Friday, August 11, 2017

Defense Contractor Pays $16 Million to Settle Allegations it Falsified Its Small/Disadvantaged Status

ADS Inc, a Defense Contractor based in Virginia Beach, Virginia, has agreed to pay the Untied States Government $16 million to settle allegations that conspired and caused small businesses to submit false claims for payment in connection with fraudulently obtained small business contracts. The whistleblower who filed the initial lawsuit, where the Government later intervened, will get a check for $2.9 million.

This settlement, according to the Department of Justice, ranks as one of the largest recoveries involving alleged fraud in connection with small business contracting eligibility.

In order to qualify as a small business, companies must meet defined eligibility criteria, including requirements concerning (i) size, (ii) ownership, and (iii) operational control. The initial whistleblower  alleged that ADS, together with several purported small businesses that it controlled, fraudulently induced the Government to award several small business set-aside contracts by misrepresenting eligibility requirements.. Small businesses affiliated with ADS falsely claimed to be eligible service-disabled veteran-owned companies or socially or economically disadvantaged businesses under SBA (Small Business Administration) 8(a) business development program. According to the Justice Department, ADS and its affiliates knowingly made misrepresentations concerning the size of the businesses and their eligibility.Additionally, ADS engaged in illegal bid rigging schemes that inflated or distorted prices charged to the Government.

ADS's actions deprived legitimate small businesses of federal contracting opportunities.

Incidentally, ADS has a comprehensive Code of Conduct that it publishes on its corporate website. Maintaining a Code of Conduct is required by Government contracts over a certain threshold but often times, as in the case of ADS, there is a wide chasm between public personas and actual practices done in dark secret places. Anyone can do a cut and paste job with codes of conduct found splattered across the internet. Its all poppycock unless company executives set the proper tone at the top.

More details are contained in the Justice Department Press Release here.

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