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Fraudsters Beware: Flurry of Recent Actions in Enforcement Show that Contracting Fraud is a Priority

Posted  June 3, 2020

Four recent state and federal actions indicate that government contracting fraud cases are in the spotlight. These actions all stemmed from alleged violations of laws that give certain businesses, such as, small, minority-owned, or veteran-owned businesses, advantages in obtaining government contracts. These contracts are often called “preference” or “set-aside” contracts and the goal of these laws is to level the playing field and allow small and diverse businesses to compete with large, multinational corporations.

Being deceptive about the size of a business or the identity of its owners to help win a government contract can be a violation of the False Claims Act. The FCA is an anti-fraud law that allows private parties, whistleblowers, to sue in the name of the United States and share in 15-30% of the government’s recovery. The law also allows the government to sue in its own name to recover taxpayer dollars lost as a result of fraud.

The United States filed such a suit last week, alleging that a New Jersey construction company, C. Abbonizio Contractors, Inc., claimed to work with businesses run by socially and economically disadvantaged individuals while working on a New Jersey Turnpike project. The government alleged that the company defrauded a Department of Transportation program meant to even the playing field for small businesses run by minorities, women, or other socially and economically disadvantaged individuals. Specifically, the government alleges that C. Abbonizio funneled oil purchases through a woman-owned business that did not actually do any work on the contract. The government adds that this scheme went as far as changing the logo painted on the side of trucks making deliveries to construction sites. The Defendant has not yet replied to this suit.

The government also settled two other similar cases in the past week. One in central Illinois, where another construction company, Williams Brothers Construction, agreed to pay $1 million to resolve allegations that it forged documents to show that windows for an airport contract were provided by a disadvantaged business when the disadvantaged business was only used as a pass-through that signed paperwork but did not actually provide the products. The other recent settlement happened in Oklahoma, where yet another construction company, Ross Group, will pay $2.8 million to settle allegations that it created a whole other company whose size would qualify for certain set-aside contracts. Instead of that company being independent, the Ross Group maintained total operational control over it. This lawsuit was first filed by a whistleblower, a competitor to Ross called Southwind Construction, which will receive over $500,000 of the recovery.

The recent burst of enforcement activity has not been limited to the federal government. The state of Massachusetts reached a settlement on a similar case in May. There, ENE, a mechanical contractor that provides system maintenance for state office buildings, paid approximately $380,000 to settle allegations that it failed to use certain types of businesses as subcontractors despite certifying to the state that it did so. Massachusetts’ Attorney General’s office notes that this is the seventh settlement that they have reached under the woman/minority-owned business program.

These settlements, like the newly filed case, show a recent uptick in the enforcement of government contracting fraud. With fraud schemes being so varied, and the interworking of small companies’ often so opaque, whistleblowers are essential to rooting out such fraud, and with an increase in government enforcement, now is their time to be vigilant.

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Tagged in: FCA Federal, Government Procurement Fraud, Government Programs Fraud, Set-Asides and Preferences,


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