Theodore P. Watson, Esquire. As it relates to government contracting and federal procurement, various agencies have Office of Investigations departments ( SBA IG) investigation, VA OIG, and DOJ OIG investigations), otherwise known as the Office of Inspector General (OIG), that conduct civil, criminal, and administrative investigations of procurement fraud involving federal government contracts, violation of SBA small business programs or VA contracting programs for service-disabled veterans (SDOVSB).
If you are a government contractor, you should be mindful that compliance with the various FAR clauses or SBA statutes involving small business programs is alive and real. The agency OIG investigates fraud and misconduct related to the various small business programs, federal statutes such as the Buy American Act and more.
Unfortunately, if you happen to be investigated, you also may experience embarrassment around employees or other competitors. OIG investigations bring a high level of stress and anxiety. However, your business operations must still go on. It may be time to seek legal representation from an OIG investigation lawyer that has experience with the various procurement regulations. This is critical since not all criminal defense attorneys understand the complex rules of government contract law. See information about hiring criminal defense attorneys for cases involving government contracts.
What is an OIG?
The Office of Inspector General (OIG) is an independent agency that investigates fraud, waste and abuse in federal programs. It has the authority to issue subpoenas, conduct searches and seizures, and review documents related to suspected violations of law. The OIG also works with other agencies to help them detect and prevent fraudulent activities.
The DOJ and SBA OIG has broad investigative powers which can be used to investigate government contracts, goods and services, or any other federal activity. It is essential to understand the role of OIGs when dealing with government contracts. OIGs are responsible for conducting audits and reviews of agency activities related to procurement. They also have the authority to recommend corrective actions if any violations are found. Additionally, they can bring criminal or civil action against those who have committed wrongdoing.
SBA OIG Investigation Statutory Responsibilities and Principles
The Office of Inspector General (OIG) is an independent office in the SBA that oversees the compliance and objectives of the enabling regulations. The SBA IG investigations authority comes from the Inspector General Act. The Inspector General Act suggests that the SBA OIG will:
- Promote economy, efficiency, and effectiveness in the management of SBA programs and supporting operations;
- Conduct and supervise audits, investigations, and reviews relating to the Agency’s programs and support operations;
- Detect and prevent fraud and abuse;
- Review existing and proposed legislation and regulations and make appropriate recommendations;
- Maintain effective working relationships with other Federal, State, and local governmental agencies, and non-governmental entities, regarding the mandated duties of the Inspector General;
- Keep the SBA Administrator and Congress informed of serious problems and recommend corrective actions and implementation measures;
- Comply with the audit standards of the Comptroller General;
- Avoid duplication of Government Accountability Office (GAO) activities; and
- Report violations of law to the U.S. Attorney General.
In the last bullet, when SBA OIG investigations find that there is credible evidence of procurement fraud in government contracting, you will then enter into a more serious phase of investigative or charging phase. This can invoke either civil or criminal liability or both. See important information about cooperating and proffer agreements.
How Can OIG Investigations Impact Your Business as a Government Contractor?
As a government contractor, you should be aware of the powers and capabilities of SBA IG having jurisdiction over your business. Specifically, SBA OIG can audit activities related to all contracts performed by small businesses under its purview. An audit is conducted to examine financial records and ensure compliance with laws and regulations related to the contract. During an audit, SBA IG representatives have the right to access your premises, inspect records related to the contracts, and ask for documents or other information. See Tips for Investigations.
If SBA OIG finds evidence of any wrongdoing related to government contracting, you will then enter into a more serious phase of investigative or charging phase. This can invoke either civil or criminal liability or both. Furthermore, even if no wrongdoing is found, you may still be held responsible for any damages or losses incurred by the government.
It is important to understand that failure to cooperate with an SBA OIG audit can result in suspension or debarment from future government contracts and also severe monetary penalties. Therefore, it is critical for small businesses to take all reasonable measures to comply with relevant laws and regulations.
How Long Does an OIG Investigation Take?
What Legal Rights Do Individuals or Government Contracting Firms Have When Under OIG Investigations?
Typically, the OIG will inform you of your legal rights during the investigative process. Generally, individuals or government contractors have the right to remain silent under the US Constitution and are not required to answer any questions posed by investigators. However, if you choose to speak with an investigator voluntarily, it is important to remain honest and truthful throughout the interview process.
Additionally, you have a right to seek representation from a qualified government contractor defense attorney during an investigation. It is important to have legal counsel present, not only for the protection of your rights but also to ensure that you provide accurate information throughout the process. Additionally, individuals and contracting firms have the right to gather evidence in their defense or challenge evidence presented by the OIG against them. Finally, you may enter into negotiations with the OIG in order to reach a settlement agreement or resolution.
No matter the circumstances surrounding your investigation, it is important to protect your rights and remain informed of all developments throughout the process. A qualified government contractor defense attorney can help you make informed decisions that are tailored to your individual needs and objectives.
Can OIG Investigations Demand Responses to Civil Investigative Demands?
Yes, the OIG may issue civil investigative demands (CID) which require contractors to provide documents and other evidence that is relevant to an investigation. CIDs are legally-binding requests issued under a statute or regulation and they must be responded to in full or the recipient may face legal action. It is important to remember that these demands are not merely requests for information but rather are an order issued by the federal government, and it is important to comply with them.
A qualified OIG investigation attorney can provide invaluable assistance in understanding the CID process and responding appropriately. An experienced representative can help you ensure that any responses you make are complete, accurate, and timely—all of which will help protect your rights throughout the investigation.
What Happens When You Do Not Respond to DOJ or SBA IG CIDs?
It is important to keep in mind that failure to respond to or comply with an OIG CID may result in significant civil and criminal penalties. One of the worst consequences of not responding to a CID is being found in violation of state and/or federal law. This could lead to fines, imprisonment, or other serious repercussions. Additionally, if you do not respond in a timely manner, the OIG could take action to enforce its CID by obtaining a court order. As part of the enforcement process, the OIG may also refer your case to other federal or state agencies for further investigation and possible legal action.
Therefore, it is important to respond promptly and accurately to an OIG CID request. An experienced government investigation attorney representative can help you respond to the CID in a timely and effective manner. Additionally, they can provide guidance as you navigate through the OIG investigation process. By taking these proactive steps, you can minimize the risk of facing serious penalties for failing to comply with an OIG CID request.
SBA OIG Investigations for Fraud in SBA 8(a) Program
The SBA OIG investigations office handles many civil and criminal allegations of fraud in procurements involving SBA programs or rules. For example, government small business fraud investigations arise because the prime may not be following requirements of the SBA 8(a) Program or SBA HUBZone Program. Most commonly, companies are charged with government contract fraud for improper use of teaming agreements or joint venture agreements. The SBA OIG also provides for independent and objective oversight to improve the agency’s integrity and accountability of agency programs for the benefit of the public. SBA OIG seeks to improve SBA programs by identifying key issues facing the agency, recommending corrective actions, and promoting a high level of integrity. Watson’s government investigation lawyers can help with these types of investigations. See information about FCA civil investigative demands.
Examples of Cases Where SBA 8(a) Program Fraud was found
In this case, the United States Attorney’s Office for the District of Colorado brought a fraud case against Idaho-based Native American Services Corp. (NASCO) and Texas-based Mirador Enterprises, Inc. (Mirador) where they agreed to pay $1.15 million to the government to resolve allegations of government contract fraud related to two construction contracts at Colorado’s Fort Carson Army installation. NASCO will pay $750,000 of the settlement amount, and Mirador paid $400,000.
In this case, one of the government contracts was reserved for eligible participants in the Small Business Administration’s “8(a) Program” for economically and socially disadvantaged small businesses. The other construction project was set aside for eligible small businesses, not in the 8(a) Program.
Both companies entered into a Mentor Protégé relationship. This type of prime subcontractor relationship is used through government contracting. However, there are specific rules of compliance
This was a case where federal prosecutors alleged that although the bids for the Fort Carson Projects were submitted in Mirador’s name and listed Mirador as the prime contractor, the bids were in fact prepared by NASCO with the intent that NASCO takes on the primary role in the performance of the contracts. This type of procurement fraud scheme is aggressively sought after by DOJ prosecutors and OIG investigators.
The point here is that there is no indication as to what possible defenses these companies had. Yet, the OIG investigations process is alive and well.
When you conduct an internal investigation and you find that you are not in compliance with the respective rules, do not conceal the fraud as the defendants did in this case. Instead, seek legal counsel or a government contractor defense lawyer that understands the process.
When you find that you may be exposed to SBA 8(a) Program fraud or some other small business fraud, do not start transferring employees. Instead, you may want to consider the mandatory disclosure requirements. You must avoid being charged with exploiting small business set aside programs by committing fraud.”
VA OIG Investigations
In government contracting, a majority of False Claims Act cases involve committing fraud in relation to the set-asides for services disabled veterans (SDVOSB). VA OIG investigations follow identical paths to those conducted by other agencies. Many VA government contractor fraud cases involve providing false information to gain the SDVOSB status, pass-through schemes, and submitting false invoices.
Veterans Administration VA OIG Investigations Attorneys for SDVOSB Fraud
Similar to the SBA OIG, VA OIG investigates government contracting fraud. Most of the cases involved SDVSOB compliance violations which ultimately lead to false claims lawsuits. The VA’s 2021 Semiannual Report to Congress summarized that during the reporting period from April 1 to September 30, 2021 VA OIG audits, evaluations, investigations, inspections, and other reviews identified more than $2.9 billion in monetary impact for a return on investment of $29 for every dollar spent on oversight.
Specifically, VA OIG issued 214 reports and publications on VA programs and operations, made 849 recommendations, and conducted investigations that led to 113 arrests. This statistic reflects the level of aggressiveness the VA OIG brings when investigating government contractors.
- At the end of the day, SDVOSB small businesses must make sure before bidding or even after award (or both) that they comply with the various VA and SBA regulations that regulate small business government contracting.
The following are examples of situations where OIG investigations led to indictment and sentencing for government procurement fraud.
Owner of Sham ‘Veteran-Owned’ Company Sentenced for $100 Million Fraud
In this Boston case, a Chelmsford man was sentenced in U.S. District Court in Boston in connection with recruiting veterans as figurehead owners of a construction company in order to receive specialized government contracts for veterans.
This particular procurement fraud scheme involved the defendant that was investigated, indicted and charged for defrauding the Federal government by abusing Service-Disabled Veteran-Owned Small Business (SDVOSB) set-asides for his own financial gain. It is true that the SDVOSB contractor may have had legal defenses or the government simply got to a result without really understanding the VA SDVOSB regulations.
The lesson learned here is that without the proper legal defense team aboard, the results could be disastrous. Having the best government contract fraud lawyer on your team to defend against what can be a better result is critical.
In 2017 in California, owners of local construction and telecommunications companies were arraigned in federal court on criminal charges that they fraudulently obtained more than $11 million in federal contracts specifically set aside for service-disabled veteran-owned businesses (SDVOSB).
The owners were indicted on a fourteen-count indictment returned April 7 2017 by a federal grand jury in San Diego.
The criminal charges resulting from OIG investigations showed that government contractor defendants participated in a conspiracy to defraud the government by forming a joint venture (JV) while falsely representing that they qualified as service-disabled veteran-owned small businesses (“SDVOSB”).
Based on the false claim to VA SDVOSB eligibility, the conspirators fraudulently obtained approximately $11 million in federal government construction contracts or task orders with the Department of Veteran Affairs (“VA”) and the Army Corps of Engineers (“ACE”). In this case, after the award, the small businesses then signed a secret side agreement, the indictment describes a variety of ways in which the JV did not operate as a valid SDVOSB. The VA OIG pursues these types of cases and not knowing how to form joint ventures or teaming agreements can lead to severe criminal and civil liability.
When looking for a criminal fraud defense lawyer involving federal contracts, you want to act quickly because VA OIG investigations usually have been ongoing long before you were made aware that you were a target. You want to get your constitutional and legal defenses into play immediately.
DOJ OIG Investigations
DOJ OIG federal agents often investigate government contractors for alleged violations of fraud, abuse, and integrity laws. DOJ investigations sometimes lead to criminal prosecution or civil or administrative action. DOJ involvement in procurement fraud cases results from qui tam litigation, where the DOJ takes over the investigation and litigation of the case on behalf of the government. DOJ OIG investigations can also lead to criminal indictment and criminal litigation. Having the right contractor criminal defense lawyer is critical given the complex procurement regulations that lead to investigations.
OIG Investigations FAQs
Q. What Authority Does OIG Have?
A. Under the Inspector General Act of 1978, as amended, each OIG investigations office can carry out investigations and audits that “promote economy, efficiency, and effectiveness in the administration of, and … prevent and detect fraud and abuse in … [the Department’s] programs and operations.”
OIG investigations can include government or contractor employees, management officials, and impacted agency programs and operations. An OIG investigation may involve criminal allegations, civil actions and administrative issues. Department OIG investigations can also include allegations of small business size violations under SBA small business regulations; violation of SBA affiliation rules, limitations on subcontracting and more.
Q: What is an OIG investigation?
A: An OIG investigation is put into place to resolve certain credible allegations or complaints about statutory violations or suspicious contractor actions that can lead to potential violations. Common OIG investigations have recently turned to Buy American Act fraud or False Claims charges resulting from Trade Agreements Act fraud.
The results of OIG investigations can ultimately lead to administrative action by the agency. The result of an investigation can also lead to charges or indictments for criminal and civil action by the U.S. Department of Justice (DOJ).
Q: What matters do OIG investigate and how do they start?
A: OIG investigates several important matters. Especially if they are directly targeting a specific program such as SBA small business or VA SDVOSB government contracting matters. Oftentimes these investigations include government fraud involving procurement contracts, kickbacks, false claims to the government and more. OIG initiates investigations triggered by information received from various sources. This includes contracting officer referrals, agency OIG fraud waste and abuse hotlines, GAO bid protests, GAO reports and DOJ referrals and whistleblowers to mention a few.
Q: Who conducts OIG investigations?
A: OIG investigations are conducted by special agency criminal investigators, assistant US attorneys, and other federal law enforcement investigative units.
Q: What is an employee’s obligation during DOJ or SBA OIG investigations?
A: Employees must fully cooperate with OIG Investigators. When called to testify, employees must be candid and tell the truth. If they are represented by an attorney, there may be a fifth amendment or other privileges or objections that can be made.
Q. Can OIG get company emails, voicemails and phone records? Generally, yes. Without full cooperation, an agency may obtain search warrants to get the information needed.
A. The Inspector General Act authorizes OIG to “have access to all records, communications (e.g., e-mail, voicemail, instant messaging), reports, audits, reviews, documents, papers, recommendations and other material available to the Department that relate to Department programs and operations.” OIG is authorized to access electronic records and data systems such as computers.
Having the right OIG investigations attorney on your side can potentially reduce the exposure of privileged documents. For example, if you don’t know your rights or constitutional or statutory protections, a court may deem those protests waived. If you are called for an interview or testify you should not attempt to give vague answers or mislead the investigators. Those actions can lead to further criminal or civil liability.
Q: What rights do an employee or person testifying have during an OIG investigation?
A: Individuals, government employees, contractor employees or even business entities have the right to assert their Fifth Amendment right to avoid self-incrimination.
Q. Can OIG investigations lead to both criminal and civil case?
A. Yes, even though an investigation may start as a civil case, OIG investigations can also lead to criminal prosecution although they have different levels of proof.
As mentioned before individuals and companies do want to wait until it is too late to engage defense counsel.
Q: Who can employees discuss OIG investigations with?
A: If OIG contacts you or your company about an investigation, an employee can mention the matter to management or the supervisor. However, you should not discuss the investigation with other employees etc. In fact, this may be one of the questions asked by OIG investigators.
As a manager, you should refrain from discussing OIG investigations with employees. You also should not retaliate against the employee if he or she is the whistleblower. Unless you have a valid right to assert your fifth amendment rights, you must cooperate with investigators. If you do have a right to claim protection, you should still attend the session and assert rights at that time or after each question.
Tip: OIG cannot compel you as an employee to be interviewed; As management, you can direct your employees to be interviewed as requested by OIG, and take disciplinary action if that person declines.
Q: Can a government attorney represent contractor employees or personnel?
A: No. Government attorneys represent the federal agency at issue and cannot provide legal advice to contractors or non-government personnel. Contractors or their employees should seek legal advice from a private attorney that understands the federal procurement process.
Q. What are common issues to avoid as a government contractor during OIG investigations?
A. When going through an investigation, you should never choose to cooperate simply because you feel that you have nothing to hide.
Government prosecutors don’t care about that. The interview and your answer can turn what would appear to be an innocent conversation into a situation where you are now a target of a government contract fraud case or criminal indictment for conspiracy charges.
Q. Can you speak to your spouse regarding guilt or innocence of procurement fraud?
A. As a general rule, the spousal privilege could be invoked. However, the simplest thing to do is not discuss your potential guilt of innocence with anyone. Having a fraud criminal defense lawyer is probably the safest best to guard attorney-client communications.
Q. Regarding procurement fraud during OIG Investigations do small businesses involved in a joint venture get to share the same attorney?
A. This is not advisable because although the joint venture in government contracting may be regarded as a separate business entity, each participant still retains their separate identity. This means that there can be conflicts down the road. Each company may want to look at retaining different defense lawyers.
Q. Can contracting officers punish contractors by referring them to law enforcement for an OIG investigation?
A. The correct answer is no. However, this can be tricky. The contracting officer, after seeing credible evidence of violations is required to refer the matter to the respective law enforcement agency. However, many contractors claim that the investigation started because of a preliminary situation such as the negotiation of a government contract claim where the CO threatens to send the contractor to OIG or DOJ.
Q. Should the OIG Investigator or DOJ be making SBA small business size determinations?
A. The preferred answer is no. Congress has empowered the SBA to provide oversight in the small business programs and to make determinations as applicable to 13 CFR 121.103. There may be an argument for due process violations when the SBA was never involved in the criminal charge brought under the False Claims Act stemming from an SBA size and affiliation allegation.
Contact Our Government Contract Fraud and Inspector General DOJ, VA and SBA OIG Investigations Lawyers for Immediate Help at 1.866.601.5518.