VMJ Construction, LLC (VMJ) and its owner, Colorado resident Michael T. Vigil, as well as Maryland-based Vigil Contracting, Inc. (Vigil Contracting) and its operations manager, John J. Vigil, have agreed to pay the United States $3.6 million to resolve allegations that they defrauded the Small Business Administration (SBA) 8(a) Business Development Program.
The SBA’s 8(a) Business Development Program for economically and socially disadvantaged small businesses serves dual roles.
- First, the program helps socially and economically disadvantaged small business owners gain access to valuable federal contracts, thereby promoting economic and social mobility.
- Second, the program saves taxpayers money by spurring a competitive marketplace. By promoting the development of small businesses, the 8(a) Program helps prevent the formation of monopolies that would stifle innovation and restrict consumers’ ability to negotiate lower prices.
It is important that the 8(a) Program is reserved only for companies that actually meet the program’s criteria because misuse of the program deprives legitimate 8(a) Program participants of valuable economic opportunities and undermines the integrity of the program.
There are several rules that businesses in the 8(a) program must abide by.
- The socially and economically disadvantaged owner of the business must manage the day-to-day operations of the company and have responsibility for the long-term decision-making for the company.
- 8(a) Program applicants must also truthfully disclose any affiliation with other businesses so that SBA may accurately assess whether the applicant meets the definition of a small business, and whether the applicant shows potential for success and the ability to perform the requisite percentage of the contracts secured through the Program.
- Businesses also cannot remain in the 8(a) Program indefinitely; after nine years, they graduate from the program and are no longer eligible to bid on 8(a) contracts.
VMJ was accepted into the 8(a) Program in 2011. Michael T. Vigil, who is Hispanic, was the 91% owner of VMJ, and was the socially and economically disadvantaged individual upon which VMJ based its application to the 8(a) program. John J. Vigil was a 9% owner of VMJ. John J. Vigil was also the operations manager of Vigil Contracting. Vigil Contracting is a 2011 graduate of the 8(a) Program. Since 2011, Vigil Contracting has not been eligible to bid for contracts reserved for 8(a) program participants.
The United States contends that VMJ made false statements to the SBA regarding its eligibility to participate in the 8(a) program. Specifically, VMJ relied almost exclusively upon Vigil Contracting to bid on and complete the work awarded to VMJ under the 8(a) program. VMJ used Vigil Contracting’s bonding, office space, employees, contractors, software, computers, and vehicles. Vigil Contracting employees and contractors, including John J. Vigil, made the high-level business decisions of VMJ and managed the day-to-day operations of VMJ. Michael T. Vigil did not control VMJ, did not set the long-term policy, nor manage the day-to-day management of the business. VMJ knowingly misrepresented these facts to SBA, in both VMJ’s initial application to participate in the 8(a) program and in an annual update to SBA. As a result of the deception, the Army, the Navy, and the Department of Agriculture awarded VMJ several federal government contracts set aside for 8(a) program participants.
“The United States uses these set-aside contracts for a clear reason — to help small businesses owned by economically and socially disadvantaged individuals. This program continues the promise of the American Dream by helping new small businesses get on their feet, and with more businesses on their feet, our markets are healthier and more competitive,” said U.S. Attorney Jason Dunn. “When companies lie about their eligibility to get these contracts, they prevent other deserving small businesses from getting the assistance that Congress intended.”