardenas in December. “If Empire is the city’s official and only procurement agency for janitorial products, it is obvious neither I nor any other vendor can do our fair and competitive share of business with the city.”

Mayor Jim Hahn’s Office of Small Business Services has steered clear of the Empire imbroglio. Mario Marin, a Hahn deputy, told the Weekly last year that Elkind and Cronyn have reached out to small businesses. (Empire contributed $1,000 to the Hahn for Mayor campaign in 1999 and 2000.)

“We don’t want some whitewash,” Miranda told City Council members last year during one of many appearances, in which she and others accused Empire of using a convoluted supply chain to create an illusion of cost savings while raking in millions in profit from off-contract sales. Armed with photographs, purchase orders and a copy of Empire’s contract — which offers the DWP the right to cancel on 30 days’ notice — they have been aching to make their case. On Monday, it appears that they found a city official to listen.

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