This week’s Department of Justice “Catch of the Week” goes to Hayner Hoyt Corporation. On Monday, the Syracuse-based government contractor 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.” See DOJ Press Release.
In an effort to promote small businesses owned by disabled veterans, Congress established a targeted procurement program for the U.S. Department of Veterans Affairs (VA) for small business owners who are also service-disabled veterans. Defendants allegedly orchestrated a scheme to take advantage of this program through government contracts secured by the now-defunct company 229 Constructors LLC, which the Thurstons — neither of whom is a veteran — created and controlled, and through subcontracts for Hayner Hoyt and its affiliates.
The government claimed the Thurstons effectively controlled 229 Constructors’ decision-making and staffed the company entirely with Hayner Hoyt employees and their spouses. They also provided 229 Constructors with considerable resources, which provided it with a competitive advantage over legitimate disabled veteran-owned small businesses. Ralph Bennett, the service-disabled veteran who supposedly ran 229 Constructors and oversaw its $14.4 million government-contracts portfolio, in reality was not involved in making important business decisions for the company. He was instead responsible for overseeing Hayner Hoyt’s tool inventory and plowing snow from Hayner Hoyt’s property.
In announcing the settlement, the government stressed that “those who do business with the federal government must do so honestly,” and that it “will vigorously pursue those individuals and entities who game programs designed to help our nation’s veterans succeed in starting small businesses.” Special Agent Jeff Hughes for the VA’s Office of Inspector General specifically highlighted his agency’s “commitment to aggressively pursue individuals and companies that misrepresent themselves as service-disabled veteran-owned small businesses and deny legitimate disabled veterans the opportunity to obtain VA set-aside contracts.” And Special Agent Craig Rupert of the Department of Defense Office of Inspector General added that his agency and its law enforcement partners “will continue to tirelessly pursue and investigate procurement fraud allegations in order to safeguard the American taxpayer and its military veterans.”
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.
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