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FCA and Compliance Issues Concerning S/M/W/SDV Businesses Enterprises

 In Blog, Government Compliance & Investigations

As I mentioned a few days ago in discussing DOJ’s annual False Claims Act (FCA) press release, the healthcare industry is still the darling of DOJ and whistleblowers. Healthcare matters comprised about 87% of DOJ’s affirmative civil recoveries in FY 2019. That said, Duke University’s $112.5 million grant fraud settlement demonstrates the importance of compliance in any field. Another case from 2019 involved less money, but was a giant in its own right and has some historical precedent here in Nashville.

There is precedent for these types of small, disadvantaged, minority, women’s, and service-disabled veteran business enterprise (S/M/W/SDVBE) cases in the Middle District of Tennessee in the transportation and construction space…Federal contractors need to be alert when bidding on and executing federal contracts with S/M/W/SDVBE requirements.

On August 20, 2019, DOJ announced that the majority owner and former CEO of defense contractor ADS, Inc., would pay $20 million to settle allegations that he violated the FCA by falsely representing that ADS qualified as a small business concern when it did not actually meet federal requirements for that classification. The government alleged that this netted ADS numerous small business contracts it was ineligible to receive.  Combined with prior settlements with ADS and ADS’s former general counsel, the investigation resulted in a nearly $37 million recovery. Taxpayers Against Fraud recently called this “the largest settlement involving allegations of small-business contract fraud in FCA history.”

There is precedent for these types of small, disadvantaged, minority, women’s, and service-disabled veteran business enterprise (S/M/W/SDVBE) cases in the Middle District of Tennessee in the transportation and construction space. In May 2016, Mountain States Contractors, LLC paid $2.25 million to settle allegations that it had improperly loaned its employees and leased its equipment to its DBE subcontractor on a federal transportation project. A few months earlier, Civil Constructors, LLC agreed to pay $400,000 to settle allegations that it improperly used a DBE as a “pass through” entity in order to meet its federal contract requirements. Federal contractors need to be alert when bidding on and executing federal contracts with S/M/W/SDVBE requirements.

SRVH can assist clients in these matters. Subscribe to the SRVH blog for further updates.

Photo By Olivier Le Moal from Shutterstock

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