DOJ Secures $21.3M False Claims Act Settlement for Fraud Involving Service-Disabled Veteran Owned Businesses

Posted June 17, 2026

By the Constantine Cannon Whistleblower Team

Last Tuesday (June 9), the Department of Justice (DOJ) announced that Illinois-based Broadway Electric Inc. and Cornerstone Contracting Inc. — along with their CEO John Oehler and President Christian Blake — agreed to pay $21.3 million to settle allegations they violated the False Claims Act by fraudulently securing federal contracts reserved for service-disabled veteran-owned businesses.[1] The settlement represents one of the largest ever involving alleged fraud under one of the Government’s various set-aside contract programs.

What Are Government Set-Aside Contracts?

The Government generally requires full and open competition for contracts with awards going to the most qualified contractors offering the best price for the products or services being provided. However, regulations under the Small Business Act and other laws allow, or sometimes even require, some federal procurements to be “set aside” for small businesses or those owned by individuals from certain socially or economically disadvantaged classes.

The Government’s various set-aside programs are designed to level the playing field for certain small businesses, women-owned businesses, veteran-owned businesses, service-disabled veteran-owned businesses, and other types of businesses with historically disadvantaged ownership or control. To qualify for these programs, the business must meet certain eligibility criteria centering around the entity’s size, ownership, and management.

What Was Broadway/Cornerstone’s Alleged Set-Aside Contract Fraud?

The set-aside program at issue was for small businesses owned, controlled, and operated by service-disabled veterans of the United States military. It is intended to provide contracting preferences and opportunities to qualifying veteran entrepreneurs.

According to the Government, from April 2017 through May 2025, Broadway/Cornerstone and its key principals schemed to obtain federal set-aside contracts to which they were not entitled. The parties’ settlement agreement sets forth the key details of the scheme as follows:[2]

- Neither of Broadway/Cornerstone’s principals, Oehler nor Blake, is a service-disabled veteran or a veteran of the military at all. Their companies therefore did not qualify for service-disabled veteran set-aside contracts. So they partnered with companies legitimately owned and controlled by service-disabled veterans where these companies served as the prime contractor in name only to qualify for the contracts.

- But Broadway/Cornerstone did all the work and controlled the contract selection and performance — identifying the contracting opportunities, preparing and pricing the bids, securing the bonding, selecting subcontractors and personnel, and performing the bulk of the contract work. The front companies received a fixed percentage of the contract value (typically 1-3%), with Broadway/Cornerstone and its selected subcontractors receiving the rest.

- Broadway/Cornerstone carried out this scheme through various business models, including teaming agreements, joint ventures, and mentor-protege relationships. But regardless of form, the substance remained the same with Broadway/Cornerstone having real control over the contract selection and performance and the partner businesses serving as a pass-through to secure the set-aside contract for which only they (and not Broadway/Cornerstone) were eligible.

- At least one of the partnering businesses raised concerns regarding compliance with the set-aside contract requirements, which Oehler and Blake acknowledged but did nothing to address. Oehler and Blake also acted to conceal the arrangements by obscuring the true role of their companies. This included Broadway/Cornerstone personnel using the email domains of the partnering businesses, using the signature authority of the partnering businesses, and failing to disclose to the Government the underlying business arrangements between Broadway/Cornerstone and the partnering businesses.

Is Going After Set-Aside Contract Fraud a Government Priority?

In announcing the settlement of this matter, the Government made it clear that strictly enforcing the set-aside contract rules remains a top enforcement priority. DOJ Civil Chief Brett Shumate underscored how “Congress intended certain federal contracts to be set aside for small businesses and for service-disabled veterans who sacrificed for this country,” and that DOJ “will hold accountable those who fraudulently obtain, or assist others in fraudulently obtaining, these set-aside contracts.”

Several other top enforcement officials weighed in with equally strong language, especially as it concerns fraudulently securing contracts reserved for service-disabled veterans. Assistant US Attorney John Sarcone III (NDNY) stressed that “these programs are designed to aid our nation’s heroes; it is unfortunate that these defendants sought to exploit the sacrifices our service members have made.”

Special Agent Jason Sargenski of the Department of Defense Office of Inspector General stated that “when large contractors fraudulently control small business entities to capture contracts they are not entitled to, they divert critical defense resources away from their intended purpose, undermine the competitive process, and betray the veterans these programs exist to serve.”

And Small Business Administration Inspector General William Kirk spoke to the “clear message” the settlement sends: “programs created to help America’s disabled veterans should not be exploited for personal profit. Our veterans earned these opportunities through their service and sacrifice.”

The Government’s priority in enforcing these programs is also reflected in the size of the settlement, one of the largest in this area of False Claims Act enforcement. As Constantine Cannon partner Dan Vitelli notes, in these types of cases, defendants often argue that, putting aside the alleged fraud related to qualifying for the set-aside contract, the Government received the underlying contract performance. “But what the Government does not receive,” Vitelli says, “is compliance with the set-aside contract rules and the important public policy purpose these programs are designed to serve.”

Vitelli notes that partly because of arguments about performance of the underlying contract, settlements in this area can be relatively small. That was not the case here with the $21.3 million settlement. Vitelli believes the Government may be sending a message with this settlement that federal contractors need to play by the rules when it comes to these programs, especially when they are designed to serve our veterans.

What Role Can Whistleblowers Play in Reporting Violations of the Set-Aside Contract Rules?

Like the vast majority of False Claims Act cases, this one was originated by whistleblowers under the qui tam provisions of the statute. These provisions allow whistleblowers to bring lawsuits on behalf of the Government against those committing fraud against the Government. In return, successful whistleblowers can receive up to 30% of the Government’s recovery.

Whistleblowers are especially important in exposing set-aside contract fraud because of the difficulty of detecting eligibility violations without the help of those inside the company with a front row seat to the fraud. Constantine Cannon’s Vitelli says, “Without the assistance of whistleblowers, the Government often struggles to uncover these complicated schemes.”

Indeed, one of the whistleblowers who originated the Broadway/Cornerstone matter was an executive at one of the partnering companies who was privy to the particulars of the partnering relationship and the misbehavior in which Broadway/Cornerstone and its principals engaged. The other whistleblower was an Air Force veteran, also with inside information on the underlying scheme. They collectively will receive a whistleblower award of roughly $3.7 million from the proceeds of the Government’s recovery.

Constantine Cannon Has Substantial Experience Representing Whistleblowers Under the False Claims Act

Constantine Cannon has substantial experience representing whistleblowers under the False Claims Act. If you would like to learn more about the work we do, Constantine Cannon’s long list of False Claims Act successes, or what it means to be a whistleblower more broadly, please do not hesitate to contact us. We will connect you with an experienced member of the Constantine Cannon whistleblower team for a free and confidential consultation.