Veterans Affairs Fraud Cases – Government Contractor Faces Service Disabled Veteran SDVOSB Fraud and False Claims Act Criminal Liability

Service Disabled Veteran Small Business and Its Owners Pay to Pay $335,000 and Possibly $250 Million to Resolve False Claims and SDVOSB Fraud and CID False Claims Act Liability and Conspiracy Criminal Charges – Protect Your Company. The DOJ and other law enforcement agencies are aggressively seeking out small businesses for fraud violations. Our government contract SDVOSB fraud defense lawyers can help in a variety of government contracting veterans affairs fraud cases.

Contractor Faces Service Disabled Veteran SDVOSB Fraud and False Claims Act Criminal LiabilityWhen a small business certifies as a Serve Disabled Veteran Owned Small Business (SDVOSB), it must also realize that the federal government investigation agencies are seriously increasing oversight and are bringing criminal charges against business owners that commit procurement fraud or in other situations violate the False Claims Act. SDVOSB fraud can originate from a variety of issues. Allegations of fraud can arise from submitting false information to get SDVOSB status; using a small business status as a front to get government contracts that the intended company could not qualify for; evidence of ‘pass through’ contracts, and more.

Federal contracts may be reserved, or “set aside,” for various categories of small businesses, such that only eligible small businesses in a particular socioeconomic category are eligible to bid on, receive, and perform the contracts.  An example is a service-disabled, veteran-owned small business (SDVOSB), which is reserved for small businesses owned, controlled, and operated by veterans of the United States military who incurred a disability in the course of their military service to the United States. 

In order to stay compliant with the governing regulations, companies should make sure that they are informed about the legal requirements, criminal penalties and civil fines associated with False Claims Act violations.

In a recent case in West Palm Beach, a Florida-based government contractor and its owners agreed to pay $335,000 to resolve criminal allegations that they took advantage of federal government contracting opportunities that were set aside for certified service-disabled veteran-owned small businesses (SDVOSBs). See information about False Claims Acts defenses for contractors in litigation.

Another case, Government Contractor, TriMark USA, LLC of Mansfield, Massachusetts, agreed to pay a record $48.5 Million to resolve claims related to SDVOSB contracts. These cases are evidence of the reality of how much the federal government is pursuing small businesses for SDVOSB fraud against the federal government.

Simple misunderstandings can lead to an IG investigation or DOJ indictment

When companies are charged with criminal violations in government contracting veterans affairs fraud cases, they should immediately seek the legal advice of a viable and experienced government contract fraud defense attorney that understands the criminal defense aspect of the case as well as the substantive issues related to the SVSOB programs. Companies that could not have submitted a bid on an SDVOSB government contract should be also aware of the criminal and civil penalties involved. Veterans affairs fraud cases and areas that veteran-owned companies should be careful of include:

Government procurement fraud investigations usually end up in some type of action or charge involving the False Claims Acts or Qui Tam case. The initiation of a procurement investigation or subpoena request for documents should immediately trigger the need to find an SDVOSB fraud defense lawyer that understands the various small business issues that can arise in a procurement investigation. See information about what is a Qui Tam Relator.

Pay attention to how you respond to requests for OIG or DOJ subpoenas and documents

 Information that companies submit to the federal government in response to a subpoena can be incriminating and can damage the outcome of an SVOSB criminal investigation case. See information about SDVOSB and small business veteran fraud cases. In the SDVOSB fraud investigation case, the agency will more than likely issue a request for a subpoena where you must provide certain documents and or answer questions. See 6 Things Contractors Should Be Aware of in Qui Tam Lawsuits & False Claims Act Lawsuits. Companies must:

  • Be mindful not to submit damaging documents that impact their constitutional right not to submit incriminating statements.
  • Have professionals also review documents to watch for hidden information that can be incriminating

Sample Case Where Government Law Enforcement Reached SDVOSB Small Business For False Veteran Claims in Government Contracting

In the West Palm Beach case, a whistleblower triggered the fraud investigation and further criminal proceedings against the small business and the individual owners. The IG from the VA and SBA attorneys worked together to get the final result.

In the article, the government found that Defendant, Academy Medical, LLC “exploited the SDVOSB certification of a service-disabled veteran to profit from VA contracting opportunities that Academy would not have qualified for on its own. To do this, Academy prepared teaming and other business agreements for the parties to sign. Before Academy signed the documents, however, it was specifically warned that the veteran must have tangible and substantive tasks to perform in their relationship and must not act as a “pass-through” for Academy.

Rather than heed that warning, Academy structured its dealings with the veteran so as to relegate the veteran to the role of a pass-through. For example, an Academy employee prepared and submitted a bid to the VA in the name of the veteran’s company. After the VA awarded that contract to the veteran as an SDVOSB set-aside, Academy arranged to procure the goods for the VA from a third party. See information about How to Minimize Criminal Liability in Government Contract Fraud and Procurement Investigations

When the VA paid the veteran under the contract, an Academy employee (who was also a signatory on the veteran’s bank account) transferred that money to Academy. Academy, Desser, and Shaw each admitted in the settlement agreement that their conduct violated federal regulations designed to encourage contract awards to SDVOSBs.” See also information about WOSB certification and false veterans claims.

Procurement Fraud Due to Unlawful Control of Business: In March 2021, in yet another case, the federal government indicted three individuals for conspiring to defraud the United States by interfering with the function of the SBA and fraudulently obtaining money from as early as 2004 continuing through at least 2017. As part of the SDVOSB  fraud scheme, the government found that as part of the scheme, the owner of the qualifying Service-Disabled Veteran-Owned Small Business (SDVOSB), conspired and exercised disqualifying financial and operational control over the SDVOSB construction company.  Court documents revealed that the defendant conspirators concealed that control in order to secure over $250 million in federal government contracts that were “set aside” for SDVOSBs in order to benefit their larger, non-qualifying businesses. See information about false claims retaliation.

Other Situations that Can Cause SDVOSB Fraud: Many small businesses doing business with the federal government can find themselves in an SDVOSB fraud case by not having a service-disabled veteran as the owner and highest-ranking officer of the firm. This person must unequivocally make the final decisions for the company. He or she must show active involvement in the company and not in name only.   In other situations, having equal partners but one just happens to be service-disabled most likely would not meet the SDVOSB status requirements. The veteran has to be in control of the business.

Lesson Learned

Not all contractors intend to defraud the government. However, when federal law enforcement decides to launch a procurement investigation against a veteran-owned company, the first order of business is to bring criminal charges where the evidence seems convincing in government contracting veterans affairs fraud cases. Federal prosecutors are not interested in whether you were careless in your operations or not. Although an argument could be made that your business merely was not organized, the reality is that if federal attorneys can prevail in a criminal case against you, they will move forward. Your best bet is to have legal representation from an SDVOSB criminal defense attorney that can provide reasonable guidance and legal defense on the underlying SDVOSB rules. When government procurement fraud is the subject of a federal investigation, companies need to have a contractor fraud defense lawyer that understands both small business size regulations, limitations on subcontracting, plus VA certification requirements.

Government contractors should take proactive measures to make sure they understand the rules and make sure that they avoid criminal liability for SDVOSB set-aside procurement fraud. See information about Federal False Claims Act penalties.

See Other VA SDVOSB Veterans Affairs Fraud Cases

For help with government procurement investigations or False Claims Act Whistleblower defense in pending Veteran’s Affairs fraud cases and procurement fraud case, call Watson & Associates, LLC SDVOSB fraud lawyers and Federal criminal defense attorneys for immediate help.