The Department of Justice (DOJ) has another message for anyone contemplating setting up a “sham” business to take advantage of procurement set-asides: Don’t do it. The DOJ recently filed a False Claims Act complaint against a Western New York contracting company, two owners and an employee, alleging that they submitted false claims for federal contracts intended for service-disabled, veteran-owned (SDVO) small businesses.
The lawsuit, filed in U.S. District Court in Buffalo, New York, alleges that Strock Contracting, Inc. and three individuals defrauded the government by setting up a company called Veteran Enterprises Company, Inc. (VECO) and falsely claiming eligibility for millions of dollars in contracts intended for SDVO small businesses.
Between 2008 and 2013, VECO claimed to have met all the requirements for SDVO small business set-asides and was awarded millions of dollars in such federal contracts. The DOJ complaint alleges that VECO did not meet the requirements and was not entitled to such contracts. In particular, the government alleges that VECO was a sham business whose day-to-day operations were controlled by Strock Contracting and the individual defendants. For example, the purported owner of VECO allegedly did not even have a key to VECO’s offices, which were located in the same building as Strock Consulting.
The case is captioned United States v. Lee Strock, et al, No. 15-CV-887-G (W.D. New York). So far, the claims made in the complaint are allegations only, and there has been no determination of liability. As DOJ notes in its press release, however, “The Justice Department is committed to making sure that only eligible companies participate in these types of federal contracting programs.” No one should doubt that. Don’t play games with the government when it comes to claiming set-aside status. Get it right – and avoid being on the receiving end of a DOJ False Claims Act complaint.
Eric Whytsell is responsible for the contents of this Short Take.
© Jackson Kelly PLLC 2015