Category Archives: Suspension Debarment and Penalties

Posts in this category deal with suspension, debarment, fines, and other penalties imposed on government contractors, as well as settlement agreements reached between the government and contractors to resolve these issues.

AbilityOne Program: False Claims Act Allegation Leads to $5 Million Settlement

Posted on by

More than once, a small government contractor has complained to me that there is “just no way” a particular AbilityOne contract recipient is performing at least 75% of direct labor hours with people who are blind or have other significant disabilities, as is required for a non-profit agency to participate in the AbilityOne Program.

Now those same contractors might be saying “I told you so.”  The U.S. Department of Justice announced yesterday that a Texas company has agreed to pay $5 million to resolve False Claims Act allegations that the company failed to comply with the 75% direct hour requirement over a period of six years, but misreported its compliance to the government.

Continue reading →

GAO: Contractor Cannot Claim “Experience” From Novated Contract

Posted on by

Michael Jackson famously bought the publishing rights to most of the Beatles’ songs, but purchasing the Beatles’ music didn’t mean that Jackson could claim to have appeared on the Ed Sullivan Show in 1964.

As the GAO recently held, a similar principle applies in government contracting: simply buying another company’s government contract does not necessarily entitle the new contractor to lay claim to the other company’s experience.

Continue reading →

Idaho Man Pleads Guilty to HUBZone Fraud Charge

Posted on by

An Idaho man has pleaded guilty to a HUBZone fraud charge.  According to a U.S. Department of Justice press release, last week, Patrick Large, the owner of Quality Tile and Roofing Inc., pleaded guilty to one count of wire fraud resulting from a HUBZone scheme.

Large admitted defrauding the government by falsely representing the location of two employees, apparently in order to satisfy the SBA’s “principal office” requirement for HUBZone firms.  Based on Large’s representation, the SBA admitted Quality Tile to the HUBZone program.  Quality Tile subsequently won a HUBZone set-aside contract valued at approximately $220,000.

As part of the guilty plea, Large agreed to pay $150,000 in restitution.  However, he still faces the possibility of additional penalties, including prison time.  He is scheduled to be sentenced on January 8, 2013.

Nearly Half of DoD Debarments Exceed Three Years: Highlights From the DoD Suspension and Debarment Report

Posted on by

Yesterday, the GAO released a report on the DoD’s use of suspension and debarment procedures.

The GAO concluded that during fiscal years 2009-2011 (the years covered by the report), the DoD had active referral systems in place to initiate suspension and debarment proceedings, although the GAO determined that the DoD did not properly inform the GSA of its “compelling reasons” for doing business with suspended or debarred contractors in a handful of cases.

The report weighs in at 34 pages, so in case you did not have time to read the entire thing, here are some of the highlights.

Continue reading →

Federal Court: False Claims Act Covers Deliberate Underbidding

Posted on by

Deliberate underbidding on federal government contracts–known in industry parlance as “buying in”–is not a terribly unusual practice.  Contractors may buy in for several reasons, such as an effort to gain a toehold in the federal marketplace or the belief that modifications to the contract will result in a higher actual price.

However, contractors thinking of underbidding, for whatever reason, should proceed with caution in light of a new federal court case.  In United States ex rel. Hooper v. Lockheed Martin Corp., No. 11-55278 (9th. Cir. 2012), the U.S. Court of Appeals for the Ninth Circuit held that underbidding and/or giving false estimates, at least in the context of a cost reimbursement contract, may be violations of the False Claims Act.

Continue reading →

8(a) Contractor Fraudulently Evades 8(a) Sole Source Threshold–With Procuring Agency’s Knowledge

Posted on by

A soon-to-graduate 8(a) contractor submitted a fraudulent proposal designed to evade the 8(a) Program’s sole source limits, with the full knowledge of the procuring agency in question, according to a decision issued by the U.S. Court of Federal Claims.

As described in Veridyne Corporation v. United States, No. 06-150C (Fed.Cl. 2012),Veridyne Corporation greatly underestimated the cost of a contract in order to slip it under the 8(a) Program’s sole source threshold, but the scheme eventually collapsed, leaving Veridyne liable for false claims and procurement fraud–and leaving the procuring agency in question with egg on its face and a lot of explaining to do.

Continue reading →

Convictions in Massive DOT DBE Fraud Case Put Spotlight on Illegal Small Business “Pass-Throughs”

Posted on by

“Guilty.”

That was the verdict Pennsylvania jurors handed down on 26 of 30 charges against Joseph W. Nagle, stemming from what an FBI press release called a 15-year scheme to commit fraud within the DOT’s Disadvantaged Business Enterprise program.  Nagle, the former president, CEO and part-owner of Schuylkill Products Inc. was convicted of conspiracy to defraud the DOT, 11 counts of wire fraud, six counts of mail fraud, and 11 counts of money laundering, among other charges.  Nagle faces the possibility of many years in federal prison and millions of dollars in fines and restitution.

Nagle’s crimes, which involved using a small company as a “front” to pass DBE work through to non-DBE concerns, should serve as a warning that small government contractors can face penalties much more severe than a successful SBA size protest for serving as “pass-throughs” to other businesses.

Continue reading →