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.

The settlement arose from a so-called “qui tam” or whistleblower lawsuit filed by a former employee of ReadyOne Industries, Inc., previously known as the National Center for Employment of the Disabled (NCED).  After the lawsuit was filed, the government investigated and apparently believed the whistleblower’s claims were meritorious.  The government ultimately alleged that NCED had employed a “large number” of non-disabled individuals to work on contracts between 2000 and 2006, but misreported the labor hours worked by these non-disabled employees in order to appear to remain above the 75% threshold.

The DOJ press release did not indicate whether NCED admitted its guilt (often, settlement agreements are accompanied by a statement disavowing any admission of wrongdoing).  Of course, even without an express admission, reasonable folks may interpret the $5 million payment as an indication that NCED thought it had a real problem on its hands.

For small contractors who may harbor doubts as to whether all AbilityOne participants are on the up-and-up, it will be heartening to see that the government aggressively pursued False Claims Act penalties in this case.  And if any other AbilityOne participants are fudging the numbers, perhaps the large NCED settlement will make them think twice before continuing their fraudulent practices.