Washington, D.C. – The national law firm of Baron & Budd today announced that the U.S. Department of Justice has reached settlements with three additional defense contractors included in a federal lawsuit the firm filed in 2013 in federal court in the District of Columbia. The settlement resolves allegations by Baron & Budd’s whistleblower clients that Virginia-based MJL Enterprises, LLC; SEK Solutions, LLC; and Karda Systems, LLC violated the federal False Claims Act (FCA) by illegally obtaining government contracts set aside for small businesses, including service-disabled veteran-owned small businesses and those which are socially or economically disadvantaged. MJL Enterprises agreed to pay $400,000, SEK Solutions agreed to a sum of $140,000 and Karda Systems has agreed to pay $80,000.
Today’s announcement is related to DOJ’s 2017 settlement with Virginia Beach-based defense contractor Atlantic Diving Supply, Inc. (ADS) for $16 million, which resolved allegations that ADS violated the FCA by illegally obtaining government contracts set aside for small businesses and businesses with special ownership. Neither ADS nor any of the three small businesses have admitted to any guilt.
MJL Enterprises is alleged to have obtained small business set-aside contracts by representing itself as a qualified service disabled veteran-owned small business while it was affiliated with ADS. SEK Solutions is alleged to have similarly misrepresented its eligibility to bid on and receive certain set-aside contracts for qualified women-owned small businesses when SEK was not eligible based on its affiliation with ADS. The government also alleges that both SEK and Karda misrepresented themselves as socially or economically disadvantaged businesses under the Small Business Administration’s 8(a) Program despite their affiliation with the much larger ADS. It is further alleged that MJL Enterprises, SEK Solutions and Karda Systems participated in illegal bid collusion or rigging schemes that inflated or distorted prices, or otherwise harmed the government.
“It’s understandable that a small business might think it helpful to team up with a larger contractor to gain the experience they need to secure federal contracts,” said Scott Simmer, head of the whistleblower and qui tam group at Baron & Budd. “However, these small businesses need to understand that, if done improperly, teaming can cause them to lose their eligibility for small business contracts. Many of our whistleblowers in this type of government fraud have been approached by a larger business to act as an illegal pass-through business.”
Through the Small Business Act, Congress created a government-wide goal for contracting with small businesses; currently 23 percent of all federal procurements are awarded to small businesses. Most federal agencies involved in procurements create opportunities called “set-asides” to meet this goal. These allow small businesses to compete against like-sized contractors for opportunities rather than competing against larger companies. Some small businesses qualify for additional programs because of their special ownership or geographic location.
The Small Business Administration (SBA) defines what constitutes a “small business” within a particular industry. To ensure that large companies do not start new businesses for the sole purpose of getting set-aside contracts, the SBA considers not only the number of employees or revenues of the contracting company, but also of any affiliated companies with common ownership, investment, management and identical business interests. They may also consider whether the small business is actually in control of over 50 percent of the work being done or is financially reliant on the larger company.
“Contractors who misrepresent their eligibility for government contracts not only undermine the integrity of the procurement process, but also harm legitimate small businesses vying for set-aside contracts,” said Baron & Budd attorney Andrew Miller, who also represented the whistleblowers. “Our clients feel vindicated for coming forward and appreciate the collective efforts of the Department of Justice and the affected federal agencies for their diligence and dedication.”
Washington, D.C.-based attorneys Scott Simmer, Andrew Miller and Thomas Poulin, formerly of the Simmer Law Group, joined Baron & Budd in February 2018. Simmer, Miller and Poulin bring more than 60 years of combined experience investigating and prosecuting multiple precedent-setting fraud and abuse cases on behalf of whistleblowers and private payors. The addition of these attorneys expands Baron & Budd’s expertise in fraud, qui tam, antitrust and third-party payor litigation, as well as strengthening the firm’s health care and government fraud practice areas.
ABOUT BARON & BUDD, P.C.
Baron & Budd, P.C. is among the largest and most accomplished plaintiffs’ law firms in the country. With more than 40 years of experience, Baron & Budd has the expertise and resources to handle complex litigation throughout the United States. As a law firm that takes pride in remaining at the forefront of litigation, Baron & Budd has spearheaded many significant cases for hundreds of entities and thousands of individuals. Since the firm was founded in 1977, Baron & Budd has achieved substantial national acclaim for its work on cutting-edge litigation, trying hundreds of cases to verdict and settling tens of thousands of cases in areas of litigation as diverse as dangerous pharmaceuticals and defective medical devices, asbestos and mesothelioma, environmental contamination, fraudulent banking practices, motor vehicles, employment, and other consumer fraud issues.