Set-Asides and Preferences

August 10, 2017

Virginia Beach-based contractor ADS Inc. and its subsidiaries agreed to pay $16 million to settle allegations that they violated the False Claims Act by conspiring with and causing purported small businesses to submit false claims for payment in connection with fraudulently obtained small business contracts.  The settlement further resolves allegations that ADS engaged in improper bid rigging relating to certain of the fraudulently obtained contracts.  The settlement ranks as one of the largest recoveries involving alleged fraud in connection with small business contracting eligibility.  The purported small businesses affiliated with ADS include Mythics Inc., London Bridge Trading Co. Ltd., and MJL Enterprises LLC, which falsely claimed to be an eligible service-disabled veteran-owned company, and SEK Solutions LLC and Karda Systems LLC, both of which falsely claimed to qualify as socially or economically disadvantaged businesses under the Small Business Administration’s 8(a) Business Development Program.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by Ameliorate Partners LLP.  It will receive a whistleblower award of roughly $2.9 million.  DOJ

April 14, 2017

HSBC Bank agreed to pay roughly $2.1 million to resolve charges it violated the False Claims Act for misconduct in connection with HSBC’s participation in the Small Business Administration (SBA) Express loan program.  According to the government, HSBC sought reimbursement from the SBA without revealing facts suggesting that borrowers submitted false information to HSBC to obtain many of the loans, or the fact that HSBC had included the loans on an internal list of fraudulent or potentially fraudulent loans.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act.  The whistleblower will receive a yet-to-be-determined whistleblower award from the proceeds of the government's recovery. DOJ (SDNY)

August 23, 2016

Walter Crummy, a former officer and owner of MCC Construction Company, pleaded guilty to conspiring to commit wire fraud and agreed to pay forfeiture of $105,618.  According to court documents, MCC and others conspired with two companies that were eligible to receive federal government contracts set asides for small, disadvantaged businesses with the understanding that MCC would illegally perform all of the work.  In so doing, MCC was able to win 27 government contracts worth over $70 million from 2008 to 2011.  MCC previously pleaded guilty to conspiring to commit fraud by illegally obtaining government contracts that were intended for small, disadvantaged businesses and agreed to pay roughly $1.8 million in criminal penalties and forfeiture.  DOJ

July 6, 2016

En Pointe Gov. Inc. (now known as Modern Gov IT Inc.), En Pointe Technologies Inc. (now known as Dinco Inc.), En Pointe Technologies Sales Inc. (now known as Collab9 Inc.), Dominguez East Holdings LLC and Din Global Corp. agreed to pay roughly $5.8 million to resolve allegations that they violated the False Claims Act by falsely certifying that En Pointe Gov. was a small business so it could obtain contracts set aside for small businesses and by underreporting sales under a General Services Administration (GSA) contract to avoid the payment of fees.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by Minburn Technology Group, , a Virginia company that sells information technology products and services, and Anthony Colangelo, Minburn’s managing member.  Minburn and Colangelo will receive a whistleblower award of approximately $1.4 million.  DOJ

June 27, 2016

Massachusetts announced that a Chicopee-based mechanical contractor has agreed to pay more than $220,000 to resolve allegations it falsely certified compliance with equal opportunity requirements on two public contracts. The assurance of discontinuance alleges B-G Mechanical Contractors, Inc. (B-G) violated the state’s consumer protection laws and False Claims Act by failing to abide by provisions in two public design-build energy contracts requiring B-G to subcontract a certain percentage of work to Minority/Women Business Enterprises (M/WBEs). For both contracts, the AG’s Office alleges B-G improperly claimed full M/WBE credit for supplies subcontractors sold to and then repurchased from M/WBEs in sham transactions. MA

June 1, 2016

San-Diego-based Harper Construction Company, Inc. paid $5.4 million to resolve allegations it violated the False Claims Act by fraudulently billing the government for work on multiple projects on military bases through the use of sham small disadvantaged businesses.  The settlement involves four government contracts to construct facilities at Camp Pendleton and Camp Lejeune.  According to the government, Harper claimed it met the contract requirement that it subcontract a certain percentage of work to small disadvantaged businesses when in fact it subcontracted with sham small disadvantaged businesses.  Also, Harper allegedly required the sham small businesses to pass through all of their work to an affiliated large business, Frazier Masonry Corporation.  The allegations originated in a whistleblower lawsuit filed by Rickey Howard, a former employee of Harper subcontractor Frazier Masonry Corporation, under the qui tam provisions of the False Claims Act.  Mr. Howard will receive a whistleblower award of $1,485,000 from the proceeds of the government's recovery.  DOJ (SDCA)

May 16, 2016

Mountain States Contractors, an affiliated company of Jones Brothers, agreed to pay $2.25 million to settle charges of violating the False Claims Act by submitting false claims for payment in connection with the Department of Transportation’s Disadvantaged Business Enterprise Program.  The allegations originated in a whistleblower lawsuit by a former Mountain States employee under the qui tam provisions of the False Claims Act.  The whistleblower will receive a whistleblower award of $500,000 from the proceeds of the government’s recovery.  Whistleblower Insider

March 14, 2016

Syracuse-based government contractor Hayner Hoyt Corporation agreed to pay $5 million to settle charges that its chairman and chief executive officer Gary Thurston, its president Jeremy Thurston, and its affiliate companies LeMoyne Interiors and Doyner Inc., violated the False Claims Act by exploiting contracting opportunities reserved for service-disabled veterans.  According to the government, “by diverting contracts and benefits intended for our nation’s service-disabled veterans . . . , the defendants undercut Congress’s intent of encouraging contract awards to legitimate service-disabled veteran-owned small businesses.” The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by former Hayner Hoyt subsidiary employee John Rubar.  He will receive a whistleblower award of $875,000 from the proceeds of the government’s recovery.  Whistleblower Insider