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The federal False Claims Act (“FCA”) applies to remedy many types of fraud perpetuated by private businesses that contract with federal agencies — including Disadvantaged Business Enterprise program fraud. The FCA provides incentives for a whistleblower, known as “relator” under the FCA, to bring a lawsuit against any business which has defrauded the United States. Such an FCA lawsuit is filed under seal to conceal its existence while the government investigates the matter. After the investigation, if the United States intervenes in the case and recovers money from the defendant(s), the whistleblower is typically entitled to a share of between 15 and 25 percent of the United States’ recovery.
One type of fraud covered by the FCA involves false claims to defraud “Disadvantaged Business Enterprise” (“DBE”). DBE programs promote diversity in government contracting by requiring prime contractors to make reasonable efforts to allocate a percentage of subcontracts on a project to “small” businesses owned by persons from traditionally disadvantaged groups, including minorities, women and service-disabled military veterans.
DBE programs are abused, however, by non-DBE companies that say a small DBE company is performing work on a contract — where, really, the small company is just a front. The large company actually performs the work at a lower cost and it keeps the extra profit. DBE fraud is seen often in the construction industry, where prime contractors defraud state DBE programs connected to U.S. Department of Transportation ("DOT") funding.
Whistleblowers who are willing to speak up about this fraud have brought many successful lawsuits against unscrupulous contractors. And they have received huge money awards for their willingness to come forward.
Below are just a few examples of big wins in DBE fraud cases. If you suspect you have witnessed fraud on the government, we encourage you to contact us for a free, confidential evaluation of your claims.
In 2014 a whistleblower was awarded over $2 million out of a $12 million recovery by the government for bringing an FCA lawsuit against McHugh Construction Company in Chicago. Management representatives directed by McHugh Construction, a non-DBE, determined the materials to use, negotiated the pricing, often drafted the purchase orders and managed the workforce on federally funded DOT construction projects. Yet McHugh Construction has falsely certified that women-owned DBEs would perform such work.
In 2016 a whistleblower was awarded $500,000 out of a $2,250,000 recovery by the government for bringing an FCA lawsuit against Mountain States Contractors in the United States District Court for the Middle District of Tennessee. Mountain States “loaned” its employees to, paid for the employee health insurance for, and “leased” equipment to, the purportedly independent DBE on several federally funded DOT construction projects.
In 2016, a whistleblower was awarded $875,000 out of a $5 million recovery by the government for bringing an FCA lawsuit against Hayner Hoyt Corporation based in Syracuse, New York. Senior managers of Hayner Hoyt controlled all of the major business decisions and provided the employees for work on contracts with the U.S. Department of Veterans Administration, so that certifications that the work was actually performed by another company owed by a service-disabled veteran were false.