Tuesday, December 2, 2014

Dept of Justice Intervenes in a Whistleblower Suit Alleging False HUBZone Certification

Historically Underutilized Business Zones (HUBZones) are areas that have historically had trouble attracting business. Companies who have their primary place of business inside a HUBZone, often receive preferential treatment when competing for Government contracts. Some Government contracts are exclusively set aside, or reserved, for HUBZone companies.

To find out whether your primary business location is situated in a HUBZone, refer to the SBA's HUBZone map.

The primary purpose in SBA's HUBZone program is to help create jobs in areas that historically, have had trouble attracting business. Companies that maintain their principal office in a zone (and meet certain other requirements) can apply to the SBA for certification as a HUBZone small business company.

As one might expect, this program is sometimes abused by companies that seek the preferential treatment but do not maintain their businesses in a HUBZone area. Such is the complaint filed yesterday involving a contractor making false statements to the SBA to obtain HUBZone certification.

The complaint alleges that the company first applied to the HUBZone program in 2010 by claiming that its principal office was located in a designated HUBZone. The complaint further alleges that the office was a "virtual office" where no employees worked - the real office was in a non-HUBZone location. The company also falsified a lease agreement for its purported HUBZone office.

After obtaining the HUBZone certification, the company then used the certification to obtain contracts from the Corps of Engineers, the Coast Guard, and the Interior Department worth millions of dollars. One contract alone was worth $11 million.

The scheme might have continued indefinitely if it were not for a whistleblower. The whistleblower, in fact, was an employee of a competitor whose duties included monitoring competitors' bidding activity. While doing so, she learned that the company had listed an Orlando, Florida address for HUBZone certification when she knew that it was actually located in Chuluota, Florida, a non-HUBZone area.

If you want to read the entire Department of Justice press release, click here.

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