A former 8(a) program participant has agreed to pay nearly $8 million to settle allegations of 8(a) program fraud.

According to a Department of Justice press release, LB&B Associates Inc. will pay $7.8 million to resolve claims that it improperly obtained 8(a) certification (and 8(a) contracts) even though it was not controlled by a disadvantaged individual.

The LB&B settlement stems from a False Claims Act lawsuit filed by two former employees.  In their lawsuit, the former employees alleged that LB&B made false claims in pursuing 8(a) certification and contracts, as well as false claims in connection with contracts it obtained as a mentor in the SBA’s 8(a) mentor-protege program.  The government then intervened in the case (except for the mentor-protege component).

The government contended that, in seeking 8(a) certification, LB&B falsely represented that it was controlled by Lily Brandon, a socially and economically disadvantaged individual.  According to the government, however, Ms. Brandon did not exercise actual control over the company when it was certified, nor did she control the company when it won and performed 8(a) contracts.

The settlement covers all of the allegations made by the whistleblowers and the government, including the mentor-protege allegations.  The whistleblowers are in line to share more than $1 million from the settlement.

As with all such settlements, the allegations against LB&B are only allegations; there was no admission or finding of wrongdoing.  However, the eye-popping $7.8 million figure should serve as a warning to anyone tempted to commit 8(a) program fraud.