Legal Meets Practical

Nearly two years after his indictment, a Georgia man was sentenced to two years in prison for fraudulently obtaining several government contracts reserved for service-disabled veterans.

One might argue Mr. Arthur Singleton got off easy. In the 2011 indictment, Singleton was charged with 14 counts of wire fraud and one count of major fraud against the United States. The wire fraud counts each carried a maximum sentence of 20 years in prison and a fine of up to $250,000, and the major fraud count carried a maximum sentence of 10 years in prison and a fine of $1,000,000.

We’ve all heard the stories about fraud in the SDVOSB contracting program, but here’s what’s wild about this one: the contractor’s bid protest may have been what raised government suspicion.

According to the information presented in court, Singleton owned a construction firm named Singleton Enterprises and had over 30 years of experience in the construction industry. In 2007, Singleton approached a Vietnam veteran, who was bedridden from surgeries due to his combat injuries. Long story short, Singleton convinced the veteran to create a solo proprietorship: GMT Mechanical (GMT), which was an alleged SDVOSB. Singleton, which was Singleton’s solo proprietorship, was a non-SDVOSB. Together, the two solo proprietorships formed a joint venture which Singleton held out as an SDVOSB.

From September 2007 to September 2008, the joint venture entered into contracts with the United States Department of Veterans Affairs (VA), the Department of Agriculture, the United States Coast Guard, and the United States Army Corps of Engineers, to perform construction work around the country. According to the U.S. Department of Justice press release, Singleton misrepresented the joint venture as eligible to participate in the set-aside program, all the while knowing it didn’t meet the requirements: the veteran performed no work for either company, did not have an ownership stake, and did not control the management or daily operations of either business. In all, Singleton obtained $1.5 million through these fraudulently-obtained set-asides.

Here’s where it began to unravel. In January 2008, Singleton successfully protested the VA’s rejection of his bid as “non-responsive.” There, the VA had conducted a total set-aside for SDVOSBs, requiring firms to certify that they were eligible SDVOSBs. Singleton’s joint venture had not done so. This protest was sustained because the failure to certify does not make a bid non-responsive. As noted by the GAO, “responsiveness involves whether a bid as submitted represents an offer to perform, without exception, the exact thing called for in the solicitation so that, upon acceptance, the contractor will be bound to perform in accordance with the IFB’s material terms and conditions.” The GAO did, however, recommend that the VA forward the matter of the joint venture’s eligibility to participate in the SDVOSB program to the SBA.

The VA contracting officer promptly protested Singleton’s SDVOSB status. In the subsequent examination by the SBA’s Director for Government Contracting (D/GC), it found the joint venture failed to meet the eligibility requirements for the SDVOSB program. GMT was wholly reliant on Singleton, and therefore its owner could not exercise “independent business judgment…without great economic risk because a non-service disabled veteran, Mr. Singleton, has the power to control GMT.” Also, the D/GC found that the joint venture had violated 13 CFR 121.103(h), which prohibits a joint venture from submitting more than three offers over a two year period. The joint venture had submitted at least ten bids or offers on VA projects. The D/GC disallowed the joint venture from submitting offers on future SDVOSB procurements unless the determination of ineligibility was overturned.

And was it overturned? Nope. On appeal, the SBA Office of Hearings and Appeals (OHA) sided with the D/GC, finding no clear error of law had been committed and confirming the joint venture’s ineligibility to bid on future SDVOSB set-asides.

Three years later came the indictment. As you might note, all the charges were based on the contracts obtained before Singleton’s protest. So just think – if Singleton had just stayed quiet and flown under the radar, he still might be receiving set-asides.

The GAO protest decision which recommended the SBA examine Singleton’s SDVOSB program eligibility may be accessed here: Singleton_GAO_2008. The subsequent decision rendered by the SBA OHA is available here: Singleton_SBA_2008.

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