Georgia Tech Procurement Assistance Center

Increasing criminal and False Claims Act liability in small business government contracting programs

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The U.S. Small Business Administration (SBA) preference programs can be vital for small businesses trying to compete in the potentially lucrative world of U.S. government contracting, but participation in these programs is not without risk.  Indeed, the programs can be fraught with peril and contain many landmines for those who do not understand and diligently comply with applicable small business program requirements.

Small Business Government Contracting Programs

The SBA works to make sure small businesses get at least 23 percent of all federal contracting dollars each year, primarily through the SBA’s small business and contracting assistance programs.  These programs are designed to assist small businesses by limiting competition for certain government contracts or by awarding a certain percentage of contracts to small businesses that participate in the respective programs.  The SBA has a variety of such programs, such as the 8(a) Business Development (8(a)) Program), the Service-Disabled Veteran-Owned Small Business (SDVOSB) program, the Women-Owned Small Business (WOSB) Program, and the Historically-Underutilized Business Zone (HUBZone) Program, which were created for small businesses owned by socially and economically disadvantaged people or entities, service-disabled veterans, or women or small businesses operating in historically underutilized business zones, respectively.

Continue reading at: JD Supra

How the Navy SEALs wound up buying 450 counterfeit radio antennas

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Last spring, the Pentagon spent more than $165,000 on a set of sophisticated radio antennas for a contingent of elite Navy SEALs.  Unfortunately, they were cheap knockoffs, courtesy of a California vendor apparently looking to secure some extra profit.

A search warrant application recently filed by the Defense Department provides a glimpse into how the alleged scam worked.

In April 2019, the Naval Special Warfare Command solicited bids to buy 450 VHF/UHF antennas for use by members of the Navy SEALs.  The request required the body-worn antennas come from New York-based manufacturer Mastodon Design, and that the supplier qualify as a small business.

The government used to purchase the antennas directly from Mastodon.  However, it no longer could because after Mastodon’s sale to a large multinational defense contractor, the once-boutique company no longer qualified as a small business.  This meant the Navy would have to buy Mastodon’s antennas through an authorized small distributor or reseller.

On May 1, the sales team at Mastodon got an email from the procurement department of a California company called Vizocom.  It said the company was bidding on a Navy contract and wanted to know how much 450 Mastodon antennas would cost.  Mastodon quoted a price: $165,109.50.

Vizocom then submitted its bid to the Navy for the exact same amount.  A source with direct knowledge of the situation told Quartz it was highly unusual that Vizocom wouldn’t want to make any money on the deal.  At this price, the Navy awarded Vizocom the contract.

The company, however, would never actually place the order with Mastodon.  Instead, it would import low-cost antennas from China and pass them off as from Mastodon using fake serial numbers and spec sheets, according to the search warrant application and sources with knowledge of the deal.

Continue reading at:  Yahoo Finance

Government settles alleged False Claims Act violations against Statesboro business

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The Sesolinc Group has agreed pay up to $2.4 million to settle allegations that they supplied defective products and submitted false claims to the Army, Department of Veterans Affairs and General Services Administration.

Based on the allegations of the unsealed complaint, Sesolinc is alleged to have violated the False Claims Act when it sold products to the United States that were not in compliance with required electrical and structural standards, said Bobby L. Christine, U.S. Attorney for the Southern District of Georgia.  After concerns were raised internally, Sesolinc, which manufactures its products in Statesboro, is alleged to have continued to deliver defective products to government customers.  As part of the settlement, Sesolinc has agreed to repair goods previously supplied to the United States and pay an additional penalty.

“If a contractor represents to the United States that it will provide products consistent with basic requirements of the government customers, this office will hold them to those promises,” said Christine.  “We will continue to vigorously pursue any contractors who try to cut corners at the taxpayers’ expense.”

“This settlement sends a clear message that defective products sold to our military will not be tolerated,” said Special Agent in Charge Cynthia A. Bruce, Defense Criminal Investigative Service (DCIS), Southeast Field Office.

Continue reading at:  Savannah Now

Recent indictments demonstrate increased focus on bid-rigging

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Companies involved in the government contracting industry should take note that the government is honing in on anticompetitive conduct affecting government procurements.  The federal government has demonstrated an increased interest in this area, and companies should refresh and audit their compliance programs to avoid hefty civil and criminal penalties and potential prison terms for implicated employees.

In the last month, the United States Department of Justice (DOJ) has announced three sets of indictments in recent months relating to bid-rigging of various government procurements and solicitations, evidencing an increased focus on anticompetitive conduct targeting federal, state and local governments.

Continue reading at:  McDermott Will & Emery

Former S.C. company executive sentenced to over 4 years in federal prison for construction fraud scheme

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United States Attorney Sherri A. Lydon announced on April 23rd, 2019 that Thomas Brock, age 62, of Camden, South Carolina, was sentenced to 51 months in federal prison after pleading guilty to wire fraud.

According to information presented during his guilty plea and sentencing, Brock was involved in a decade-long scheme to defraud the government in the acquisition of military construction contracts.  Under programs instituted by the United States Small Business Administration (SBA) and the Department of Veterans Affairs (VA), certain military and federal government contracts are specifically set aside for award to minorities, women, and service veterans.  These programs are intended to provide small businesses with an opportunity for growth and experience working through the federal government. 

Brock was an executive with Boykin Contracting and used various straw-owners within the company to pose as a female, an African-American, a disabled person, and a veteran in order to qualify for over $160 million dollars’ worth of these government construction contracts.  Based on information presented in court, Brock illegally acquired the contracts and siphoned money from the company to support a lavish lifestyle.  The scheme fell apart when Brock fraudulently acquired loans to cover the company’s losses and fell behind on the repayments, prompting a civil lawsuit and a criminal investigation.

Continue reading at:  https://www.justice.gov/usao-sc/pr/former-company-executive-sentenced-over-four-years-federal-prison-construction-fraud

FBI warns of online scams posing as government services websites

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From May 2012 to March 2015, the FBI’s Internet Crime Complaint Center (IC3) has received complaints regarding criminals hosting fraudulent government services websites in order to acquire Personally Identifiable Information (PII) and to collect fraudulent fees from consumers.

FBIAlthough the volume and loss amounts associated with these websites are minimal to date, the victims are having their PII data compromised which may be used by criminals for any number of other illicit activities, ranging from the creation of fraudulent IDs and passports to fraudulent loans and tax refunds. The PII can include the victim’s name, address, phone number, e-mail address, social security number, date of birth, and mother’s maiden name.

This is how the scheme usually happens: victims use a search engine to search for government services such as obtaining an Employer Identification Number (EIN) or replacement social security card. The fraudulent criminal websites are the first to appear in search results, prompting the victims to click on the fraudulent government services website. The victim completes the required fraudulently posted forms for the government service they need. The victim submits the form online, believing they are providing their PII to government agencies such as the Internal Revenue Service, Social Security Administration, or similar agency based on the service they need. Once the forms are completed and submitted, the fraudulent website usually requires a fee to complete the service requested. The fees typically range from $29 to $199 based on the government service requested. Once the fees are paid the victim is notified they need to send their birth certificate, driver’s license, employee badge, or other personal items to a specified address. The victim is then told to wait a few days to several weeks for processing. By the time the victim realizes it is a scam, they may have had extra charges billed to their credit/debit card, had a third-party designee added to their EIN card, and never received the service(s) or documents requested. Additionally, all of their PII data has been compromised by the criminals running the websites and can be used for any number of illicit purposes. The potential harm gets worse for those who send their birth certificate or other government-issued identification to the perpetrator.

Follow-up calls or e-mails to the perpetrator(s) are normally ignored and many victims report the customer service telephone numbers provided are out of service. The FBI recommends that consumers ensure they are communicating or requesting services/merchandise from a legitimate source by verifying the entity. When dealing with government websites, look for the .gov domain instead of a .com domain (e.g. www.ssa.gov and not www.ssa.com).

Below are some consumer tips when using government services or contacting agencies online:

  • Use search engines or other websites to research the advertised services or person/company you plan to deal with.
  • Search the Internet for any negative feedback or reviews on the government services company, their Web site, their e-mail addresses, telephone numbers, or other searchable identifiers.
  • Research the company policies before completing a transaction.
  • Be cautious when surfing the Internet or responding to advertisements and special offers.
  • Be cautious when dealing with persons/companies from outside the country.
  • Maintain records for all online transactions.

As a consumer, if you suspect you are a victim of an Internet-related crime, you may file a complaint with the FBI’s Internet Crime Complaint Center at www.IC3.gov.

Source: http://www.ic3.gov/media/2015/150407-2.aspx

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