A HUBZone contractor has been accused of HUBZone program fraud for allegedly falsely claiming to be located in a HUBZone, when in fact the office in question was a “virtual office” where no employees worked.

According to a Department of Justice press release, the contractor not only misrepresented its principal office location, but submitted a fabricated lease to the SBA as part of its HUBZone application.

The DOJ contends that when Air Ideal, Inc. applied for HUBZone certification in 2010, the company falsely claimed to maintain a principal office in a HUBZone.  In fact, the DOJ says, this HUBZone location was a “virtual office,” and no Air Ideal employees worked there.  Air Ideal’s true principal office was in a non-HUBZone location.  The DOJ alleges that Air Ideal not only misrepresented its principal office location, but submitted a fabricated lease to the SBA in connection with its HUBZone application.

Air Ideal was apparently quite successful in the HUBZone program.  The DOJ alleges that the company “used its fraudulently procured HUBZone certification to obtain contracts . . . worth millions of dollars” from various government agencies.  Each of these contracts “had been set aside for qualified HUBZone companies.”

Air Ideal is being charged under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.  Like many procurement fraud cases, the Air Ideal matter initially arose as a “qui tam,” or whistleblower action under the False Claims Act.  Should the DOJ’s actions result in civil penalties or a financial settlement, the whistleblower will be entitled to a portion of the proceeds.

The DOJ press release cautions that these claims “are allegations only, and there has been no determination of liability.”  I will keep you posted.