Legal Meets Practical

On October 7, the U.S. Government filed a civil complaint* against a company for damages and civil penalties arising from false claims made in connection to SDVOSB status. The Complaint is one worth looking at, because it gives a complete and comprehensive rundown of what, exactly, can happen if one goes the rent-a-vet route. It is a cautionary tale for every SDOVSB competing in the federal arena.

The Complaint alleges that from 2008 through 2013, the Defendants – consisting of an SDVOSB and three individuals, manipulated the SDVOSB Program and the Veterans First Contracting Program in obtaining $24 million in SDVOSB set-aside contracts. (U.S. v. Strock Contracting, Inc., et. al., 1:15cv00887). In a nutshell, in 2006 they created a corporation, Veteran Enterprises Company (VECO), and appointed a service-disabled veteran as its President and 51% owner. At the time the individual was courted as the “veteran owner,” he worked full-time as a New York State Parole Officer, a position he held through 2013. The Defendants assisted VECO in obtaining its SDVOSB certifications (both self-certifications and through the VA), despite knowing that it did not meet the necessary criteria.

After VECO obtained its certifications, it successfully competed for a number of SDVOSB set-aside contracts. As set forth in the Complaint, during the next few years, the service-disabled veteran did little but sign the contracts and proposals presented to him (because, as anyone in the VetBiz registry knows, one element the VA scrutinizes is whether the veteran is signing these documents). He also acted as a figurehead in attending the pre-award and post-award meetings held by the contracting agencies, and performed inspections.

According to the Complaint, the service-disabled veteran earned a small portion of the monies reaped by this scheme, with Strock and the associated individuals reaping the vast majority of profits. In fact, he even earned less than the 5% he was promised. (This flies in the face of the regulatory requirements that the veteran be the highest-compensated employee).

In general, the Complaint states that: “[b]y diverting contracts and benefits therefrom intended for service-disabled veterans towards an ineligible company, defendants undercut the purpose of statutorily created programs to encourage contract awards to legitimate SDVO small business.” It goes on to provide a rundown of the eligibility requirements set forth by both the SBA’s SDVOSB Program, and the VA’s Veterans First Contracting Program. Its five Counts accuse the defendants of violating the False Claims Act by: presenting false claims, making or using a false record of statement, and conspiring to submit/cause to be submitted a false claim or to make or use a false record or statement; as well as committing common law fraud and being unjustly enriched. It seeks millions of dollars from the Defendants, including treble damages associated with the false claims.

Because the Complaint comprehensively addresses the grounds for each claim, it’s helpful to understand what you’re not allowed to do. Stay tuned next week for a more detailed analysis (which you, hopefully, will never need. But if there’s ever a question…).

*This matter is yet to be adjudicated, and liability determined.  All facts set forth in this article are taken from the allegations made in the Complaint, which have yet to be determined as true.

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