Georgia Tech Procurement Assistance Center

Contractor settles fraud claims related to 8(a) joint venture

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R&W Builders, Inc. (R&W) of O’Fallon, Illinois, has agreed to pay the United States $400,000 to resolve allegations that it violated the False Claims Act by fraudulently obtaining construction contracts reserved for disadvantaged small businesses, U.S. Attorney Steven D. Weinhoeft announced today.

The Small Business Administration (SBA) 8(a) Business Development Program helps provide a level playing field for small businesses owned by socially and economically disadvantaged individuals by limiting competition for certain federal contracts to Program participants.  To increase the opportunities available to these disadvantaged businesses, the SBA also permits Program participants to partner with another company on certain contracts through approved joint venture agreements.  The SBA requires the joint venture agreements to include specific terms to ensure the relationship is fair and provides a benefit to the disadvantaged business, including provisions designating the disadvantaged business as the managing partner of the joint venture and requiring the disadvantaged business to perform a specified percentage of the work.  It is important that 8(a) joint ventures comply with the SBA’s criteria because misuse of the Program deprives real disadvantaged businesses of valuable economic opportunities and undermines the Program’s integrity.

In 2014, after R&W was no longer eligible to participate in the 8(a) Program, it entered into a joint venture agreement with Global Environmental, Inc. (GEI), an 8(a) Program participant based in St. Louis, Missouri.  R&W and GEI named the joint venture Patriot Commercial Construction, LLC (Patriot) and successfully secured an award set aside solely for Program participants on the Multiple Award Construction Contract (MACC) at Scott Air Force Base, Illinois.

The United States contends that R&W falsely represented it would abide by the Program requirements and the Patriot joint venture agreement to obtain the SBA’s approval.  Immediately after Patriot received an 8(a) award on the MACC, R&W began managing the joint venture and using its own employees to complete nearly all of the work Patriot performed.  Over the next two years, R&W caused Patriot to receive numerous MACC task orders set aside for 8(a) Program participants when Patriot was under R&W’s control, in violation of SBA requirements.

Continue reading at:  U.S. Department of Justice

Senator: Pandemic makes anti-fraud law more important than ever

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A long-time Senate advocate for whistleblowers and strong oversight of agencies said on Wednesday that due to the historic spending for the coronavirus pandemic, the law that targets fraud against the federal government and in federal contracting is more important now than ever.

Sen. Chuck Grassley, R-Iowa, spoke at the Federal Bar Association’s fourth annual Qui Tam Conference.  Qui tam, a provision of the “The False Claims Act,” which was originally enacted during the Civil War, allows individuals or non-government organizations to file lawsuits on behalf of the government to disclose fraud that led to financial loss for the government.  They can be awarded between 15% and 30% of the proceeds collected.  Grassley co-authored updates to the act in 1986 and 2009.

“As the country continues to battle the global pandemic, the False Claims Act has never been more important than it is right now,” said Grassley at the virtual event.  “The massive increases in government spending to address the COVID crisis have created new opportunities for fraudsters trying to cheat the government and steal the people’s money.  As history has shown all of us, fraudsters thrive during times of crises and large-scale government spending.”

He said it’s important the Justice Department, Congress and whistleblowers “remain very vigilant” due to the trillions of dollars spent in pandemic relief.

Continue reading at:  Government Executive

 

Concrete contractor agrees to settle false claims act allegations for $3.9 million

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Colas Djibouti, a contractor for the Department of the Navy at Camp Lemonnier and Chabelley Airfield, and the U.S. Embassy in Djibouti, admitted today that it faked testing results and submitted a series of false documents and false claims to the United States as part of a scheme to defraud the United States in the sale of substandard concrete used to construct U.S. Navy airfields in Djibouti.

Colas Djibouti, a French limited liability company, is a wholly-owned subsidiary of Colas SA, a French civil engineering company.  According to documents filed in court, as part of its contracts with the Department of the Navy, Colas Djibouti was required to certify that it supplied concrete with specific composition and characteristics.  Notwithstanding these obligations, Colas Djibouti created fictitious testing results, made fraudulent representations regarding the concrete’s composition and characteristics, and knowingly provided concrete to the United States that did not comply with the specifications.

Continue reading at:  U.S. Department of Justice

False Claims Act: The risks to small business government contractors

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“False Claims Act: The Risks to Small Business Government Contractors” is the fifth episode of “Ex Rel. Radio,” a multi-part series on the False Claims Act, which includes commentary on potential pitfalls for government contractors who may face enforcement issues in light of emerging trends.

In this episode, Firm Counsel Michelle Litteken joins our host, Jon Williams, to discuss how the False Claims Act relates to small business programs, potential risks these companies face, and strategies for avoiding a potentially costly FCA claim.

Listen to the podcast at:  JD Supra

Four issues that defined the False Claims Act in 2019

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As I wrote two weeks ago, the Department of Justice (DOJ) recently released its annual fiscal year statistics on False Claims Act (FCA) and fraud matters.  The report shows Fiscal Year 2019 was another big year for the FCA, as the number of new matters initiated and the amount of monetary recoveries obtained both increased over the previous year.  2019 also brought important FCA decisions from federal courts, including the Supreme Court; potential new avenues for FCA liability; and formal announcements from DOJ.  These reveal emerging trends that may have lasting implications for government contractors.

Continue reading at:  Piliero Mazza

 

Deputy Associate Attorney General sheds light on DOJ’s FCA priorities at annual False Claims Act conference

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“Enforcing the False Claims Act is a top priority for the Department—not just for our office,” said Deputy Associate Attorney General Stephen Cox, the Keynote Speaker for the 2020 Advanced Forum on False Claims and Qui Tam Enforcement, hosted by the American Conference Institute.  Deputy Cox reflected on FCA recoveries in 2019 and previewed DOJ’s FCA priorities for 2020.  Specifically, his keynote address on Monday, January 27 focused on: (1) enforcement; (2) cooperation credit; and (3) third-party financing.

Continue reading at:  Arent Fox

Recent cases indicate viability of False Claims Act liability connected to federal cybersecurity standards

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Government contractors are no strangers to the numerous quality standards and assurances required by the government.  Over the past several years, cybersecurity in federal contracting has emerged as yet another standard to achieve.  While data breaches are big news in the private sector, the issue remained somewhat under the radar for public contracts — until now.

Last summer, two significant whistleblower cases sent ripples through the False Claims Act (FCA) community by demonstrating the specter of FCA liability resulting from the failure to comply with cybersecurity requirements in government contracts.  In May, the U.S. District Court for the Eastern District of California refused to dismiss a case alleging that Aerojet Rocketdyne Holdings Inc. falsely asserted its compliance with the Department of Defense’s (DOD) cybersecurity standards.  Then, in late July, the government announced that Cisco Systems Inc. agreed to pay $8.6 million to settle a whistleblower suit alleging that the company fell short of federal cybersecurity standards by selling video surveillance products with known vulnerabilities that hackers could exploit.  These cases show that cybersecurity-based FCA claims may be the new frontier and that such claims may prove difficult to defeat depending on the facts in any given case.

Continue reading at:  Carlton Fields

Justice Department recovers over $3 billion from False Claims Act cases in FY 2019

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The Department of Justice obtained more than $3 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2019, Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division announced today.  Recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, now total more than $62 billion.

“The significant number of settlements and judgments obtained over the past year demonstrate the high priority this administration places on deterring fraud against the government and ensuring that citizens’ tax dollars are well spent,” said Assistant Attorney General Hunt.  “The continued success of the department’s False Claims Act enforcement efforts are a testament to the tireless efforts of the civil servants who investigate, litigate, and try these important cases as well as to the fortitude of whistleblowers who report fraud.”

Continue reading at:  U.S. Department of Justice website

Are more FCA cases against small businesses on the horizon?

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On August 20, 2019, the U.S. Department of Justice announced that it had reached a $20 million settlement with Luke Hillier (Hillier), the majority owner and former CEO of a Virginia-based defense contractor, ADS, Inc. (ADS), to resolve “allegations that he violated the False Claims Act (FCA) by fraudulently obtaining federal set-aside contracts reserved for small businesses that his company was ineligible to receive . . . .”  The resolution of the claims against Hillier follows ADS’s payment of a separate $16 million settlement on related claims, as well as an additional $225,000 paid by Charles Salle, the former general counsel of ADS, to resolve claims arising from his role in the alleged scheme.  Combined, the $36 million total settlement is believed to be the largest FCA recovery in history based on allegations of small business contracting fraud.  Given the size of the collective settlement and the nature of the allegations against Hillier and ADS, small businesses everywhere—particularly government contractors—should anticipate a potential increase in the frequency of small business fraud-related FCA cases.

The case from which these settlements arose was originally filed in November 2013 and alleged that ADS caused its affiliates to falsely represent themselves as, among other things, Service-Disabled Veteran-Owned Small Businesses (SDVOSBs).  It further alleged that these false representations allowed ADS, through its affiliates, to compete improperly for set-aside opportunities that were intended to be available only to SDVOSBs and for which ADS was not eligible.  As a result of this improper access, ADS profited at the expense of both the government and eligible SDVOSBs.  The claims against ADS were settled in August 2017; however, the claims against Hillier remained outstanding until last month.

Continue reading at: Piliero Mazza

Government contractor pleads guilty to fraud for paying drivers as independent contractors

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Paying workers as independent contractors instead of as employees may land a former executive in jail for criminal wire fraud.  On June 12, 2019, the former operations manager and vice president of a Florida-based mail transportation contractor pled guilty to two counts of wire fraud related to such treatment.  The Government’s case was based on pricing estimates for employee-related costs that the contractor later did not incur because it instead used independent contractors.

In the June 1, 2018 indictment of Alexei Rivero, the Government contended that Rivero purposely misclassified the drivers it hired as independent contractors.  According to the indictment, this allowed the contractor to “misappropriate” $1.5 million in USPS contract payments “designated” for fringe benefits and $1.2 million designated for payroll taxes.

Continue reading at:  Husch Blackwell’s The Contractor’s Perspective

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