A contractor has agreed to pay the government $1 million–and to dissolve as an ongoing entity–to resolve allegations that it falsely claimed SDVOSB status in order to receive VA SDVOSB set-aside contracts.

According to a government press release, the settlement comes after VA investigators alleged that the company’s non-veteran partner made all important corporate decisions, while the service-disabled veteran partner spent much of his time away from the company.

From 2008 to 2013, Veterans of the Land, Inc. performed landscaping and cemetery restoration services under VA SDVOSB set-aside contracts.  But then, during a routine audit of SDVOSB contractors, the VA became concerned that VOTL was not controlled by service-disabled veterans.

According to the VA’s investigators, VOTL’s non-veteran partner, Robert Laurel, recruited a relative, Enrique Escamilla, who is a service-disabled veteran, to partner in the company.  But Escamilla lived in Hawaii, far from VOTL’s operations in Santa Maria, California.  More importantly, according to the government, “Laurel allegedly made all important corporate decisions, including leasing equipment from another company that he owned.”

The government brought charges against VOTL under the False Claims Act, contending that VOTL violated the FCA by claiming to be a SDVOSB, when it was actually controlled by a non-veteran.  To settle the False Claims Act allegations, VOTL agreed to pay the government $1 million, which “represents virtually all of VOTL’s assets.”  VOTL also agreed to dissolve as a corporation.

The government’s allegations in the VOTL case sound like a classic example of a “rent-a-vet” scheme.  To qualify as a SDVOSB, it isn’t enough that service-disabled veterans own at least 51% of the company.  When non-veterans control a company, the company does not qualify as a SDVOSB–and, as the VOTL case demonstrates, the government may crack down hard if the company attempts to claim SDVOSB status.