A federal jury has convicted Andrew Otero and his company, A&D General Contracting, Inc. (A&D), on charges that they fraudulently obtained $11 million in federal contracts specifically set aside for service-disabled veteran-owned businesses. The jury’s decision was rendered on Nov. 21, 2018.
The evidence demonstrated that Otero had no military experience. Yet Otero and veteran Roger Ramsey participated in a conspiracy to defraud the government by forming a joint venture (JV) – and falsely representing that Ramsey’s firm and the JV qualified as service-disabled veteran-owned small businesses (SDVOSB). Based on the false claim to SDVOSB eligibility, the conspirators fraudulently obtained approximately $11 million in federal government construction contracts or task orders with the Department of Veterans Affairs (VA) and the Army Corps of Engineers (ACE).
As proven at trial, the fraudulent conspiracy involved set-aside contracts that could only be bid upon by legitimate service-disabled veteran-owned small businesses – a designation that did not apply to Otero or A&D. To appear qualified, Otero and Ramsey initially executed an agreement to create the JV, which stated that Ramsey’s company would be the managing venturer, employ a project manager for each of the set-aside contracts, and receive the majority of the JV’s profits.
However, as proved at trial, six months later, Otero and Ramsey signed a secret side agreement that made clear the JV was ineligible under the SDVOSB program. For example, the side agreement said the parties created the JV so that A&D could simply use the disabled veteran status of Ramsey’s firm to bid on contracts. The side agreement also stated that A&D – not Ramsey – would run the construction jobs. They also agreed that A&D would keep 98 percent of every payment.
In addition to the secret side agreement, the evidence demonstrated several ways in which the JV did not operate as a legitimate SDVOSB, but was essentially controlled by Otero and A&D. For example, although Ramsey (a service-disabled veteran) nominally served as president of his firm and the JV, he actually worked full-time for a telecommunications company. Otero and A&D, not Ramsey, controlled the day-to-day management, daily operation and long-term decision making of the JV. Among other things, Otero and A&D appointed an A&D employee as the project manager for every contract and task order.
“Our nation strives to repay the debt of gratitude we owe to our veterans by setting aside some government contracts for veterans with service-related disabilities,” said United States Attorney Adam Braverman. “These unscrupulous contractors abused this program through a cynical and illegal ‘rent-a-vet’ scheme. They are now being held fully accountable for robbing truly deserving vets of important economic opportunities.”
The defendants are also facing civil charges consisting of alleged violations of the false claims act based on the similar misconduct. The defendants have been ordered to appear in U.S. District Court for sentencing on February 19, 2019.
Indal Technologies, Inc. has agreed to pay $3.5 million to resolve allegations that it knowingly sold defective helicopter landing systems designed for U.S. Navy destroyers. Indal, of Ontario, Canada, is a division within Curtiss-Wright Corporation of Charlotte, North Carolina.
A company that rents tents and other outdoor structures for events agreed to pay the government $7.8 million to settle charges that it wrongly won Defense Department set-aside contracts reserved for small businesses.
“As a result of this scheme, which was perpetuated at Fort Stewart, Ga., and at other military installations across the United States, millions of dollars in defense contracts wrongfully were awarded to Arena Americas instead of legitimate small businesses,” said Bobby Christine, U.S. Attorney for the Southern District of Georgia, in a statement. “The U.S. Attorney’s Office will not tolerate any attempts to illegally exploit the system for a company’s personal advantage” in obtaining the set-asides that Congress intended as a tool to help grow small businesses.
Due to the government’s increased focus on domestic preference requirements – for example, through President Trump’s 
The joint strike force that led to these convictions and settlements involved agents, investigators, and auditors from the Department of Justice, Defense Criminal Investigative Service, Army Criminal Investigation Command (Major Procurement Fraud Unit), Naval Criminal Investigative Service, the Small Business Administration Office of Inspector General. Significant and critical assistance was also provided by civilian and military personnel from the Army, Navy, and Air Force stationed at affected military installations.
“SBA OIG will aggressively investigate allegations of fraud involving SBA’s preferential contracting programs, to include false statements made to gain access to contracting opportunities set aside for small businesses,” said SBA OIG Eastern Region Special Agent-in-Charge Kevin Kupperbusch. “SBA’s preferential contracting programs are intended to promote the economy and grow and develop small businesses across the nation. I want to thank the U.S Attorney’s Office and our law enforcement partners for their dedication and hard work throughout these investigations.”
On Monday, the U.S. District Court for the District of Columbia ruled that bonding companies can be held liable for treble damages under the False Claims Act for issuing surety bonds to construction companies that falsely claim to be a Service-Disabled Veteran-Owned Small Business (SDVOSB).
Week before last, the United States Supreme Court heard argument in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby over the False Claim Act’s (FCA) “seal requirement.” The controversy highlights an important statutory tool for government contractors who face allegations of making false claims for payment. It also provides important lessons for those seeking to bring such allegations.