Government Procurement Fraud

June 1, 2018

Richmond, Virginia-based James River Air Conditioning Company agreed to pay $625,000 to settle allegations that it violated prevailing wage requirements, underpaid workers, and submitted false payroll reports to the government related to plumbing, heating, and HVAC work the company performed under seven federal renovation and construction project contracts.  The case was originally filed as a whistleblower complaint under the False Claims Act by Nathan Kirchgessner, who will receive $106,250 from the settlement. USAO EDVA

May 29, 2018

UK-headquartered marine services contractor Inchcape will pay $20 million to resolve allegations the company and its subsidiaries defrauded the U.S. Navy by submitted exaggerated invoices, double-billing, and billing at rates in excess of agreed-upon rates under contracts for ship "husbanding" services, including ship-to-shore and local transportation, force protection services, food provision, and waste removal. The case was originally filed under the False Claims Act by former employees of Inchcape, Noah Rudolph, Andrea Ford, and Lawrence Cosgriff, who will receive approximately $4.4 million of the settlement. USAO DDC

May 9, 2018

The SEC announced it charged a registered municipal advisor and its owner with defrauding a south Texas school district in connection with multiple municipal bond offerings. The SEC’s order instituting proceedings found that in connection with three municipal bond offerings between January 2013 and December 2014, Mario Hinojosa and his wholly-owned municipal advisor, Barcelona Strategies LLC, misrepresented their municipal advisory experience and failed to disclose conflicts of interests to their client, a local school district in South Texas. While working as a paralegal, Hinojosa set up Barcelona, registered it as an SEC municipal advisor, drafted a marketing brochure about the firm, and circulated the brochure to the school district and other municipalities. The brochure created the misleading impression that Hinojosa and Barcelona had served as a municipal advisor on numerous municipal bond issuances and failed to disclose that Hinojosa had a financial interest in the school district’s offerings. By virtue of their misrepresentations and omissions, Barcelona and Hinojosa improperly earned hundreds of thousands of dollars in municipal advisory fees. The SEC’s order found that Hinojosa and Barcelona engaged in fraudulent, deceptive, or manipulative acts and breached their fiduciary duties to municipal clients. Without admitting or denying the allegations, Barcelona and Hinojosa consented to a cease-and-desist order and are jointly and severally liable for paying $362,606 in disgorgement and $19,514 in prejudgment interest.  Barcelona was also assessed a civil penalty of $160,000 while Hinojosa was assessed a civil penalty of $20,000. Finally, Hinojosa was barred from association with various regulated entities, including municipal advisors. SEC

May 4, 2018

Cary Hudson, a former financial administrator for the U.S. Bureau of Prisons, agreed to pay $50,000 to resolve allegations he violated the Anti-Kickback Act by accepting improper payments from Texas-based Integrated Medical Solutions Inc. in exchange for his assistance in obtaining BOP contracts. IMS and its former president Jerry Heftler previously agreed to pay more than $2.4 million for their role in the alleged scheme. DOJ

May 3, 2018

Maryland-based MassTech, Inc. along with its former CEO and CFO have agreed to pay $1.9 million to resolve allegations that the company violated the False Claims Act by falsely certifying it was a small business concern in order to obtain Small Business Innovation Research (SBIR) awards. According to the government, MassTech falsely represented to NSF, NASA, and HHS that it was an eligible small business concern at the time of its SBIR application and throughout the lifecycle of the award and as a result the government approved and funded SBIR awards to MassTech that it otherwise would not have received. DOJ (MD)

May 2, 2018

New Jersey construction company Ranco Construction agreed to pay $1.5 million to resolve allegations it violated the False Claims Act by contracting for public construction jobs despite paying its workers a lower hourly wage than required under state and federal law. Specifically, the government claimed that Ranco routinely entered into construction contracts with various state and federal entities and falsely certified to the government that its employees were paid hourly wage rates set under federal and New Jersey prevailing wage laws. The allegations originated in a whistleblower lawsuit filed former Ranco employee Robert Kleinow under the qui tam provisions of the False Claims Act. He will receive of a whistleblower award of more than $150,000 from the proceeds of the government’s recovery. DOJ (NJ)

April 19, 2018

Former professional cyclist Lance Armstrong agreed to pay $5 million to settle claims he violated the False Claims Act through his admitted use of performance-enhancing drugs and methods resulting in the submission of millions of dollars in false claims for sponsorship payments to the U.S. Postal Service. The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by former teammate Floyd Landis.  Landis will receive a whistleblower award of $1.1 million from the proceeds of the government’s recovery. DOJ

April 2, 2018

Utah construction companies Big-D Construction Corp. and Creative Times Day School, Inc. agreed to pay roughly $1 million and $150,000 respectively to settle claims they violated the False Claims Act by violating the terms of a Small Business Administration (SBA) program for small and disadvantaged businesses. DOJ (Utah)

March 29, 2018

Dow Chemical Company agreed to pay $479,000 to settle allegations that former Dow subsidiary Poly-Carb, Inc. violated the False Claims Act by submitting fraudulent materials certifications related to a federally-funded highway resurfacing project. DOJ (SC)