Tuesday, June 9, 2015

Abusing the SDVOSB Program

The Department of Justice issued a press release late last week announcing a Grand Jury indictment of three people for abusing the SDVOSB (Service-Disabled Veteran-Owned Small Business) program in Puerto Rico. The press release calls it a multi-million dollar fraud against the U.S. Government but it provides no further specifics on the magnitude of the fraud (or alleged fraud, at this point).

There was this man who owned a construction company called IRC Air Contractors. He had a brother who was a Service Disabled Veteran. Together they decided to take advantage of the disabled brother's status so they created a new company called Belko General Contractors. Turns out however that Belko was just a front company for IRC Air Contractors, created solely to obtain contracts that were set-aside for SDVOSBs.

This went on for quite some time. Between 2007 and 2014 Belko received a bunch of non-competitive, set-aside and sole-source government contracts. All of these were awarded to Belko under false pretense.

Here's something interesting. The disabled brother was also a full-time letter carrier for the U.S. Postal Service which calls into question the severity of his disability in the first place. Additionally, the disabled brother was not in charge of day to day operations and really had no role in anything connected to Belko or IRC Air Contractors. He was simply, as Justice put it, a "rent-a-vet".

These type of schemes are really not too hard to uncover. It just takes someone within the Government to be observant or a whistle-blower from inside the company. Based on the limited amount of detail presented in the press release, we don't know whether the Government was overcharged for the work performed. We do know that programs designed to benefit service-disabled veterans was abused and the awards did not benefit the targeted beneficiaries.

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