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Set-Asides and Preferences

This archive displays posts tagged as relevant to fraud in government contracting set-aside and preference programs. You may also be interested in the following pages:

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August 18, 2021

Defense contractor Iris Kim, Inc. (“I-Tek”), together with its owner and four employees, were sentenced on criminal charges arising out of a fraudulent scheme to falsely qualify for Department of Defense and other federal government supply contracts set aside for service-disabled veterans, import Chinese-manufactured goods in violation of the terms of these contracts, and falsely relabel these goods as if they were made in the U.S.  The U.S. spent over $7 million on fraudulently-imported goods sold by I-Tek.  Owner Beyung S. Kim was sentenced to 58 months in prison, and the four employees were sentenced to a combined 93 months in prison.  USAO ED VA

July 20, 2021

Sage Consulting Group, Inc., and its president and owner Robert Pleghardt, agreed to pay $4.8 million to resolve claims that they paid kickbacks to two business, Wete & Company, Inc. and Index Systems, Inc., which were SBA certified as small businesses owned and operated by socially and economically disadvantaged individuals, to permit Sage to represent that those companies would be performing at least 50% of the work as subcontractors on Sage’s contracts with the Department of Defense Education Activity and Defense Human Resources Activity when, in fact, Sage performed 100% of the work.  USAO EDVA

July 14, 2021

Diesel Direct, LLC of Stoughton, Massachusetts will pay $850,000 to resolve claims brought in a qui tam action alleging that the company knowingly delivered nonconforming petroleum diesel fuel to state agencies while charging for a higher-priced and more environmentally-friendly biodiesel fuel; improperly charged state agencies a federal fuel excise tax; and failed to comply with the state's Supplier Diversity Program requiring spending with women-owned, minority-owned, and veteran-owned businesses. Mass

June 30, 2021

Armed Forces Services Corporation (AFSC) d/b/a Magellan Federal has agreed to pay over $4.3 million to resolve its liability under the False Claims Act.  In a written disclosure to the U.S. Small Business Administration, AFSC revealed that a former executive had orchestrated kickbacks for himself and two other executives in exchange for awarding subcontractors work on federal contracts.  USAO EDVA

June 25, 2021

Multinational telecommunications and internet service provider Level 3 Communications, LLC has agreed to pay over $12.7 million to resolve claims a former employee brought under the False Claims Act, alleging violations of the Anti-Kickback Act, False Claims Act, and Procurement Integrity Act.  Under a contract with the General Services Administration, Level 3 allegedly accepted kickbacks from subcontractors MSO Tech, Inc. and P.V.S. Inc. in exchange for steering work to them.  Additionally, under a contract with the Department of Homeland Security, Level 3 allegedly maintained that subcontractor PVS qualified as a contractually obligated woman-owned small business when in fact PVS is owned by a man.  USAO EDVA

Catch of the Week: a Medley of Contracting Fraud in Telecom

Posted  06/25/21
business person stamping a paper
This week’s Catch of the Week goes to Level 3 Communications, which agreed to pay $12.7M to resolve claims that the company paid kickbacks paid to former Level 3 officials in return for favorable treatment to subcontractors in connection with government contracts, improperly obtained competitive bid information of competitors, and misstated compliance with woman-owned small business subcontracting requirements to...

June 4, 2021

Virginia-based 360 Patriot Enterprises, LLC and its former minority shareholder, Delaware-based 360 Ventures LLC have agreed to pay $1.12 million to resolve allegations that they fraudulently obtained two U.S. Army contracts intended for service-disabled veteran-owned small businesses (SDVOSB).  At the time the contracts were awarded (between 2015 to 2017), 360 Patriot was not controlled by a qualified SDVOSB.  USAO EDVA

June 3, 2021

A Department of Energy (DOE) prime contractor responsible for cleaning up a decommissioned nuclear production complex in Washington State has agreed to pay over $3 million to resolve alleged False Claims Act violations involving false and fraudulent small business subcontract reports.  Whistleblower Salina Savage and her company, Savage Logistics LLC, had alleged that CH2M Hill Plateau Remediation Company (CHPRC) knowingly misrepresented two of its subcontractors, Indian Eyes, LLC and Phoenix-ABC A Joint Venture, as businesses located in Historically Underutilized Business Zones (HUBZones) in order to meet contract requirements and obtain reimbursements totaling hundreds of millions of dollars from DOE.  As a result of bringing a successful enforcement action, Savage and her company will receive a relator’s share of approximately $865,000.  USAO EDWA

June 2, 2021

Pennsylvania-based fuel distributor Naughton Energy Corporation and two of its owners, Mariette and Joseph Naughton, have agreed to pay $692,000 over the next five years to settle claims of causing false claims to be submitted to the Department of Transportation (DOT).  As a subcontractor on the federally funded New NY Bridge Project, Naughton Energy, a Disadvantaged Business Enterprise (DBE), had represented to the prime contractor that it could deliver fuel to the worksite wholly independently.  However, lacking the requisite vehicle and employees to deliver fuel, and without the knowledge of the prime contractor, Naughton Energy arranged for a non-DBE subcontractor to supply the missing components in exchange for half of its profits from the project.  USAO SDNY

April 20, 2021

A construction firm in California that allegedly violated federal contracting rules has agreed to pay $2.5 million to resolve civil and criminal charges relating to the misconduct.  In order to qualify for contracts set aside for service-disabled, veteran-owned small businesses (SDVOSB), the owners of Stronghold Engineering, Inc. (SEI) colluded with Kadena Pacific, Inc. (KPI)—owned by a qualifying veteran and the father of SEI owner Beverly Bailey—to obtain fourteen contracts from the VA that were intended for SDVOSBs.  USAO CDCA
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