Consumer Fraud

Defense Contractor Pays $7.8 Million To Resolve Fraud Allegations

whistleblower USA Defense Contractor Pays $7.8 Million To Resolve Fraud AllegationsA defense contractor has agreed to pay $7.8 million to settle allegations with the U.S. government that it illegally exploited military contracts set aside for small businesses.

The U.S. Attorney’s Office for the Southern District of Georgia said that Arena Event Services Inc., which does business as Arena Americas, coordinated with Military Training Solutions LLC (MTS) to obtain the small business contracts.

Congress mandates that a certain amount of government contracts go to small businesses as a way to encourage small business growth. These contracts prohibit the small business from being affiliated with a non-small business, while also limiting the amount of work that can be subcontracted to a non-small business.

According to federal officials, Arena Americas paid MTS to bid on and obtain the defense contracts reserved for small businesses. Under this arrangement, Arena Americas performed the contractual work that MTS, as a small business, was supposed to perform.

MTS previously entered into a settlement agreement with the U.S. to resolve its liability under the False Claims Act, and MTS owner Robert Obradovich pled guilty to one felony count of receiving unlawful kickbacks in a similar scheme.

As a result of the scheme, which federal prosecutors said was perpetrated at Fort Stewart, Georgia and other military installations across the country, millions of dollars in defense contracts wrongfully were awarded to Arena Americas instead of legitimate small businesses.

The Arena Americas settlement resulted from work of the Southern District of Georgia’s Procurement Fraud Task Force, which investigates fraud at military bases in the Southern District of Georgia. The Procurement Fraud Task Force has brought about several criminal prosecutions and civil settlements from fraud schemes at Fort Stewart, Fort Gordon, Hunter Army Air Field, and the Kings Bay Naval Submarine Base.

U.S. Attorney Bobby Christin said the settlement was a win for U.S. taxpayers and said his office would continue to prosecute “any attempts to illegally exploit the system for a company’s personal advantage.”