A whistleblower’s False Claims Act lawsuit filed on behalf of the U.S. government against a Virginia Beach-based defense contractor and its subsidiaries has settled for $16 million, resolving allegations that the companies fraudulently obtained small-business contracts and engaged in illegal bid rigging.
According to the U.S Department of Justice (DOJ), the settlement with contractor ADS Inc. is one of the largest ever in connection with small-business contracting fraud.
The whistleblower lawsuit was filed in 2013, alleging ADS conspired with small businesses that it owns and controls to apply for several valuable defense contracts reserved for small businesses.
ADS subsidiaries Mythics Inc., London Bridge Trading Co., and MJL Enterprises LLC, falsely claimed to be eligible service-disabled, veteran-owned companies, the lawsuit alleged. This scheme allowed those companies to win contracts that should have gone to small veteran-owned enterprises.
SEK Solutions and Karda Systems falsely claimed to qualify as socially or economically disadvantaged businesses under the Small Business Administration’s 8(a) Business Development Program, allowing them to receive contracts for which they failed to qualify, federal prosecutors alleged.
All the companies “knowingly made misrepresentations concerning the size of the businesses and their eligibility” for the small-business contracts, the U.S. Justice Department said.
ADS also engaged in illegal bid rigging schemes that inflated or distorted prices charged to the government under certain contracts, federal prosecutors claimed.
“The actions of ADS and its affiliated entities deprived legitimate small businesses of valuable federal contracting opportunities.” said Acting Small Business Administration Inspector General Hannibal “Mike” Ware. “OIG will aggressively pursue companies that, through false statements, wrongfully benefit from small business set-aside contracts.”
Washington D.C.-based Ameliorate Partners LLP, which brought the False Claims Act suit against ADS, will receive $2.9 million as an award.
According to The Virginian-Pilot, Ameliorate evolved from a small dive shop into a billion-dollar business providing diving goods and services to the U.S. for defense purposes.