Service Disabled Veteran Small Business SDVOSB and Its Owners Pay to Pay $335,000 and Possibly $250 million to Resolve False Claims Act Liability and Conspiracy Criminal Charges – Protect Your Company. Our government contract lawyers can help.
When 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.
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).
Simple misunderstandings can lead to an IG investigation or DOJ indictment: When companies are charged with criminal violations, they should immediately seek the legal advice of a viable and experienced government contracts attorney that understands the criminal defense aspect of the case as wells 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:
- Limitations on subcontracting
- Teaming agreements and joint venture regulations
- Veteran disability fraud
- How SBA affiliation rules can lead to pass through contract schemes and criminal investigations
The federal investigations usually end up in some type of action or charge involving the False Claims Acts or Qui Tam case. The initiation of an investigation or subpoena request for documents should immediately trigger the need to find a defense lawyer that understands the various small business issues that can arise in procurement fraud investigation.
Pay attention to how you respond to request for 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 fraud and small business fraud cases. In SDVOSB fraud investigation case, the agency will more than likely issues a request for subpoena where you must provide certain documents and or answer questions. Companies must:
- Be mindful not to submit damaging documents that impact their constitutional right not to submit incriminating statements.
- Have professional also review documents to watch for hidden information that can be incriminating
Sample Case Where Government Law Enforcement Reached SDVOSB Small Business
In the West Palm Beach case, a whistleblower triggered the fraud investigation and further criminal proceeds 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 the 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.
SDVOSB Fraud Due to Unlawful Control
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, 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.
To avoid criminal liability, SDVOSB small businesses must understand the SBA affiliation and control laws. Facing a criminal procurement fraud claim for violating SDVOSB government contracting rules. CEO’s and small businesses often make the mistake of interviewing with federal agents without attorneys present. As a result, admissions are made that can propel the government’s case. Once admissions are mage without your SDVOSB lawyer present, it can be difficult to overcome.
What is the lessen learned?
Not all contractors intend to defraud the government. However, when federal law enforcement decide to launch an investigation against a veteran-owned company, the first order of business is to bring criminal charges. Federal prosecutors are not interested in whether you were careless in your operations or not. Your best bet is to have legal representation than can provide reasonable guidance and defense on the underlying SDVOSB rules. When government procurement fraud is the subject of the federal investigation, companies need to have someone that understands both small business size regulations, limitations on subcontracting, plus VA certification requirements.
Government contractors should take proactive measure to make sure they understand the rules and make sure that they avoid criminal liability for SDVOSB set- side procurement fraud. See information about Federal False Claims Act penalties.
See Other VA SDVOSB Fraud Cases
For help with government investigations or False Claims Act Whistleblower defense in a pending Veterans affairs fraud cases and SDVOSB fraud case, call Watson & Associates, LLC Federal criminal defense attorneys for immediate help.