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