Friday, August 29, 2014

Contractor Pleads Guilty for Falsifying Small Business Status

It may be just that our awareness has been piqued by so many recent Department of Justice's press releases or there has actually been an increase in the number of Government contractors charged (and convicted) for obtaining contracts set aside for small businesses, women-owned businesses, or small disadvantaged businesses under false pretense. Another case was reported this week.

In this latest announcement, a construction contractor used a fronting company to secure 45 contracts totaling $23 million that were set aside to be awarded to Service-Disabled Veteran-Owned Small Businesses (SDVOSB). The Government's investigation revealed that the one company had set up a second company and found a service disabled veteran to act as a figurehead. (Justice used the term "rent-a-vet"). Evidence showed that the primary company controlled the second company and even set up all its CCR and ORCA (now SAM) certifications and representations. As a result of the misrepresentation, the company received at least 45 contracts that should have been awarded to SDVOSB contractors.

The principle behind the scheme plead guilty with sentencing scheduled for later. He could face jail time but he will definitely forfeit the profits he earned on those contracts and his compnaies (both the primary and sham corporation) have been suspended (and will probably be debarred) from obtaining future Government contracts.

It seems to us that this kind of fraud is not particularly sophisticated in that it can be easily investigated and proven. Perhaps the perpetrators believed they can somehow avoid detection with clever planning and careful implementation. That might work for awhile but even the most clueless COR (contracting officer representative) is going to figure out after awhile that something is not right and will probably report it. Or, a disgruntled employee could become a whistle-blower.

The DoJ press release did not state how the scheme was uncovered. These press releases never disclose that kind of information. However, since the Inspector General (IG) was involved in the investigation, it suggests that the accusation might have come through a "Hot Line" call.

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