Monday, November 26, 2018

Secret Side Agreements and "Rent-a-Vet" Schemes

By all appearances, A&D General Contracting was a fairly successful Government contractor performing construction work for VA (Veterans Affairs) and the Army Corps of Engineers in California. Together in joint venture with another company, (Action Telecom), they pursued and were awarded more than $11 million in contracts set aside for service-disabled veteran-owned small businesses (SDVOSB). The problem was, neither A&D or its owner Andrew Otero qualified for those set-aside contracts.

Mr. Otero never served in the military, much less being disabled as a result. To "appear" qualified, Otero and a fellow named Ramsey (who was a service disabled veteran) entered into a joint venture agreement whereby Ramsey's company (Action) would be the managing venturer, employ a project manager for each of the set-aside contracts, and receive the majority of the JV's profits. So far, so good. However, there was the matter of the secret side-agreement.

Six months after forming the joint venture, Otero and Ramsey signed a secret side agreement that made clear the joint venture was ineligible under the SDVOSB program. It was pretty obvious since the side agreement specifically stated that the parties created the joint venture so that A&D could simply used the  Disabled Veteran Status of Action Telecom to bid on contracts. The side agreement also stated that A&D, not Action, would run the construction jobs. Thirdly, the side agreement stated that A&D wold keep 98 percent of every payment with Action receiving only two percent.

Well, there was the matter of the side agreement but how did the joint venture work in practice. Not so well. Ramsey, the disabled vet, had a full-time job at another telecommunications company. Otero, not Ramsey, controlled the day-to-day management, daily operations and long-term decision making of the joint venture. Also, Otero, not Ramsey appointed A&D employees as project managers for each and every contract and task order.

Last week, a federal jury convicted Mr. Otero on charges of fraudulently obtaining federal contracts specifically set aside for SDVOSBs. Sentencing is scheduled for next February.

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